Mortgage Loan Officer Ethics:
Understanding What's Ethical & What's Not

Part 1

Part 2

Video Transcript

I want to talk to you about ethics, which is a really tough subject to talk about. And the reason is, I can go on for like six hours and show you every single unethical activity that you could engage in your job and be like, "Don't do that, and don't do that, and don't do that." But that's hard because then that's a giant list, right?

One of the things that I run into is people will say, "Oh, no, no, no. Everything we do is ethical." And so, it's hard to talk about it because if I identify some of these areas, you might catch it. But I have a better way to do it where you're going to catch yourself doing things you didn't even know you were doing if you just practice understanding and utilizing the wah-wah meter.

Now, I was a loan officer back in 1998, that's when I got in the business. And my first ever training on sexual harassment was where they came in and talked about our wah-wah meter which, for me, I was like, "Wait. What? I have no idea what they're talking about right now." And they said, "We all have this wah-wah meter inside of us. And it's this meter that when people say something to you, and this was a sexual harassment training, when they say something to you or they do something that makes you feel awkward, you get this icky feeling that's like, "Oh, gosh." Like, somebody looks at you and they're like, "How you doing?" And you're like, "Ooh, that just got weird."

Wah-Wah Meter

That wah-wah meter is what they were training us, is how you identify sexual harassment.

Well, I used that in trainings over the last many years to look for fraud and unethical behavior. So, you have a meter that tells you when you're doing something that you're proud of and that you wouldn't mind other people finding out about. That meter stays like this, until you say something or do something, or make a decision that makes you go, "Oh, that didn't feel right." All you have to do is identify when something's not making you feel right. And then, dive in and go, "Okay. What is it about that that makes me feel like it's a little bit icky?" And then, make a better decision. So, start looking for that in yourself like, "Where am I going? Ooh, that just feels weird."

It's so funny. I've been talking about that for 15 years now in seminars. And people will come up to me and go, "Hey. I want to check your wah-wah meter. Is this making your wah-wah meter go off?" And they'll run a scenario by me. And really, that's been successful at teaching people how to watch for unethical activity. So that’s my first thing is, know when you're doing something that just may be crossing a line, or at least makes you feel bad.



"So, we just got a call from the underwriter on this file and, I guess, one of the lines of credit, or lines of credit or whatever, is outdated, so we need to get a new credit statement or bill or whatever."

"I hate doing that. It's so uncomfortable. Call the borrower and saying, "Hey, no, we don't believe your debt. What is your new debt?"

"Yeah, it's..."

"Oh! I've got an idea. You sound like you've got two kids. Why don't you just call and act like you're the borrower?"

"Totally confused on why me having kids has anything to do with that. And also, I pretty sure it's illegal for me to pretend to be a borrower."

"No. No, no, no. OK. Seriously. It's not that hard. You just call and say this is what it is."

"Yeah. I don't think it's the difficulty factor. It's the illegal factor."

"Fine. Look. I'll take care of it. Strike two, man. Strike two, Sherman. Strike two."

The second thing I'm going to encourage you to do with this is, when you do have that wah-wah meter go off, go find the person you trust to give you the correct advice.

We all have two types of people in our life. One type, you can go to them and be like, "I'm thinking about doing this." And they will be like, "Hey, that's outside of your value set. That's not something that you should be doing based on how you feel and how you live." That's one type of person, right? The other one, you could be like, "Man, I just killed a guy," and they'd be like, "I'll bring my car over. Let's bury this body." That's a totally different type of person.

So, you've got two sets. When your wah-wah meter goes off, who are you going to go ask if something feels unethical?

If you go ask the person who is over here that's totally ethical, you'll get a good response, you'll make a decision that's good. If you go over to this other person that's totally unethical and will tell you whatever it is they think you want to hear, that's a bad thing. So, number one, figure out if you're doing something unethical based on that feeling inside. The second thing is, go to the people that will assist you in making a good decision.

Have those people [in your life].

MLO Ethics

Now, let me take a second and tell you why you should be ethical, because it seems like you should just always be ethical, right? Let me give you three quick reasons to be ethical:

The first one is, this is about your personal brand. Everywhere you go, people will know you based on the actions you've taken. And if you make a poor decision – an unethical decision – that can come back and bite you like crazy. Look at Hollywood, look at the political situation, look at all the things coming out around sexual harassment and those types of things. That's all personal brand. Go ask Kevin Spacey what movies he's been cast for recently. It's just completely obliterated him. So, watch out for your brand, and understand when you do make that decision that you shouldn't have made, that can lead to your brand being completely ruined.

Secondly, I want you to think about your company's brand. Everything that you do affects and impacts everybody who you work with. Making a poor decision that could get out there – you don't want to be trending on social networks – making a decision that trends in a negative way on social networks will affect your entire company. So, imagine working for a company where somebody did something that just dragged your name through the mud. That affects you in a big way. So, understand, make decisions that are going to be good for your company.

Let me leave you with one more crazy story:

There was a loan originator who decided that he wanted to get a loan funded, and there were two borrowers on the loan. Well, one of the borrowers was not going to be on the loan anymore and it was just going to be in the name of the husband. So, the loan originator says to his processor, he says, "Hey. These bank statements, we're going to have to divide them by two if we want to count income because we only have the husband on the loan. So, what I want you to do is white out the wife's name on all of these bank statements and then send that over to the lender to get that done." It was a brokered loan. And so, the specific instructions were, white out the wife's name, and then make a photocopy, and then send it off to the lender. Well, this was a new processor, so the processor whited out the wife's name, made a copy, and sent the whited out version with fresh white out to the lender.

So, here's what happened. Lender got it and looked at the company. They didn't just address the LO, they said, "That company is fraudulent." They froze every single deal that company had in the pipeline. That guy in one minute became the least popular guy at the company as all kinds of loan originators in the company were failing to be able to fund loans for their borrowers that were already committed. And so, you're harming your company, he harmed himself because he was eventually moved out of the industry, and then harmed the borrowers. So, all three of those kind of knocked out.

Finally, I want to remind you that you are protecting consumers for a living. The hard part about this is, consumers don't actually know the laws that are surrounding you. In fact, a lot of people in the mortgage business don't even fully understand the laws. So, your job is really to educate them in a way that they will make a good decision and understand where the boundaries are. You really have to set up the boundaries for each consumer you talk to. So, whether you are a processor or a loan officer or somebody else who talks to borrowers, keep in mind they don't know the rules. And so, something that you say, like, "Oh, no. We always do this." If that's unethical, you're actually causing your borrower to make an unethical decision. Imagine you are a borrower getting in trouble, or even getting a phone call from the state or from an attorney over something that you didn't tell them was unethical, you just did it. The key is, catch when you are starting to feel like you're doing something unethical, and then protect the borrower from actually falling into one of those situations.

It's really important that you do these things.


  • Understand what's unethical,
  • stay away from unethical activities,
  • protect your brand,
  • protect your future business,
  • protect your company,
  • and just always watch out to make the right decisions.

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