by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
I’ve been wondering about this Certified Mortgage Planning Specialist ( CMPS ) designation some of us loan hacks are displaying now. I remember hearing Barry Habib discuss “strategic equity management” back in 2002. I thought , “It’s about time! ” when he discussed that strategy. I had a securities brokerage background so the concept of a mortgage as a financial planning tool wasn’t alien to me.
Then they created this designation, the CMPS. I often chuckled at the litany of letters that followed a Realtor’s name on a business card. I used to think that they were somewhat narcissistic but now realize that they do represent a commitment to lifelong education. I considered the CMPS designation as one more racket.
Papa Joe (my father) used to tell me that you should wear your education like a watch; for use and not for show. I was taught that the mark of an educated man was his comportment not his resume. I still believe that but have realized that many originators whom I respect display the CMPS designation.
The CMPS designation marks membership in the Certified Mortgage Planning Specialist Institute. It means you’ve completed 18 hours of education in the areas of taxation, financial markets, cash flow and debt analysis, and most importantly, equity management. It means you’ve subscribed to a Code of Ethics that exceeds the state requirements and commit to using mortgage products as part of, what Jeff Brown would call, a purposeful plan. It means that you’ll carefully scrutinize the suitability of the mortgage recommendation to a borrower’s financial situation.
I’d like to think I practice those principles now.
I’m starting to think this is a step in the right direction for our industry. Perhaps the designation is somewhat obscure right now but it might be quite popular if ethical originators committed to such practice. The designation may be the first step to taking back our industry from the boiler rooms and point mongers. Responsible originators should build the “brand”. That’s what I’m thinking today.
So, I ask the audience? Is this designation useful? Would you prefer dealing with a CMPS? Is it worth the $1,400 and time investment?
Jillayne Schlicke says:
The 18 hours of education sounds more like becoming educated how to sell, sell, sell, and how to churn the client to refi over and over again in order to invest. I’m sure there are referrals back and forth to and from securities brokers. I would rather hire a retail mortgage salesperson who has a B.A. in Economics than a CMP with 18 hours of this curriculum.
How about a B.A. in Mortgage Lending? How about a person who has an Associates degree in real estate? One of our local colleges offers such a degree. At this point, we don’t need more Certified Mortgage Planners. The world needs more retail mortgage salespeople who have learned the state and federal laws governing mortgage lending. I don’t see that in the CMP curriculum.
http://www.cmpsinstitute.org/professional/ethics_code
Their code of ethics is a step in the right direction when compared with the industry standard:
http://www.namb.org/namb/Code_of_Ethics.asp?SnID=203520391
In today’s current climate, there will be some retail mortgage salespeople who will decide to voluntarily follow a code of ethics like the CMP.
I co-authored such a code last summer.
http://www.ethicallending.org/code.htm
Some retail mortgage salespeople tell me (in their ethics class) that they prefer the way things are now because they can make lots of money. Those folks can then belong to NAMB and give the public the appearance of ethics without having to be ethical. Seriously, the current NAMB president has been quoted many times in press releases as saying “our members adhere to a strict code of ethics.” This organization does nothing to police ethical conduct, or even asking a predatory lender to leave. Look at the NAMB membership roster and find Ameriquest.
It is years past time for a brand new professional association of mortgage lending workers to form. The CMPS, what I’m doing, what the mortgage professor is doing, and there’s a guy who’s writing a series of articles for Brad Inman who also has formed a similar group. We should all join together.
A non-political, non-governmental organization. No one would be constantly milked for lobbying dollars. NAMB and MBAA already do a good job at that.
April 12, 2007 — 11:12 pm
Brian Brady says:
Thanks for the comments, Jillayne. I agree with you about NAMB. I commented about how they embraced some pretty shoddy lenders at our CAMB trade fair yesterday:
https://www.bloodhoundrealty.com/BloodhoundBlog/?p=1281
The mortgage professor’s credibility was ruined when he started advocating a government regulated flat fee model for mortgage brokerage:
http://db.inman.com/inman/content/subscribers/inman/column.cfm?StoryId=050904JG&columnistid=guttentag
Lending is an intimate profession designed to offer tailored solutions to real life problems and opportunites. CMPS is the only organization I’ve seen that offers a positive solution to the few problems we’ve had.
