Thursday, November 3, 2011

It's Continuing Ed Season - Let's See What Government Mandated Education has in Store for US!

Some welcome changes to the regulatory scheme have come out of the meltdown, but having the government mandate minimum hours and content have turned mortgage training into a commodity. Prior to the SAFE Act and the incumbent NMLS some states had much more rigorous requirements. Smaller, local course providers developed and delivered training in the same marketplace where the training was approved. It allowed for relevant and practical adult learning, where instructors developed relationships with the students and the employers and really understood the needs of the workplace. The NMLS underwritten current scheme put that model out of business.  

This thinking evolved not from debating the need for a system of licensing (which mostly existed), but realizing federal government involvement's negative impact.  A review of what has happened since the implementation of the NMLS makes a fine example of how the best intentions of regulation create unintended consequences that limit choice and adversely affect market operation.  

Only 85,000 MLOs are now targeted for CE.  Stands in stark contrast to the 375,000 to 600,000 that the agency originally anticipated.  (Source NMLS)
As an example, our company abandoned providing NMLS centered training programs.  We were only a niche player in PE/CE, nowhere near the scale of Financial Strategies, Training Pro, or even Loan Officer School.  We focused on providing vocational, skills-based training through a network of companies that used our product as a backbone for their internal programs.  The NMLS offering was an add-on.  Though we were small, we provided value and flexibility.  Those choices are now gone primarily as a consequence of the regulatory scheme:

1. The NMLS, erroneously believing that there was a shortage of training companies, literally invited hundreds of non-mortgage training firms into the mix; real estate schools, appraiser institutes, community colleges... anyone who was related to training in real estate, insurance, or any vocational training school. The result was a "fractionalization" of the business. 300 firms for 90,000 licensed loan officers. That's 300 potential students for each of us!
2. There is a definite "bureaucratic-governmental" subjectivity to the NMLS' content review. Many of the reviewers hired to approve the content come from real estate training. As a 28 year industry veteran, I was astonished to see the level of misunderstanding of products, underwriting, business practices and general viewpoints expressed in the review of course material. I would rather not provide material, than provide something I believe to be wrong.
3. The low baseline has created a standard for the lowest common denominator. I've just gone through my licensing renewal CE online, and if your view the current offerings is "groan and bear it", then we share an opinion.
4. Commodities don't have any value. It costs tens of thousands of dollars and a lot of time to develop a good, interactive course. A 1 hour online course can take as long as 120 hours to create. If the market says an 8 hour course sells for $129, then I have to sell several thousand just to break even, and with a diminished market and so many competitors, what is the point?

Standardization always seems to result in a lowering of standards. In this case, while the bar is set very low, the positive takeaway is that at least there is a bar. My reputation as a loan officer won't be negatively impacted by the behavior of some unethical loan officer at another company... Unless he or she works for a bank, of course.


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