Should an LO with a foreclosure be able to remain licensed?

[jillayne]

Should a mortgage broker or loan originator be able to keep their license if they have a foreclosure on their record?

I have received several calls just this week and many in 2008 from loan originators facing foreclosure. All were worried about losing their loan originator license. The state law doesn't directly address foreclosures (it does address bankruptcy.)

I've been told by LOs who have called the state that DFI is telling them that if they have a foreclosure, they will NOT lose their license.

Do SB readers think that LOs with a foreclosure be allowed to keep their license?

Thanks for the feedback.

[EconE]

Case by case basis....some I'd say yes, some I'd say no. They don't like people with "money" issues handling other peoples money usually. They would be more easily induced to "get the deal done" just so they can keep their own head above water.

A better question would be...

"What should the percentage of past clients of the of the LO, (who lose their homes due to toxic mortgages, liars loans, neg-am et al) reach before said LO loses their liscence"

[ira s]

In general, why not?
I've gone to mechanics whose own cars were in bad shape, and I've gone to barbers who needed haircuts.
Just because a LO has a foreclosure on their record doesn't indicate one way or the other the degree of professionalism regarding how they handle other people's loans.
A lot of highly intelligent people have done stupid things.
A few years ago LOs were making tons of money, people were busting down their doors to borrow money, and that's not the case right now. LOs are human, and humans do stupid things. Too many thought it was a permanent feast. It should have no bearing on how they conduct themselves professionally.

[rose-colored-coolaid]

No, having their own house go into foreclosure just means the LO doesn't know how to manage their own money.

However, perhaps they should lose their license if enough of their clients go into foreclosure. That's evidence of work poorly done. Or better yet, the state should examine every foreclosure for evidence of fraud, and use something like a 3-strikes rule. If a LO accepted fraudulent information in 3 distinct cases over some period of time (10 years?) then they permanently lose their license in WA. Better still if they lost the ability to gain a license in the rest of the states as well.

[jillayne]

Hi Guys,

Thank you for the feedback. I remember reading somewhere that information about either fraud or foreclosures was going to be connected to the licensed loan originator inside the national LO database. I'll have to research that, though. Maybe it was lenders who were going to have to keep track of foreclosures.

From the inside of a bank/lender, an underwriter who is FHA approved does have early payment default and foreclosures traced back to his/her underwriter number and lose the ability to underwrite FHA loans with too many foreclosures.