State Mortgage Regulators Notified of Mortgage Planning Abuse
Market Wire
Atlanta, Georgia
11/2/2006
"The Book On Mortgage Planning" Is Made Available to Promote Professional Mortgage Planning and Fill Gaps in Financial Planning Says The Mortgage Institute for Financial Services Professionals.
Today, the Mortgage Institute for Financial Services Professionals, Inc. (www.MIFSP.org) notified mortgage regulators in all fifty states of its concerns about the growth of mortgage-investment marketing schemes it refers to as "tag team mortgage planning."
In a letter to state regulators, MIFSP expressed concern that many financial representatives and mortgage originators may inappropriately recommend that homeowners pull equity from their homes, and use it to make risky investments without any determination of the suitability of this kind of mortgage-investment model.
According to Leon Morris RMP, RFC, CLU, ChFC, FFSI, Executive Director of MIFSP, there could be tens of thousands of people in the mortgage and financial planning industry operating under this kind of tag team business model referring to it as "mortgage planning."
"It's a real problem when this kind of sales pitch is made to folks who can't afford to bet the ranch and it's a sad day for financial planning if we've reached the point where a financial advisor's desire to sell products is so overwhelming he or she doesn't care that the consumer has to borrow money to buy it. There are over 100 million households in this country and the average homeowner with a mortgage spends 30% or more of their income on a residential mortgage. Therefore, all financial planners, mortgage originators, and others who provide consumers financial advice should at least read a book on mortgage planning if not take a course on the subject," says Morris. Morris says that's why he has written a book entitled "The Book On Mortgage Planning" that explains the basics of mortgage planning and promotes a uniform mortgage planning process that he believes will enable mortgage planning to grow and flourish as a much needed financial specialty.
Morris has also written a parallel book for consumers. "I believe mortgage planning is essential to being able to truly justify the suitability of other financial recommendations because of the magnitude of the expense and because it's tied to the largest physical asset most people have. Rather than treating the mortgage like it's the elephant in the room, walking around it because you don't know what to do with it, the mortgage should be planned for just like any other aspect of a person's financial future," says Morris. With over a 100 million households, Morris says mortgage planning can easily become a $50 billion a year industry if each household utilized the services of a mortgage planner once a year at a cost of just $500.
A national registry is being set up through the National Association of Independent Mortgage Service Providers, a division of MIFSP, whereby mortgage and financial services professionals who certify that they have read "The Book on Mortgage Planning" use the hallmark Qualified Mortgage Planner™ professional and become listees in the registry by also agreeing to adhere to a specified professional code of ethics and standards for QMP™ professionals that includes providing certain disclosures to the consumer from the outset. Access to the registry will be free of charge to consumers.
"MIFSP offers an educational program in Mortgage Based™ Financial Planning that leads to two designations, Residential Mortgage Planner® professional and Associate, Residential Mortgage Planner™ professional. However, for starters the QMP™ registry will give consumers a way to confirm those who have expanded their knowledge through reading a book on mortgage planning and who are willing to live up to professional standards and a code of ethics in practicing it," says Morris. MIFSP told state regulators that consumers are already being harmed by unsuitable mortgage-investment recommendations as evidenced by a March 2004 press release issued by the National Association of Securities Dealers (NASD) in which it announced it had charged several securities brokers with suitability violations for making unsuitable recommendations to customers, urging them to purchase investments using proceeds obtained from cash-out home mortgage refinancing.
Morris says he agrees with the statement made by Mary Schapiro, NASD's current Chairman & CEO, as quoted in the NASD March 2004 press release, when she said all kinds of regulatory red flags should go up whenever a securities firm or a broker recommends an investor mortgage his home to buy securities, but Morris says it's not just a concern for the consumer as an investor, it's a concern for the consumer as a homeowner and mortgagor as well. "Back in 2004, Ms. Schapiro said the NASD would always ask whether it's appropriate to recommend that a homeowner risk their home to seek investment returns, and we at MIFSP are urging all state mortgage regulators to ask the same question before it's too late," says Morris. MIFSP has urged all states to move forward with initiatives to implement requirements to provide consumers clear and adequate disclosure of the risks they're assuming and of any conflicts of interest the mortgage originator or investment adviser may have, along with requiring determination of suitability.
Morris says in order to better protect mortgagors and investors, there needs to be disclosure of the potential harm they may face when and if the investment-mortgage advice backfires. "With all the great things mortgage planning can do for so many millions of people and with the multi-billion dollar growth potential of this specialty, it isn't necessary to abuse it by being an equity predator," says Morris. The best advice Morris says he can give to those in the mortgage and financial services industry who may be part of a tag team mortgage scheme is the same warning they give for cigarette smoking: if you're not doing it, don't start and if you've started, stop.