April 13, 2007 — 7:36 am
Morgan Brown says:
Brian,
I believe that in principle that there should be a way to “move up the ladder” of this profession, to designate yourself as having achieved a higher level of professional success and in a way not just counted by dollar signs.
In California, anyone with a heartbeat can pretty much get the Real Estate Salesperson’s license. The explosion of the issuances of such licenses over the last few years testify to that. Having that DRE license does not make one qualified or ethical or working in the best interests of the customer.
On the other hand, I believe that there are some very LARGE problems that are associated with the CMPS, including some legal liability issues that my attorneys discussed with us when we were considering having our loan officers receive the designation. As our attorneys informed us, its not a widely supported designation and ties itself to some strategies about refinancing and equity withdrawal that could be cast in a dubious light (especially in this market). Further concerns included its limited range of acceptance, the lack of any type of state oversight or acknowledgement of the certification and the limited requirements to obtain such a designation.
The part that shut it down for us was the legal liability part – if I have initials at the end of my name and then some federal or state agency comes along and calls the CMPS a bogus way to bilk consumers in to cashing out the maximum from their equity, then anyone with those initials after their name are going to have some people asking questions.
As Jillayne said, many of the CMPS tactics stem from the “Missed Fortune” dogma or using equity to get a better return on investment. While a good theory on paper, many mortgage professionals use it as an excuse to get max cash out for refinances for customers without the intent of following through with them to see any return on that money.
Additonally, ethical lending groups that purport to higher lending standards and claim a vigorous review of originator files, etc. before issuing thier seal of approval have similar problems.
I am planning on staying away.
April 13, 2007 — 7:58 am
Brian Brady says:
“The part that shut it down for us was the legal liability part”
Ouch! Something I never considered, Morgan
April 13, 2007 — 9:06 am
Rhonda Porter says:
First, Brian, thank you so much for writing this piece on CMPS and for the mention. I’m honored. Fellow Bloodhound, Dan Green, as I’m sure you know, is also a CMPS.
When I took my exam last year, there were many of us who appreciated SOME of Missed Fortune’s concepts. I agree that stripping all of ones home equity from their home is a horrific gamble.
Leaving all of your equity in your home thinking that it’s earning interest or working for you is also false.
The bottom line is that there is no one strategy that works for everyone and we must consider long term goals and the ability (dare I say, suitability) of our clients.
Hey, I’m preaching to the choir.
I do think I’m going to remove Missed Fortune from my blog site, because I do not fully endorse the practice. If you do read the book, there is value to it (until you suck 100% of the equity out of the property). Morgan–thanks for pointing that out.
April 13, 2007 — 9:44 am
Jeff Brown says:
Brian – CMPS has been a dilemma for me, providing solid education for brokers, but also, in its practice, some much appreciated comic relief.
Much of what I’ve observed first hand is how it’s given the public, by way of direct explanation from their CMPS designated mortgage broker, is that their guy can give them top notch investment advice.
That would be funny if it wasn’t so dangerous to the borrower.
I’ve already taken on two clients who’ve made silly investments, endorsed by their ‘mortgage planner’. These investors will now have to take an additional step just to get back to square one.
It is for this basic reason I’ve turned down numerous opportunities to add a lending division to my own firm. I don’t know the ins and outs of it like I do investing. I’d rather call you, and know my client is in an expert’s hands.
As far as taking a page from the book ‘Missed Fortune….’, there’s nothing in that book that would do anything but help the average Joe. It’s only weakness is in conspicuously avoiding the use of real estate as a growth vehicle. This isn’t a surprise, since financial planners have traditionally treat real estate as a cancer for one reason – they can’t make any money from it since it’s not a product on their shelves.
