Faced with a topsy-turvy home mortgage market, the Maryland Association of Mortgage Brokers (MAMB) recently adopted a new code of ethics for its members. On the national level, blame for the subprime mortgage woes has been imputed to the mortgage loan industry. Critics have argued that mortgage brokers did not explain to borrowers the terms of complex and new home loan products, and that they induced them to take on loans they could not afford. The MAMB decided to address the situation by implementing new membership standards which will serve to weed out, as its association president Charles DiPino stated in a news release, the "few bad apples" in the business that "have caused a great deal of trouble for the professional, ethical broker". Pursuant to the new requirements, any mortgage broker and his or her loan originator seeking to join the MAMB will be expected to abide by its Code of Ethics and adhere to its Best Lending Practices/Professional Standards, or they will risk discharge from the Association.
In its overall scheme, the MAMB's ethics code states that members must demonstrate honor, integrity, and honesty when conducting business. Specifically, loan originators and mortgage companies who are association members or would like to join must comply with the following terms:
- Members must not succumb to or exert influence or pressure aimed at circumventing the home mortgage loan industry's professional standards and ethics.
- Their solicitations and advertisements must contain accurate information.
- They are prohibited from disclosing unauthorized confidential data.
- When carrying out their business, they must comply with all applicable federal and state regulations and laws pertaining to mortgage lenders.
- Any financial interest or equity that a member has in the collateral being pledged for securing a loan must be disclosed.
- Members are barred from discriminating in the fees and rates they offer.
- They must thoroughly explain to consumers all fees and costs associated with mortgage loans, the various financing program options, and the loan application's documents.
- Members are required to explain the mortgage process from application to closing.
- Customers must be furnished a written document that spells out the mortgage rates and terms.
- Members may only charge fees that are listed in the Good Faith Estimate.
- They must communicate in a timely fashion with their customers throughout the home loan mortgage process.
- They are required to provide their clients with a written agreement that explains their business relationship and the manner in which they, the service providers, are to be compensated.
The MAMB has created a wide range of disciplinary actions for members who violate its standards. These penalties range from a letter of reprimand or a letter of warning to suspension or expulsion from the Association. Upon suspension or expulsion of a member, the MAMB will relay the information to the National Association of Mortgage Brokers as well as state and federal regulators. While MAMB's Board of Directors has adopted this new code of conduct, full enforcement of the program's implementation will not commence until January 1, 2008.