I was reading a blog post today in which the merit of requiring real estate agents to have college degrees was hotly debated. It got me thinking about the value of a similar requirement in the mortgage lending industry. When you analyze the sub-prime lending crisis and the bad credit mortgages that were provided to people who probably should not have become homeowners, it's clear that the source of the problem was not (just) an insufficiency of ethics but often of training. That's the problem with fields being too easy to enter when business is good -- everyone stampedes in and the rotten eggs give the whole profession a stinky reputation.

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Portrait of a housing boom loan officer

You probably saw him at the neighborhood sports bar, projecting his self-important voice through his cell phone and drilling it into the irritated skulls of everyone in the room. He still had on the same tie (30% silk!) that he wore at Boris O'Malley's Pre-owned Cars, which is where he worked until deciding to become a lender two weeks before. He was typical of hyped-up go-getters chasing the big easy money they were sure would be theirs if they got into mortgage lending. The pros who had been in the business for a decade or so groaned and wished for the hundredth time that mortgage lending was harder to get into.

Fog a mirror!

In many states those who wanted to become mortgage lenders faced no requirements at all. There was no coursework, no continuing education, no test to pass, no code to adhere to. Just start cold-calling or canvassing neighborhoods occupied by people with bad credit and sell them poor credit home loans that you don't understand yourself. So you earn a few commissions, mess up a few families' lives, and then your lack of knowledge, your poor service, and your bad reputation catches up with you and you go find another way of making a buck. Because while it's been too easy to enter mortgage lending, it's very, very difficult to stay with it unless you are very, very good.

I helped cause the financial crisis, and I'm sorry.

One loan agent who worked for a subprime mortgage broker wrote about his experience and said, "All you needed to do was learn the script. Everything else was unimportant. JUST LEARN THE SCRIPT." No classes on what the Truth in Lending Act was about. No training in the disclosures customers were supposed to receive, or in the laws that prevent racial discrimination. Just the script, and pushing people to "lower their monthly payments," or "consolidate their high-interest credit cards into a low monthly payment," mostly through sub-prime refinancing.

Is this the sort of person we want helping us with huge financial decisions?

Of course not. And requiring a degree, whether it's in pre-law, management, marketing, or finance, would make sure that the person setting himself or herself up as your mortgage adviser has the education to sort out home loan products, present your case to an underwriter, and know when a mortgage is NOT in your best interest. Even more important, degree requirements would mean disenchanted and unsuccessful sorts can't just become mortgage lenders on a whim; you wouldn't be able to pick up a new career like a middle-aged dentist picks up a new 'Vette. There would have to be a level of commitment strong enough to inspire the candidate to get through school, pass exams, and respect a code of ethics.

So, we want our loan officers to be smarter and more ethical and professional.

That doesn't necessarily mean a college degree is required but it should mean a level of training considerably higher than mastering a script and memorizing a product line. Licensing requirements are being beefed up and standardized, thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act and other regulations. Today, all over America, new licensing and education requirements are driving dubious loan agents from the industry. That's a good thing, and the professionals who remain are happy to see the shakeout and the upgrading of the mortgage credit profession, especially bad credit mortgage lending.

So, ask your mortgage consultant a few questions.

Ask any of the candidates you consider doing business with how long they have been mortgage lenders, what kind of license they have (get the license numbers too), and what sort of lending they specialize in (if you have bad credit and want an FHA loan, you'd better get someone who knows government lending inside and out). When they recommend a mortgage product, ask them why they have selected it for you. When they give you a mortgage quote, ask what goes into the rate you were quoted. In short, ask them things they probably won't have been taught in silly-script-school and you'll see who has bothered to get an appropriate education.