The House Subcommittee on Housing and Community Opportunity met on Sept. 29 for a hearing entitled, "Licensing and Registration in the Mortgage Industry." The hearing focused on the pros and cons of the patchwork of state licensing, registration and education requirements for the mortgage industry. H.R. 1295, the Responsible Lending Act of 2005--co-sponsored by House Financial Services Housing Subcommittee Chair Bob Ney and ranking member of the Capital Markets Subcommittee, Rep. Paul Kanjorski--seeks to curb abusive lending practices in the sub-prime market while ensuring that sub-prime loans remain available to consumers with less-than-perfect credit histories. The bill would create uniform national standards that would pre-empt state predatory lending laws. During the hearing, the Title V "Requirements for Mortgage Brokers" under H.R. 1295 were discussed. Title V would give states three years to pass uniform statutes for the licensing of mortgage brokers, create federal mortgage broker requirements for those states that do not pass compliant legislation, and establish a national database of licensed mortgage brokers.
In testimony before the subcommittee, National Association of Mortgage Brokers Government Affairs Committee Chair Joe Falk objected to the fact that in its current form, H.R. 1295 imposes requirements on mortgage brokers that would not apply to mortgage bankers and other types of loan originators, thereby placing brokers at a competitive disadvantage. He noted that the bill would actually weaken consumer protections if loan officers were excluded from the licensing requirements.
"It's good public policy to protect all consumers, regardless of where they choose to get their mortgage from," said Falk.
In contrast to NAMB's position, the Mortgage Bankers Association (MBA) was generally supportive of the bill in its current form.
"Title V of H.R. 1295, the Responsible Lending Act of 2005, will elevate the standards within the mortgage brokering industry, lead to greater accountability, and make compliance easier for multi-state brokers," said Teresa Bryce, co-chair of the MBA's State Licensing Task Force during her testimony.
Bryce stated that mortgage bankers and loan originators working for mortgage bankers didn't require licensing under H.R. 1295 because they are already subject to several levels of oversight from federal and state government. She also suggested that mortgage bankers were less prone to engage in abusive lending practices since, unlike mortgage brokers, they have capital that remains at risk beyond a loan's closing date.
Rep. Stephanie Tubbs Jones of Ohio noted during the hearing that the differences between mortgage bankers and mortgage brokers may be a bit too subtle for minority and low-income homebuyers because of their relative lack of financial sophistication. She urged that both mortgage bankers and brokers be licensed.
For more information about H.R. 1295, visit www.house.gov.