As Morgan said, many brokers use Missed Fortune as an excuse to constantly refinance in order to invest. But then he puts a spotlight on why CMPS’s teachings are bogus. Morgan laments that the brokers (paraphrasing) ‘don’t follow up to ensure the borrower gets the return he needs.’
I assume Morgan pretty much keeps to lending, and doesn’t try to act as an investment advisor, but I have a question for those who do.
Exactly what vehicle was the broker going to recommend to the borrower? Stocks? Bonds? Insurance? Real estate? What kind of real estate? Where?
CMPS, at least in part, seems to me to be a ploy to give mortgage brokers credibility they can’t possibly live up to.
April 13, 2007 — 9:46 am
Morgan Brown says:
Jeff,
Excellent points. An I agree with you, I think Missed Fortune is excellent and has many strategies that can help. I think the problem lies in the mortgage broker’s use of it as an excuse to up the cash out on equity withdrawals.
This is a crucial point: “CMPS, at least in part, seems to me to be a ploy to give mortgage brokers credibility they can’t possibly live up to. ”
The CMPS doesn’t give the mortgage broker any legal right to provide advice on stocks, bonds, mutual funds or insurance – these fields all have their own licensing requirements that the CMPS doesn’t come close to fulfilling. Just look at the Series 7 license as one example.
If a CMPS is giving investment advice in to any of the above categories (save real estate) they are doing so clearly outside of the law and regulations that govern each investment area (unless of course they carry the requiste license as well).
Great points Jeff.
April 13, 2007 — 9:56 am
Jeff Brown says:
Brian – You asked about the effectiveness of having the designation after your name. And thought CMPS was a step in the right direction.
I went through the grueling 40 hour obstacle course known as CCIM back in 1980. I passed all five classes with flying colors. Since my wife was pregnant with our first child, and the economy was totally in the sewer, I had zero time to to continue with the next steps required to actually gain the designation. I was busy supporting my family in some very trying times.
However, the education received from that program was pivotal to my upward progression in the real estate investment world.
The letters after my name? I stopped even mentioning them to my clients because I found 99% of brokers didn’t even have a clue what CCIM meant. Why would clients?
They certainly appreciated the massive expertise added to my repertoire though.
Brian, you are pretty rare in your business as a result of your Wall Street years. When it comes to investment analysis 99% of your competition could study that subject for a year and not know what you’ve forgotten.
Given that – even you don’t like giving that kind of advice. Yet, after 18 whole hours, dozens if not hundreds of brokers will begin dispensing investment advice.
I now have learned a ton about many of the products available through financial planners. But instead of doing it myself, I merely explain the concepts, (not dissimilar to real estate investment principles) and then turn them over to the financial planning expert aligned with my firm. (for zero referral fee)
I don’t try to do anything for which I’m not totally trained and expertly qualified for.
April 13, 2007 — 10:11 am
Rhonda Porter says:
Morgan,
A CMPS designee should be referring their clients to the proper financial professional and NOT providing investment advice. We’re not licensed or experts in those fields.
The designation must be renewed (if one wants to keep it)annually. And it is also recognized by the CFP organization.
April 13, 2007 — 10:53 am
Brian Brady says:
“Fellow Bloodhound, Dan Green, as I’m sure you know, is also a CMPS.”
Ooops! Dan is most certainly a CMPS and inadvertently not given credit in my post. Dan, a Philly native like I am, is one of the premier originators in the country (just read The Mortage Reports to understand why).
My apologies, Dan, for the omission.
April 13, 2007 — 11:08 am
Brian Brady says:
I think I had better read “Missed Fortune” this weekend
April 13, 2007 — 11:09 am
Rhonda Porter says:
Gee…and I thought you liked me better! Just kidding. 🙂
It will be interesting to see what your thoughts are on Missed Fortune. I did take it off Mortgage Porter only because I would not want someone (a consumer) to read it and take every step literally by “harvesting” all of their equity.