Atlanta, Georgia
11/2/2006
"The Book On Mortgage Planning" Is Made Available to Promote Professional Mortgage Planning and Fill Gaps in Financial Planning Says The Mortgage Institute for Financial Services Professionals.
Today, the Mortgage Institute for Financial Services Professionals, Inc. (www.MIFSP.org) notified mortgage regulators in all fifty states of its concerns about the growth of mortgage-investment marketing schemes it refers to as "tag team mortgage planning."
In a letter to state regulators, MIFSP expressed concern that many financial representatives and mortgage originators may inappropriately recommend that homeowners pull equity from their homes, and use it to make risky investments without any determination of the suitability of this kind of mortgage-investment model.
According to Leon Morris RMP, RFC, CLU, ChFC, FFSI, Executive Director of MIFSP, there could be tens of thousands of people in the mortgage and financial planning industry operating under this kind of tag team business model referring to it as "mortgage planning."
"It's a real problem when this kind of sales pitch is made to folks who can't afford to bet the ranch and it's a sad day for financial planning if we've reached the point where a financial advisor's desire to sell products is so overwhelming he or she doesn't care that the consumer has to borrow money to buy it. There are over 100 million households in this country and the average homeowner with a mortgage spends 30% or more of their income on a residential mortgage. Therefore, all financial planners, mortgage originators, and others who provide consumers financial advice should at least read a book on mortgage planning if not take a course on the subject," says Morris. Morris says that's why he has written a book entitled "The Book On Mortgage Planning" that explains the basics of mortgage planning and promotes a uniform mortgage planning process that he believes will enable mortgage planning to grow and flourish as a much needed financial specialty.
Morris has also written a parallel book for consumers. "I believe mortgage planning is essential to being able to truly justify the suitability of other financial recommendations because of the magnitude of the expense and because it's tied to the largest physical asset most people have. Rather than treating the mortgage like it's the elephant in the room, walking around it because you don't know what to do with it, the mortgage should be planned for just like any other aspect of a person's financial future," says Morris. With over a 100 million households, Morris says mortgage planning can easily become a $50 billion a year industry if each household utilized the services of a mortgage planner once a year at a cost of just $500.
A national registry is being set up through the National Association of Independent Mortgage Service Providers, a division of MIFSP, whereby mortgage and financial services professionals who certify that they have read "The Book on Mortgage Planning" use the hallmark Qualified Mortgage Planner™ professional and become listees in the registry by also agreeing to adhere to a specified professional code of ethics and standards for QMP™ professionals that includes providing certain disclosures to the consumer from the outset. Access to the registry will be free of charge to consumers.
"MIFSP offers an educational program in Mortgage Based™ Financial Planning that leads to two designations, Residential Mortgage Planner® professional and Associate, Residential Mortgage Planner™ professional. However, for starters the QMP™ registry will give consumers a way to confirm those who have expanded their knowledge through reading a book on mortgage planning and who are willing to live up to professional standards and a code of ethics in practicing it," says Morris. MIFSP told state regulators that consumers are already being harmed by unsuitable mortgage-investment recommendations as evidenced by a March 2004 press release issued by the National Association of Securities Dealers (NASD) in which it announced it had charged several securities brokers with suitability violations for making unsuitable recommendations to customers, urging them to purchase investments using proceeds obtained from cash-out home mortgage refinancing.
Morris says he agrees with the statement made by Mary Schapiro, NASD's current Chairman & CEO, as quoted in the NASD March 2004 press release, when she said all kinds of regulatory red flags should go up whenever a securities firm or a broker recommends an investor mortgage his home to buy securities, but Morris says it's not just a concern for the consumer as an investor, it's a concern for the consumer as a homeowner and mortgagor as well. "Back in 2004, Ms. Schapiro said the NASD would always ask whether it's appropriate to recommend that a homeowner risk their home to seek investment returns, and we at MIFSP are urging all state mortgage regulators to ask the same question before it's too late," says Morris. MIFSP has urged all states to move forward with initiatives to implement requirements to provide consumers clear and adequate disclosure of the risks they're assuming and of any conflicts of interest the mortgage originator or investment adviser may have, along with requiring determination of suitability.
Morris says in order to better protect mortgagors and investors, there needs to be disclosure of the potential harm they may face when and if the investment-mortgage advice backfires. "With all the great things mortgage planning can do for so many millions of people and with the multi-billion dollar growth potential of this specialty, it isn't necessary to abuse it by being an equity predator," says Morris. The best advice Morris says he can give to those in the mortgage and financial services industry who may be part of a tag team mortgage scheme is the same warning they give for cigarette smoking: if you're not doing it, don't start and if you've started, stop.
posted by Kirby P at 12:35 PM
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