The recent foreclosure fiasco has left many mortgage borrowers wondering where to find an honest lender.
"Mortgage lending is a boom-and-bust industry, so some people who jumped onto the bandwagon during the housing boom may have had less experience than what is optimal," says Doug Johnson, vice president and senior adviser, risk-management policy, at the American Bankers Association in Washington, D.C.
However, the recent housing meltdown may actually have improved the odds of finding a good, trustworthy lender.
"The recent cycle has left the most-experienced lenders still in business," Johnson says.
How can you find a good lender? One good approach is to find a "warm referral," says William R. Howe, the president of the National Association of Mortgage Brokers and the president of Howe Mortgage in Scottsdale, Ariz.
Howe recommends that consumers follow up on these recommendations by checking for ratings and complaints with the Better Business Bureau and bank and credit-union safety ratings.
"Each certification also has continuing-education requirements," Howe says. "NAMB has a certification committee, too, so that if they receive a complaint against a member, they can take away that certification."
Licenses and certifications
Although requirements vary, all states mandate that lenders be registered or licensed. The Mortgage Bankers Association's Home Loan Learning Center offers a list of state banking authorities.The National Mortgage Licensing System and Registry has a searchable database of licensed and registered mortgage lenders. The NMLS was established as part of the SAFE Act, or the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires that all mortgage loan originators to be licensed or registered.
In addition, the SAFE Act stipulates that all lenders undergo a criminal background check and complete education and testing requirements.
"If a lender doesn't have a license number, that should be a red flag," says Gibran Nicholas, the chairman and CEO of the CMPS Institute, a national organization that certifies mortgage bankers and brokers in Ann Arbor, Mich. "However, lenders who work for a depository company, such as a bank or credit union, need only to be registered, not licensed."
Many lenders earn certifications from associations, nonprofit groups and educational institutions.
The National Association of Mortgage Brokers has three levels of certification tied to the level of experience of mortgage brokers.
A general mortgage associate, or GMA, is a trained beginner mortgage broker, while a certified residential mortgage specialist, or CRMS, has at least two years of experience, Howe says.
After five years in the industry, a broker can become a certified mortgage consultant, or CMC.
"Each certification also has continuing education requirements," Howe says. "NAMB has a certification committee, too, so that if they receive a complaint against a member they can take away that certification."
The Mortgage Bankers Association offers employees of member organizations a certified mortgage banker, or CMB, designation after three years of experience and continuing education. A master CMB designation can be earned after seven years in the business, while an executive CMB designation can be earned after 13 years.
Continued: Questions to ask a lender