April 13, 2007 — 11:17 am
Jeff Brown says:
Rhonda – All Missed Fortune does is use jr. high math to illustrate indisputable axioms.
There’s no mystery to the equation which states: if you borrow at 6% and invest at a higher rate, you make money.
Since investment grade insurance policies have been tied to the S & P, and that index has averaged 8% or a little better since the year I was born (’51), there is no ‘maybe’ about what Missed Fortune espouses.
April 13, 2007 — 11:19 am
Morgan Brown says:
Rhonda –
I agree with you – and I know that is what CMPS education teaches too; refer your clients to a circle of trusted advisors, etc.
I have personally handed out 5 copies of Missed Fortune to friends; it works when done right. The tough part is going from equity withdrawal to finalizing life insurance policy. Too many people go from equity withdrawal to new kitchen or vacation.
April 13, 2007 — 11:24 am
Morgan Brown says:
To Dan & Rhonda and other CMPS,
I want to make clear that I am in no way questioning your very clear expertise and excellence in our industry. And I applaud you for taking steps to stand out from the rest of the industry based on the options currently available to you to do so.
I may still get the designation, just for the additional education, which we can all use.
Morgan
April 13, 2007 — 11:30 am
Rhonda Porter says:
It’s the kitchen and vacation clients that I’m concerned about! And it goes back to the ol’ 80/20 rule, altough I don’t believe that 20% might be on the high side (at least, I hope so).
April 13, 2007 — 11:33 am
Rhonda Porter says:
Beyond adding CMPS to my business cards, email, etc. I have not really “marketed” it. My first referral from a fellow CMPS member closed this week…which is a nice side benefit for being a member.
My purpose for obtaining the designation was to try to find some tool to set me apart from the 10,000 other mortgage brokers in WA State.
April 13, 2007 — 11:47 am
Jeff Brown says:
Rhonda – Please take this in the spirit in which it’s given, i.e. smart-aleck.
Does CMPS have a form their borrowers can sign saying they REALLY intend to invest and not do something like remodel their kitchen or go on a dream vacation? 🙂
And what if a CMPS was told up front the borrower was using the money to spend three months on a world cruise. Would they refuse them the loan based on their judgment that the vacation is a silly motivation?
When we get to the point we need a lender’s approval for how we spend our cashed out equity, we’re in big trouble.
April 13, 2007 — 11:48 am
Rhonda Porter says:
Jeff–I’m a fellow smart aleck. No worries!
CMPS aside, if Barney Frank and in Congress have their way with the mortgage industry, I think we will be having to determine if the loan is “suitable”. Or, maybe we should revert to “don’t ask/don’t tell” with regards to what people do with their equity.
April 13, 2007 — 11:51 am
Jeff Brown says:
Rhonda – I’m shocked a liberal politician would want laws telling us what we can and can’t do with our own cash. 🙂
April 13, 2007 — 11:58 am
Jillayne Schlicke says:
You know, back in the mid 1980s, lenders DID ask for the purpose of the “cash back” refinance.
Don’t be surprised if this happens again. It sure would be a great way to analyze risk.
Is the money being put back into the property for renovations or maintenance? Is ALL the equity coming out and going into high risk stocks? Is the person going to grow corn and soybeans and brew bio-diesel in their backyard? Start a high tech porn business? Invest in Second Life? The answers could provide underwriters with some much needed, stress-relieving entertainment.
April 13, 2007 — 11:19 pm
Robert D. Ashby says:
Brian,
I do not think I need to go into any length of explanation to you as to what I do, believe, etc. as you have seen most of my posts on the topic.
As far as legality goes, I use a sophisticated blend of questions to ensure I am acting in the best interests of my clients, so I can defend any recommendation I give, which many times is don’t do it. I feel very confident in my business practices and do not recommend taking any equity out, let alone maxing out, if it doesn’t make sense and the client doesn’t know and agree to why they are doing it.
