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CircleLending introduces private reverse mortgages

National Mortgage Professional
Feb 28, 2007

Critical flaws persist in nationwide residential mortgage licensing systemMortgagePress.comlicensing, registration, mortgage brokers, NAMB, CSBS, AARMR, nationwide registry, NAMB Consumer Protection Subcommittee We support a nationwide license registry only if it includes all mortgage originators. It just doesnt make sense to include some and not others, because all consumers should benefit regardless of the distribution channel chosen. --Harry H. Dinham, CMC, President, National Association of Mortgage Brokers A regulatory initiative to create a nationwide licensing standard and registration system for residential mortgage originators continues to be critically flawed, according to the National Association of Mortgage Brokers. The initiative, sponsored by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR), is solely focused on the mortgage broker community and excludes originators at banks and other federally regulated financial institutions from participating. In a statement dated Nov. 3, 2006, the NAMB Consumer Protection Subcommittee outlined several areas of concern regarding the proposed CSBS/AARMR registry and concluded, NAMBs continued participation in the CSBS/AARMR effort should not be considered an endorsement of the current proposal. On Nov. 4, 2006, the NAMB Delegate Council unanimously endorsed the subcommittees statement and urged NAMBs member states to oppose any effort to pass enabling legislation or regulations that do not mirror the principles outlined in the NAMB statement. We support a nationwide license registry only if it includes all mortgage originators. It just doesnt make sense to include some and not others, because all consumers should benefit regardless of the distribution channel chosen, said NAMB President Harry H. Dinham, CMC. Dinham said that NAMB has long advocated a national licensing standard that is evenly applied to government-regulated banks, credit unions, mortgage bankers, lenders and brokers and all employees of these entities. He also noted that more time was needed to consider the type and amount of personal information that would be included in the registry. The current proposal subjects individuals to a burdensome and intrusive data collection protocol, said Dinham. In fact, much of the data for the registry is not even legally required in many states. Part of the registrys goal is to create an outlet for consumers to lodge complaints against licensed professionals. Dinham said that CSBS and AARMR have not worked out the details of the complaint resolution process. He said the complaint process must meet the needs of consumers while protecting licensed originators from financial harm that could occur because of frivolous claims. A statement from NAMBs Consumer Protection Subcommittee For nearly two years, CSBS and AARMR have been working with more than 20 state regulators and a number of industry participants to develop a national mortgage licensing system and database registry. On Oct. 4, 2006, CSBS announced the creation of a limited liability companyState Regulatory Registry LLC (SRR)that will manage this database and uniform licensing system. NAMB is concerned with the direction the CSBS/AARMR effort is currently taking. NAMB would like to take this opportunity to articulate some serious concerns. In summer 2006more than 18 months into the projectNAMB was asked to participate in a CSBS/AARMR-formed industry working group. We are pleased to participate in this process, but fear that NAMB is not a full partner in considering this proposal. We believe that the substantive structure of the system was developed without our input and our concerns are not being addressed. Mortgage brokers have a vested interest in addressing the issues raised by the development and implementation of any new licensing system. Throughout discussions with CSBS/AARMR and the industry working group, NAMB has expressed concerns about the proposed systems operation and maintenance, as well as the cost and benefits of the proposed system to consumers, state regulators and mortgage originators. NAMB has the following specific concerns about the CSBS/AARMR system as it is currently proposed: 1. Include all originators It appears that mortgage brokers might be singled out for inclusion in the SRR database. The proposed CSBS/AARMR licensing system and SRR database must include all mortgage originators. All mortgage originators means all federally regulated and state-regulated banks and their subsidiaries, along with credit unions, mortgage bankers, lenders and brokers and all employees of these entities. 2. Limit information collection The current proposed system will subject individuals to the burdensome and intrusive collection of the following personal information: a. Employment history for the previous 10 years, including any periods of unemployment or part-time employment; b. Address and residence information for the previous 10 years; c. Whether individuals have filed for personal bankruptcy in the previous 10 years; and d. Whether individuals have ever been charged with a misdemeanor criminal offense, even if they were never convicted. It is important to limit the amount of personal information that is collected by the state regulators and maintained in the SRR database. The excessive collection and retention of personal information makes the database ripe for a potential security breach or inappropriate disclosure of personal information. A great deal of the information that originators will provide regulators on CSBS/AARMRs proposed uniform licensing forms is not required by the laws of every state. The uniform licensing forms will enable participating state regulators to collect personal information from originators that they may be unauthorized to collect. CSBS and AARMR must ensure that participating state regulators only collect the information that is required by the laws of their particular state. Standards of conduct and professionalism vary from state to state; thus, the conduct of licensees in one state may result in a complaint being registered in the SRR database, while the same conduct in another state would not. Who will determine what negative information should be included in the database and what should not? Uniform standards of professionalism and conduct should be developed and applied to every mortgage originator. Additionally, only formally adjudicated disciplinary actions should be included in the SRR databasenot mere threats, investigations, allegations or consumer complaints. 3. Security concerns The SRR database will be maintained by a third-party vendor, with no relationship to the real estate finance industry. Because of the tremendous amount of personal information that will be maintained in this database and the potential for a security breach, CSBS and AARMR must identify who will be held accountable for any mishandled personal information or breach in database security. 4. No complaint resolution process CSBS/AARMR has not identified how complaints can be filed against licensees. Who will be able to see when complaints are filed? How will complaints be registered on the database, and how long will those complaints reside in the database? CSBS/AARMR has also failed to establish an appeals process for licensees who have had a complaint registered against them in the database. A formal appeals process is needed to ensure the accuracy and authenticity of the information collected and maintained in the SRR. Additionally, any costs incurred in the development of this process should be absorbed by CSBS and AARMR. 5. Employer to pay costs The annual operating costs for the national mortgage licensing system and SRR database are projected between $6.5 and $7.5 million over each of the next five years. These annual operating costs will be covered by initial setup fees and application processing fees, which will be paid by licensees in every participating state. The costs associated with the operation and maintenance of this system should not be borne by individual mortgage originators; rather, those costs should be borne by the entities that employ these originators and by self-employed independent contractors. We look forward to maintaining an open dialogue with CSBS/AARMR and the participating state regulators; however, NAMBs continued participation in the CSBS/AARMR effort should not be considered an endorsement of the current proposal. NAMB will not tolerate CSBS, AARMR or any other entity or representative misrepresenting NAMBs positions and policies on the proposed registry and licensing scheme. For more information, visit
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