State regulators press on with flawed registration systemMortgagepress.comprotect consumers, flawed, public policy concern, false sense of security
National licensing initiative must include all mortgage
originators to succeed
Mortgage regulators at 29 state agencies announced their support
for a nationwide licensing and registration system that the National Association of Mortgage
Brokers says is too narrowly focused to effectively protect
NAMB President Harry Dinham, CMC said the initiative, sponsored
by the Conference of State Bank
Supervisors (CSBS) and the American Association of Residential
Mortgage Regulators (AARMR), is seriously flawed because it
intentionally exempts more than 60 percent of mortgage originators
from the proposed registry system.
Dinham said that this is a public policy concern because the
largest and most recent fines and settlements for abusive lending
practices have involved lenders and banks (i.e., Ameriquest's $325
million dollar settlement in 2006 and Household and Beneficial
Finance's $484 million dollar settlement in 2003).
"If the goal of this registry is to protect consumers by
standardizing license requirements and tracking bad behavior, then
it should apply to all mortgage originators," said Dinham. "As it
stands today, thousands of loan originators who work at banks and
other financial institutions would not be required to register.
This approach puts consumers at risk."
Dinham added, "This flawed system will create a false sense of
security for consumers and government agencies because many bad
actors will continue to be able to move freely from bank to lender
and back again without fear of being detected by the proposed
registry." For example, a bad actor at a bank can be fired for
unethical practices and then go work for another bank as a mortgage
originator without any record of his actions.
"We support stronger licensing requirements for the industry,
background checks for all originators and increased protections for
our customers," said Dinham. "This registry falls short of
accomplishing these goals. It is disappointing that the regulatory
agencies continue to exempt many in our industry from meeting the
requirements advanced by CSBS and AARMR."
He said that NAMB has long advocated a national licensing
standard that is evenly applied to government-regulated banks,
credit unions, mortgage bankers, lenders, brokers and all employees
of these entities.
For more information, visit www.namb.org.