Now, regarding the designation, as I have said in many posts elsewhere, AR for example, there are many “certified mortgage planners” out there that have grabbed on to the growing popularity of the concepts and are “screwing people” for profit. From what I have seen, the CMPS designation is the only designation of a mortgage planner that has had to take courses (and CE) in order to earn a trademarked designation. The lack of a trademark on “certified mortgage planner” designations leaves them open to abuse by the unscrupulous mortgage personnel.
It also doesn’t hurt that the CMPS designation is the only one recognized by the FPA to my knowledge.
To answer the question, is it worth the money, I would say it depends. I know you know the concepts, Doug Andrew’s, Ric Edelman’s and the others. The question for you is whether or not you want the general public to know immediately if you are truly competent or not by looking at your business card, website, or other marketing material. That is where the CMPS designation truly helps since it is trademarked and shows expertise, ethics, and cannot legally be abused.
Just my inputs. Send me an email if you have any other thoughts or questions on the subject.
April 15, 2007 — 8:38 pm
Brian Brady says:
I’m actually going to go for it, Robert et al.
I think the tax information could be useful. Furthermore, I think Jeff Brown’s constructive criticism, while correct, can serve as a catalyst for the association to take a lead role in our industry.
April 16, 2007 — 11:50 am
Todd Ballenger says:
I was reading this blog with great curiosity. I’m not sure how many of you are familiar with my book, Borrow Smart Retire Rich, or our certification class – Borrow Smart University to earn a Certified Liability Advisor designation. We have had a lot of CMPS graduates attend our class and the share many of the same comments you listed above. If any of you have any questions, feel free to email me at toddb@kendalltodd.com. I’d recommend you read the book if you have not to understand our approach – we were financial advisors that became mortgage lenders, and we approach lending from the perspective of managing the liabilities of the clients for Safety first, then Liquidity, and then Return with (taxes, leverage and diversification) being part of a discussion – but what you said above is right – there is a big storm potentially coming with regulation, and you can’t use ‘planning, planner, or plan’ in any of your work products, naming, etc. without being a licensed financial planner with the appropriate designations. It is very important that you separate yourself from direct financial advice. I’ve been in this space since 1989, and there have been many lawsuits related to this issues. I’ve got a post on the blog site below about regulations forthcoming that is worth a read.
http://www.toddballenger.com (blog)
http://www.kendalltodd.com (website)
http://www.borrowsmartretirerich.com (book)
CMPS is like any program, and single idea is worth $1,000 or more if you can actualize it into your practice. I like what they are doing – related to education. Our approach is education, but with a very practical appeal to integrating it from the perspective of liablity management for the client – we recommend every loan officer have a variety of financial advisors they work with to create that clear separation of what they do for the client, and what the financial advisor does for the client.
April 17, 2007 — 7:41 am
Rob Garrison says:
I think we can all agree that the practical information and knowledge that CMPS teaches can be nothing but positive for this industry. But, this is certainly when the strategies are used properly.
I believe mortgage planning is not about encouraging clients to harvest all of their equity, but rather to (just as in financial planning) help the client accomplish THEIR financial goals in line with THEIR risk tolerance. As was previously mentioned, suitability is a very important factor in any kind of financial planning advice.
A good mortgage planner will also not try to give asset advice unless he or she holds the appropriate license and therefore has the knowledge to do so. I myself hold a Series 6 Securities license, and I still don’t offer asset advice (it’s simply for monitoring the financial planner to ensure they have the right idea about the best place for harvested equity). But beyond that, I feel it’s also very important when teaching these strategies to manage that clients mortgage plan for life. Conducting periodic reviews to ensure that the plan you put in place with the client is working is a very important step. You can’t just turn a client over to a financial planner with all of their harvested equity expecting that planner to meet their needs as well until you truly have a team that you can trust to accomplish the objectives that you and the client have set forth.
CMPS is good for this industry. In an industry saturated with “professionals” who have been through no kind of professional education, CMPS is much needed. But, as with anything else, you will find individuals that will abuse the power it gives them.
May 7, 2007 — 4:45 pm