Licensing could stem mortgage fraud

There are lots of proposed remedies to prevent another mortgage catastrophe like the one we’re going through now. Most of the suggestions I’ve seen won’t fix the loopholes that allowed so many borrowers to take on mortgage loans they couldn’t afford.

But there is one solution that may help stem fraud in the mortgage industry, and it could reduce the number of unscrupulous or unlicensed brokers and loan officers who move from state to state preying on borrowers.

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators have launched the Nationwide Mortgage Licensing System, which is designed to help state licensing officials keep track of individuals and companies responsible for arranging mortgage loans.

The system streamlines the regulatory process by allowing state-licensed mortgage lenders, brokers and loan officers to use one form to apply for, amend, update or renew licenses online.

The registry brings uniformity and transparency to the mortgage industry without impairing the ability of states to approve, deny, suspend or revoke licenses.

Often unsavory individuals and companies can continue their unlawful business practices because there are no uniform mortgage licensing rules.

What they are prohibited from doing in one state might be allowed in another. Some states have tough mortgage laws; others do not.

Clearly, this new registry won’t catch people who choose to escape detection by not applying for a license. But the database could be used by responsible lenders, brokers, and eventually consumers to check whether someone who claims to have a state license to arrange mortgage loans actually does.

“It’s incredible how much mortgage fraud is out there and how pervasive it is,” said Bill Matthews, senior vice president of the Conference of State Bank Supervisors, which owns and operates the Nationwide Mortgage Licensing System.

With the mortgage registry, brokers, lenders and loan officers fill out a comprehensive application that can be forwarded to states participating in the system. As part of the process, applicants have to disclose a great deal of information ranging from their Social Security number to any criminal or civil actions against them. They also must provide fingerprints and identify affiliations with industry firms such as lenders, brokerages and title companies.

The database is also designed to track individuals or companies that do business under various names.

“From this single record it allows the regulators to see the entity exactly the same as other regulators,” Matthews said in an interview. “A uniform application increases the breadth and depth of information available.”

What a great tool this will be once all the states participate.

Imagine state investigators being able to check the status of a questionable applicant nationwide without having to search databases in 50-plus jurisdictions.

This uniform licensing source will be a crucial tool for regulators trying to determine if someone is participating in an unlawful activity that got them banned from mortgage activity in another state.

So far, seven states — Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York and Rhode Island — are participating in the mortgage registry, which was launched online in January. By year’s end, 18 state agencies are scheduled to be part of the system, although 42 state agencies representing mortgage regulators in 40 states have indicated their intent to come on board.

Matthews said he expects all 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands to be part of the registry in the next three to five years. By 2009, consumers will have access to the database, he said.

I know it takes time to get such a system up and operating, but I certainly hope the states that intend to join do so quickly. Those who haven’t made a commitment should race to participate. This type of oversight is badly needed.

A lot of criticism for the mortgage mess has fallen on borrowers — and rightfully so. Many did not do their research and didn’t read their closing documents carefully or crunch the numbers long-term to see if they could afford their loans.

Still, some blame should be placed on brokers, lenders and front-line loan officers (some of whom were unlicensed) who pushed mortgage products on borrowers without adequately explaining the terms. The nationwide licensing system can go a long way to weed out these players.

It’s not a perfect system. For one, the registry doesn’t include the professionals working for federally insured banks, thrifts and credit unions. Still, the database is a better regulatory net than we have now.

We’ve had a lot of pompous proclamations of what should be done to avoid a repeat of the current mortgage disaster. At least this new system may actually provide much-needed consumer protection.

(c) Washington Post Writers Group

Talk to us

More in Herald Business Journal

A man walks by Pfizer headquarters, Friday, Feb. 5, 2021, in New York. Pfizer will spend about $43 billion to buy Seagen and broaden its reach into cancer treatments, the pharmaceutical giant said Monday, March 13, 2023. (AP Photo / Mark Lennihan, File)
Pharmaceutical giant Pfizer to acquire Bothell-based Seagen

Pfizer announced Monday it plans to acquire Seagen in an all-cash deal for $43 billion.

Lacie Marsh-Carroll stirs wax before pouring candles in her garage at her home on March 17, 2018 in Lake Stevens. (Kevin Clark / The Daily Herald)
Women business owners in Snohomish, Island counties make their mark

In honor of Women’s History Month, we spotlight three local business owners.

x
Edmonds International Women’s Day takes place Saturday

The Edmonds gathering celebrates women and diversity with this year’s theme, “EmbraceEquity.”

Owner and CEO Lacie Carroll holds a “Warr;or” candle at the Malicious Women Candle Co workspace in Snohomish, Washington on Wednesday, Feb. 15, 2023. The business is women run and owned. (Annie Barker / The Herald)
Malicious Women Co: She turned Crock-Pot candles into a sassy venture

Lacie Marsh-Carroll is rekindling her Snohomish candle company with new designs and products.

Kelly Matthews, 36, left, Tonka, 6, center, and Nichole Matthews, 36, pose for a photo in their home in Lynnwood, Washington on Thursday, Feb. 2, 2023.  The twin sisters work as freelance comic book artists and illustrators. (Annie Barker / The Herald)
Drawing interest: Twin sisters never gave up on making their mark

Lynnwood sisters, Kelly and Nichole Matthews, got their big break a decade ago and now draw comics full time.

Willow Mietus, 50, poses for a photo at her home in Coupeville, Washington on Wednesday, Feb. 1, 2023. Mietus bought a former Frito-Lay truck to sell her dyed yarn out of. She calls it "The Wool Wagon." (Annie Barker / The Herald)
The Wool Wagon to hit the streets of Whidbey Island

A self-described “professional yarn temptress” from Coupeville is setting up shop in a modified truck.

IonQ will open a new quantum computing manufacturing and research center at 3755 Monte Villa Parkway in Bothell. (Photo courtesy of IonQ)
Quantum computing firm IonQ to open Bothell R&D center

IonQ says quantum computing systems are key to addressing climate change, energy and transportation.

Nathanael Engen, founder of Black Forest Mushrooms, sits in the lobby of Think Tank Cowork with his 9-year-old dog, Bruce Wayne, on Friday, Jan. 27, 2023, in downtown Everett, Washington. (Ryan Berry / The Herald)
Growing green mushrooms in downtown Everett

The founder of Black Forest Mushrooms plans to grow gourmet mushrooms locally, reducing their carbon footprint.

Barb Lamoureux, 78, poses for a photo at her office at 1904 Wetmore Ave in Everett, Washington on Monday, Jan. 23, 2023. Lamoureux, who founded Lamoureux Real Estate in 2004, is retiring after 33 years. (Annie Barker / The Herald)
Barb Lamoureux, ‘North Everett’s Real Estate Agent’ retires

A longtime supporter of Housing Hope, Lamoureux helped launch the Windermere Foundation Golf Tournament.

Bothell
AGC Biologics in Bothell to produce new diabetes treatment

The contract drug manufacturer paired with drug developer Provention Bio to bring the new therapy to market.

The Walmart Store on 11400 Highway 99 on March 21, 2023 in in Everett, Washington. The retail giant will close the store on April 21, 2023. (Janice Podsada / The Herald)
Walmart announces Everett store on Highway 99 will close on April 21

The Arkansas-based retail giant said the 20-year-old Walmart location was “underperforming financially.”

Everett Memorial Stadium and Funko Field on Wednesday, Sept. 2, 2020 in Everett, Washington. (Olivia Vanni / The Herald)
Drive to build new AquaSox ballpark gets $7.4M boost from state

The proposed Senate capital budget contains critical seed money for the city-led project likely to get matched by the House.