States unveil new nationwide mortgage regulatory frameworkMortgagePress.comCSBS, AARMR, MBA, NAMB, consumer protection, mortgage supervision On Jan. 2, the Nationwide Mortgage Licensing System (NMLS), an Internet-based system created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) that will serve as the foundation of a coordinated state mortgage regulatory framework, successfully launched. To date, 42 state agencies representing mortgage regulators in 40 states have indicated their intent to transition onto the system. The NMLS currently has seven states as initial participants, including Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York and Rhode Island. "This is the culmination of a four-year effort by state regulators to provide a new and more solid foundation for mortgage supervision and consumer protection," said CSBS Executive Vice President John Ryan. "NMLS provides the underpinnings of a regulatory framework to address the weaknesses of our current fragmented and complex system of mortgage origination and supervision." In the fall of 2004, through CSBS and AARMR, state banking and mortgage regulators came together to create a new regulatory framework for the nation's residential mortgage lending industry. The primary objectives of this framework are to enhance consumer protection, strengthen supervision and streamline the regulatory process. "In 2004, we rolled up our sleeves and started the development of NMLS, and moreover, a new model for mortgage supervision," said David Bleicken, president of AARMR. "We recognized that we had to apply today's technology to the regulation of an evolving and complex system of origination fueled by securitization." One group critical of the registry is the National Association of Mortgage Brokers, noting that it doesn't go far enough. The system only oversees state-regulated banks and lenders, not the largest banks that are regulated by the federal government. "From a consumer standpoint, this isn't the perfect scenario because if there's a bad originator out there, they can easily fall through the cracks and work for someone else, such as a federally regulated bank," said NAMB President George Hanzimanolis, CRMS in an early January interview with Stateline.org. "If this is about consumer protection, there can't be an argument that anybody should be left out of this." The launch of NMLS is just one part of a multi-faceted plan being implemented by CSBS and AARMR to improve regulation and bring about greater uniformity across state lines in mortgage supervision. These efforts include coordinated supervision, improved regulatory practices and consistent standards for testing and training for mortgage originators. To accomplish this, many states have changed or are in the process of changing their laws and regulations. "The state-based approach of NMLS has the benefits of localized accountability and an on-the-ground regulatory system combined with the efficiencies of a nationwide framework," said Ryan. "You can create high and consistent regulatory standards without preempting the states' important role in the development of consumer protections and the enforcement of lending standards." Eventually, CSBS expects all 50 states will transition onto the system. CSBS and AARMR project enrollment of more than 500,000 company and professional licensees eventually to be registered through the NMLS repository. Plans call for consumers to have access to the system's public licensing and enforcement information in 2009, enabling them to make a more informed decision when selecting a mortgage loan officer and lender. For more information, visit www.stateregulatoryregistry.org/nmls.