Time to talk testing

Brokers looking to raise the bar in the mortgage industry are taking aim at agent testing standards, Vernon Clement Jones reports

When Angela Wong-Liao came over to the broker side in 2001, she crammed her years of banking experience into a bag and brought it with her. Considering she’d toiled for nearly three decades as both a branch and mortgage development manager, she may have needed a porter to lift it.
“You can’t spend 28 years in the banking industry and not learn a thing or two,” says the
Toronto Invis mortgage agent, “so I brought that experience to the industry when I came. Few of the people now being licensed as mortgage agents have that kind of related experience. In fact, there are many that have no related experience whatsoever.”
Wong-Liao isn’t the first to make the observation. She’s also not the first to suggest the industry and its regulators need to do something about it. The mortgage professional is among those seeking real changes to the way hopefuls – young and old – gain a license to practice in Ontario and other provinces now regulating the industry.
While most want to see the testing and class-room instruction doubled or even tripled from the current standards, others – Wong-Liao included – want to see the first barrier to entry put in place well before students hit the books.
“I would like to see a prerequisite put in place that mandates that candidates need to have at least one year’s experience in a related financial position in order to get their license,” she tells CMP. “Being able to come to mortgage brokering without any related experience is a bit of a joke.”
Under Ontario’s Mortgage Brokerages, Lenders and Administrators Act, 2006, and regulations, would-be mortgage agents must be 18 or older, Canadian residents, “authorized by a Mortgage
Brokerage to deal in mortgages,” and “work for only one Mortgage Brokerage.” They’re also required to meet mortgage agent educational requirements, generally a 42-hour course, in-class or online, focused on providing an “understanding of the mortgage brokerage industry and an ability to perform the agent’s role in the mortgage application process.”
Class subjects run from a primer on the relevant legislation to consumer protection and ethic. Regardless of the course provider, all programs culminate in a final examination, usually three hours. Pass rates vary from institution to institution, although critics charge those figures suggest what testing there is needs to be more rigorous.
“Is a three-hour exam good enough? I don’t think so,” Bruno Pileggi, broker-owner at The
Mortgage Centre - YNMP, tells CMP. “Anyone can take a three-hour test, and in keeping the bar that low, you’re opening the door to anyone just coming into the business. It has to be a little more extensive. I’m not saying it needs to be three months of solid testing, but testing has to be a big part of it, because it filters out the individuals who should not be in our industry. And there are a lot of them.”
Brokers across Ontario, Alberta, Saskatchewan and British Columbia, are saying much the same thing, although legislative requirements in those provinces remain the highest in Canada. Like Pileggi, they’re lobbying for a written testing requirement that would likely follow those of other regulated financial services professions, mandating a series of written examinations. The tests would escalate in difficulty, each the prerequisite for the following exam.
Several industry veterans back adoption of the chartered accounting model, which not only requires articling, an undergraduate degree and, in most provinces, additional education, but also a three-day “Uniform Evaluation.” Its pass rate also varies from province to province, with the 2010 figure for Ontario sitting just above 70 per cent for first-time test-takers.
Still, beefing up Ontario’s mortgage agent licensing standard may be only part of the solution, concede critics, suggesting that brokerage hiring standards also have to be put under the microscope.
“First of all, regardless of who’s teaching the course and whether it’s a week in school or one day a week for 12, 13 or 14 weeks, nobody comes out of the course with knowledge of what it really takes to make a success of it in this business,” says Kevin Power, president of Power Mortgages Inc., an independent 10-member team operating in the Kitchener-Waterloo market. “They’re basically just going to come out with basic knowledge around debt service ratios. Most of the serious learning is really done on the frontlines.”
It suggests that brokers are largely responsible for the kind of knowledge gaps evident in many young mortgage professionals, he says. It also suggests that principal brokers have some work to do.
“I do most of the agent training myself, everything including helping agents package deals, underwrite them, sign commitments, collect documents and meet lender funding requirements,” he tells CMP. “I don’t think additional training is going to help people to be more prepared when entering into the industry. What would really help is if brokers give new candidates and agents that kind of hands-on guidance. It’s a commitment.”
A leading industry trainer is also asking brokerages to up their collective game in order to advance the viability of the average mortgage agent’s career. It’s too often begun and ended in the same year.
“Each provider must test students on FSCO’s Mortgage Agent Qualifying Standards (MAQS), and from REMIC’s perspective, our exam is very thorough and demanding,” Joe White, president of the Real Estate and Mortgage Institute of Canada, tells CMP. “Our 47-hour course incorporates all of the MAQS, and prepares students not just for the exam, but for their career.
“When it comes to hiring agents, brokerages that do their due diligence, including undertaking a rigorous interviewing process, can choose the candidate that they feel meets their needs. Simply because an agent is on commission doesn’t mean that they shouldn’t have to go through the same rigorous hiring process as a person applying for a salaried position. By incorporating a thorough interviewing process the industry will increase the level of professional agents.”
Wong-Liao is advocating for the same kind of active screening of prospective candidates – above and beyond educational prerequisites and tougher testing for agents.
“I always encounter young agents who are just lost,” she tells CMP. “They don’t know how to network. They have no concept of how to be a self-employed business person and they’re coming to mortgage brokering because they may have lost their job and it’s easy to get qualified as an agent. I think that brokers need to start using an aptitude test for those looking to become agents to make sure they have what it takes to go out and attract work for themselves and manage their businesses.”