(2/14/2010) Landmark federal regulations designed to reign in outlaw
mortgage originators, curb abusive lending tactics and reduce mortgage fraud
comes with a watchdog that bites and mortgage borrowers get to help hold the
leash.
Mortgage originators who don't register with the Nationwide Mortgage
Licensing System and Registry (NMLS) by July 29, 2011 won't get an NMLS
identification number and will be prohibited from originating mortgages.
Consumers can keep tabs on who is or isn't in the the registry
by looking up the mortgage originator's name, NMLS identification number,
current employer, business location, contact information, employment history
and any public record of disciplinary, enforcement and arbitration actions
against the originator.
SAFE also mandates that states meet or exceed SAFE Act standards for
state-level licensing and registration of mortgage originators who want
national registration.
Mortgage originators have gone kicking and screaming to comply with
rules, which some say amount to overkill.
"It is another government level of getting rid of the bad apples," says
Michael A. Sibilia, president of the Santa Clara County Association of
Realtors.
"I do believe something needed to be done because it (mortgage
originating) was a wild wild west show, but it may be limiting the amount of
competition and consumer choices," said Sibilia also with Keller Williams
Realty Silicon Valley in Campbell, CA.
That's because it's not easy getting into the registry, which reports an
initial failure rate of more than 30 percent on the tough national test.
In addition to other requirements, originators must pass both a national
100-question NMLS mortgage test and a shorter state test, with a score of 75
percent or better. The tests include questions on federal and state mortgage
laws and regulations about mortgage fraud, consumer protection, non-traditional
mortgages, fair lending and ethics.
Originators who fail the original national test get several opportunities
to pass, but the NMLS reports subsequent efforts weren't much better. After
the first test, the failure rate for all subsequent national tests combined
was 56 percent.
State tests proved easier with 82 percent of mortgage originators passing
nationwide the first time around.
"It's definitely a cumbersome system, but it's a good thing in and of
itself, in that it protects consumers by weeding out the bad apples," said
David Setti at Turnkey Mortgage Solutions in Campbell, CA.
Some states report as many as 40 percent of previously licensed mortgage
originators have not reupped since the NMLS system became a requirement.
Under the SAFE Act, mortgage originators who want to join the NMLS
registry must also:
• Take 20 hours of NMLS pre-registration education courses in
federal law and regulations, ethics, fraud, consumer protection, fair
lending and non-traditional mortgage lending.
• Takes eight hours of continuing education each year in the same
subjects.
• Provide fingerprints for a Federal Bureau of Investigations
background check.
• Provide authorization for the NMLS to obtain a credit report.
"It's grueling, but it's important and I'm happy with the system," says
Julie Larsen Wyss, a broker associate with Intero Real Estate Services in
Los Gatos, CA
"It makes sense to have a background check and finger prints when you are
handling consumers' money. It should have come to this a long time ago,"
said Wyss, also a mortgage broker with North Star Mortgage Associates in San
Jose, CA.
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