As licensed mortgage professionals, our clients rely on us for guidance through the mortgage process. It doesn’t matter if we’ve been licensed for a week or for 10 years – we have the licence, so they view us as experts, regardless of our level of experience. But is this really true in every situation?
Given the lack of educational requirements to entering the business, virtually anyone can become a broker. The mortgage licensing courses train us on the basics – the bare minimum. And no one comes out of school an expert. This is why doctors do three years of residency before they are permitted to practice. Experience trumps education, every time. The real learning begins when the broker gets out into the real world and is dealing with real clients in actual situations.
Many consumers feel more comfortable dealing directly with banks and won’t consider anything but a bank. This is changing, but slowly. We can accelerate the pace by raising the bar for entry. A healthy tree starts with healthy roots. The stronger the roots, the stronger the tree. Raising the bar for entry into this industry amounts to strengthening its roots.
If it’s too easy to become a mortgage agent, the quality of advice coming from our industry suffers. I’ve seen mortgage ‘professionals’ working for banks who have no business giving people advice on mortgages. Don’t get me wrong – there are some truly talented mortgage professionals working for the banks, but they seem to be few and far between. I hate to say it, but the broker channel is no different.
If it’s too easy to enter this business, this will be reflected in the quality of applicants to which we are handing licences. This will have a direct influence on the quality of advice given to clients, which impacts the quality of our industry.
Several things should be done to make entering the industry more challenging. First, licensing courses are too short – I’d like to see them at least three times longer. Additional areas of focus should include examples of real-world situations and how to handle them.
Increasing course length will also increase the cost, which isn’t a bad thing. The more skin someone has in the game, the more seriously they will take it. Among other things, a higher cost will deter those just looking to earn some extra income on the side.
Second, the final exam passing grade should be raised to 80%. The exams should also include more essay questions and fewer multiple-choice options that show the student the right answer. Let them come up with the answer themselves. This alone will help strengthen students’ comprehension of the material.
Some licensing exam questions should result in immediate failure of the course if answered incorrectly, regardless of the actual score obtained. I remember seeing questions about fraud on my exam and thinking that anyone getting this wrong should be determined ineligible for a mortgage licence.
If the exam is more difficult, fewer applicants will pass, and fewer will become licensed. This is as it should be. Just because someone can come up with $300 for the course, they shouldn’t be de facto guaranteed a licence.
Once licensed, mortgage agents don’t have any additional restrictions against them – they have the ability to operate independently right from the beginning. But just as one cannot get a driver’s licence and immediately have full access to its privileges, the same caution should be bought to bear when issuing mortgage licences. New agents should be under the close supervision of an established mortgage broker for at least the first year before being permitted to go out and advise fully on their own. Over that period, their emails should be monitored by their broker so they can be guided accordingly.
As an industry, we are still growing and getting stronger all the time, but there is much room for improvement. We have the power to take our industry to the next level. The question is, what are we prepared to do to make it happen?
Paul Meredith is a broker with CityCan Financial and author of the Amazon bestseller Beat the Bank: How to Win the Mortgage Game in Canada. He was a finalist for Mortgage Broker of the Year at the Canadian Mortgage Awards in 2018 and 2019.