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C.A.M.B. HISTORY CODE OF ETHICS

NEWS FLASH

3 Articles

CAMB's "Consumer Protection Package"
signed by Governor

AB 790, AB 2890 and AJR 47 Become Law

From Michael Faust
CAMB Government Affairs Chair
Vice President, American Pacific Mortgage

The California Association of Mortgage Brokers (CAMB) hails Governor Arnold Schwarzenegger and members of the California State Legislature as CAMB-sponsored consumer protection legislation (AB 790 and AB 2890) were signed into law this week.

These bills are a huge win for CAMB members. AB 790 and AB 2890 provide a legal and an enforceable means for CAMB brokers to separate themselves from the less ethical brokers, by displaying the CAMB logo or other CAMB certifications. CAMB brokers can earn these certifications and then demonstrate to consumers they adhere to a code of ethics and best practices. When consumers see the CAMB logo and CAMB certifications they will know that they are dealing with a CAMB broker, someone they can trust. CAMB Brokers having these certifications will know they are protected under the laws of California and it will allow our industry to self-regulate and weed out the bad actors.

The two bills are also huge win for consumers because they now can clearly gauge the level of qualifications of anybody seeking to provide a real estate loan in the State of California. At a glace they will be able to tell who adheres to a code of ethics and best practices and who they can trust.

CAMB President Jack Williams and I joined the Governor at a signing ceremony in Palo Alto, California on Wednesday where he lauded CAMB for its efforts to protect consumers in mortgage lending transactions.

AB 790 and AB 2890 join AJR 47 as the latest effort in CAMB's ongoing consumer protection and industry professionalism campaign. AJR 47 was recently unanimously passed by the California State Senate and Assembly and demand that Congress and the President act immediately to increase federally backed conforming loan limits and provide Californians the same access to these loans as Americans in the rest of the country.

I am proud to say that CAMB is leading the nation when it comes to making sure loan originators hold themselves to the highest standards of professionalism. CAMB is grateful to Assembly members Leland Yee and Mark Ridley-Thomas for authoring our consumer
protection bills, and we applaud Governor Schwarzenegger for signing them into law.

AB 790 and AB 2890 would make it a licensing violation for any individual Department of Real Estate licensee or an employee working under a Department of Corporations licensee to misrepresent themselves in their business, credentials, education, or even trade membership.

The California Association of Mortgage Brokers recommends that all loan originators seek the highest levels of training and preparation so they can provide the best possible service. We want to make sure that all consumers can seek out the best and most qualified loan consultant without fear of fraud. AB 790 and AB 2890 represent the next step in our Association’s ongoing consumer protection campaign.

Three New Laws Protect Consumers

By Gregory J. Wilson
Staff Writer, LA Daily News

Consumers now have more mortgage protection when it comes to buying a home or obtaining a traditional or reverse mortgage, courtesy of three bills signed last week by Governor Arnold Schwarzenegger. Surprisingly, there was no opposition.

Two assembly bills, AB 790 and AB 2890, provide regulators with a big hammer and the California Association of Mortgage Brokers with house-cleaning ability. AB 790-introduced by Leland Yee, D-San Francisco-deals with licensed real estate broekrs and AB 2890-introduced by Mark Ridley-Thomas, D-Los Angeles-focuses on mortgage brokers. Both give regulators the right to suspend the license of brokers who mislead the public about their experience in the industry. In the case of real-estate brokers, it's the California Department of Real Estate, and the Department of Corporations for the mortgage industry.

Ridley-Thomas said it was no easy task to get the bill through the legislateur without opposition. "Consumers deserve being treated honestly when it comes to borrowing money and trying to raise their standard of living. They shouldn't be ripped off or misled, and that's what the legislation seeks to address," he said. His was supported by the California Association of Mortgage Brokers.

"For the first time, it's going to give the industry the opportunity to self-regulate and start cleaning up our industry from the inside-out," said Michael Faust, association vice president and chairman of its government affairs committee. "From now on, the consumers is going to be able to tell who adheres to a code of ethics and best practices."

For example, if a mortgage broker claims to be a member of the association but is not, he or she can be disciplined by the state. After due process, the broker could lose his or her license and be barred from working for any Department of Corporations licensed company in the state. Possible infractions in both cases also include falsely education or specialized skills.

Alex Creel, senior vice president of legislative affairs for the California Association of Realtors, said his group had no problem with AB 790. "You shouldn't represent yourself as having a certification that you don't have," he said. The trademarked term Realtor is a case in point. To be certifified as a Realtor requires joining a local chapter of the state association, Creel said. There are about 500,000 licensed real-estate sales people in California and somewhat less than half are association members. And some that aren't likely use the term in generic fashion.

