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 www.namb.org.
