Treasury Department aims to revamp financial regulatory structure

NAMB supports creation of federal Mortgage Origination Commission
The National Association of Mortgage Brokers expressed support for Treasury Secretary Henry Paulson's recommendation to form a federal Mortgage Origination Commission, as long as it would have oversight over all mortgage originators, including those employed by subsidiaries of federally-chartered banks. The formation of the Commission is just one of a series of short-, intermediate- and long-term recommendations for reform of the U.S. regulatory structure presented by the U.S. Treasury Department in its "Blueprint for a Modernized Financial Regulatory Structure." A copy of the 212-paged document is available online at www.treas.gov/press/releases/reports/Blueprint.pdf.

"Although we are still analyzing the plan, Treasury Secretary Paulson's recommendation in this area [a federal Mortgage Origination Commission] appears to compliment efforts by the House and the Senate to create a federal clearinghouse or registry for all loan originators," said NAMB President George Hanzimanolis, CRMS. "This proposal addresses how the registry requirement would be enforced, and establishes an office to oversee individual and state compliance with its rules. We support this aspect of the recommendations, and look forward to hearing more details in the days ahead."

The "Blueprint for a Modernized Financial Regulatory Structure" proposes the following changes to reform government regulation of financial institutions:

Short-term recommendations
•Expand President Bush's working group on financial markets.
•Establish a federal Mortgage Origination Commission to set minimum licensing and consumer protection standards.
•Expand the Federal Reserve's powers to regulate non-bank institutions.

Intermediate recommendations
•Eliminate the Office of Thrift Supervision, and merge its responsibilities into the Office of the Comptroller of the Currency.
•Determine whether the Federal Reserve or the Federal Deposit Insurance Company should have oversight of state-chartered banks.
•Give the Federal Reserve regulatory authority over systems that process payments and transfer securities.
•Propose a Congressionally-created Office of Insurance Oversight within the Department of Treasury.
•Streamline the Commodity Futures Trading Commission and the Securities and Exchange Commission into a single entity.

Long-term recommendation
•Create an entirely new regulatory structure consisting of a market stability regulator, a prudential regulator, and a business conduct regulator with a focus on consumer protection.

"We should, and can, have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change, one that will allow us to more effectively deal with inevitable market disruptions and one that will better protect investors and consumers," said Treasury Secretary Paulson. "The challenge is to evolve to a more flexible, efficient and effective regulatory framework—and that is the purpose of this Blueprint."

In defining the role of the Mortgage Oversight Commission, NAMB believes federal regulators should closely follow the guidelines established in HR 3915, which has already won bipartisan support in the House of Representatives, as well as the Secure and Fair Enforcement in Mortgage Licensing (SAFE) Act, S 2595, introduced in the Senate by Sens. Dianne Feinstein (D-CA) and Mel Martinez (R-FL).

NAMB has long contended that real consumer protection can be achieved by creating a single national registry that includes all mortgage originators, including Mortgage Brokers, loan officers and bank employees who originate loans at a bank or bank subsidiary, credit union, or mortgage brokerage; and to create national standards that include professional education and passage of an examination and criminal background check.

"An all-inclusive registry will give consumers access to the information they need about their mortgage professional in order to make sound financial decisions," said Hanzimanolis. "Hopefully, the current instability of our financial markets makes clear that an overhaul of the entire system overseeing the activities of financial institutions and Wall Street firms is critically needed to ensure the safety and soundness of the system and restore public confidence."

Federal financial institutions have historically been untouchable when it comes to enforcing state consumer protections imposed on individuals originating mortgage loans. State requirements for criminal background checks and education requirements for mortgage originators have been pre-empted by federal regulators. NAMB believes a uniform standard for individuals in the mortgage origination business should mean "uniform" and apply to those employed by federal institutions and their subsidiaries as well.

NAMB has established similar standards for its members, and after the 2008 grace period, all new and renewing NAMB professional and loan originator members must attend professional education and ethics training, pass a criminal background check, and, if their state requires it, hold a valid state license to conduct business as a Mortgage Broker or loan officer.

For more information, visit www.namb.org.