The third piece of legislation, SB 1609, introduced by Senator Joseph Simitian, D-Palo Alto, helps protect seniors when they enter into reverse mortgages. "It is our responsibility to help protect those who are most vulnerable in our society," Schwarzenegger said in a statement. The bill prohibits a reverse mortgage lender from accepting an application or assessing any fees until the borrower has received independent counseling regarding the loan. It also prohibits a lender from requiring a borrower to purchase an annuity as a part of the reverse-mortgage transaction and requires a reverse-mortgage contract to be translated into Spanish, Chinese, Tagalog, Vietnamese or Korean if the contract was primarily negotiated in one of those languages.

Typically, a reverse mortgage allows homeowners 62 and older to receive either monthly payments or one lump sum from the property's equity without having to sell the property or make monthly repayments. The reverse mortgages also don't have to be repaid for as long as residents do not move, but they must be repaid in full, inlcuding all interest and other charges, when the last living borrower dies, sells the home or permanently moves away.

The borrowers continue to own their homes and are responsible for property taxes, insurance and repairs. "Older Californians considering reverse mortgages as a source of retirement income will be provided greater consumer protections as a result of SB 1609," Corporations Commissioner Preston DeFauchard said in a statement.

Baltimore Sun article written by Ken Harney:

Mortgage group pushes for stop to pitches made after loan applications

Originally published September 8, 2006

Picture this: You apply for a new home loan from a local mortgage company on a Monday afternoon. By Tuesday morning, you're suddenly getting unsolicited phone pitches from out-of-state lenders who seem to know a lot about your personal finances:

• Your credit scores.

• Your outstanding credit-card balances and other revolving credit accounts.

• The approximate market value of your home and how much you owe on it.

• Your home address and, obviously, your phone number.

Thousands of loan applicants around the country are receiving uninvited pitches like these, sometimes just 12 hours after getting a mortgage quote. But now a major mortgage industry group is planning a campaign to put a damper on the practice.

"There are very serious privacy, identity-theft and bait-and-switch issues involved here," says Roy DeLoach, executive vice president of the 27,000-member National Association of Mortgage Brokers.

"It's outrageous that simply applying for a home loan should open up a person's sensitive personal information" to prying eyes anywhere, literally overnight, DeLoach said.

The practice targeted by the mortgage brokers is known in the industry as "trigger list" marketing - a warp-speed version of the "prescreened" credit-card offers you routinely get in your mailbox.

The "trigger list" works like this: When your local mortgage company checks your credit to provide you a rate quote, one or more of the national credit bureaus take that inquiry and essentially turn it into a marketing product.

So-called "lead generator" companies and some lenders are eager to know the identities of people who are in the process of shopping for a mortgage - and they pay the credit bureaus for those hot prospects. Generally, the prospects have to fit credit and geographic profiles that the lenders have set in advance. For example, one customer might only want the identities and contact information of people in the Los Angeles area with FICO credit scores above 700 who have applied or inquired about a jumbo home mortgage within the past 24 hours.

Another might only want the credit and contact information of Washington or Chicago residents who applied for a zero-down-payment loan no more than 12 hours ago. The fresher the information, the better, say marketers.

The credit bureaus defend their right to sell applicants' personal financial information, arguing that it is a zippier form of marketing "prescreened" target prospects lists for credit offers - something they've been doing for years.

Tim Summers, a vice president at Experian, one of the three dominant national credit bureaus, said in an e-mail response that his company's "Prospect Triggers" program "provides consumers with choice and potentially significant cost savings by delivering relevant information at the decision-making point instead of weeks after a mortgage lending choice has been made."

Summers said the program meets "all requirements" under federal credit and privacy statutes.

But the National Association of Mortgage Brokers doesn't agree. When credit bureaus sell overnight trigger lists to third-party lead generators, the brokers argue, they fail to comply with a key provision of the Fair Credit Reporting Act: that anyone receiving consumers' personal information must be in the position to make a "firm offer of credit" or have previously received permission from the consumer to obtain credit file data. Third-party lead generators obtain no permission and are in no position to make any credit offers, firm or otherwise.

The brokers also contend that even lenders who obtain trigger lists might not be in a position to make the firm offers that the law requires. A firm offer for a mortgage is vastly different from a firm offer for, say, a credit card. The mortgage process is more complex, and rates and fees are more difficult to quote on the basis of a credit score alone.

To make a firm loan quote, says DeLoach, "you need to know a consumer's income, you need to have an appraisal" - you need to know a lot more than the telephone marketers have in hand.

The biggest problem, however, might be the confusion that overnight trigger marketing brings to the mortgage business. Your local lender or broker quotes you one rate and estimated fees. But now one or more outside lenders - whose reputation for honesty or service you know nothing about, and who are in possession of your personal financial data without your permission - intervene and offer a lower rate.

Are the rate quotes for real? Or will they morph into costly bait-and-switch deals weeks or months from now?

You really can't know. But what you can do is remove yourself from all potential trigger list come-ons by opting out.

Much like the federal Do Not Call program, you can opt out of prescreened offers by going online to www.optoutprescreen. com or by calling this toll-free number: 888-567-8688.

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