Since the collapse of the housing market, the mortgage lending community has seen an onslaught of new regulations designed to prevent the next bubble. Unfortunately, instead of trying to correct the many causes of the collapse – which include a failed national housing policy – many elected officials have taken the easy route and are content to simply write more regulations.
The Secure and Fair Enforcement Mortgage Licensing Act was passed by Congress as part of the Housing and Economic Recovery Act in 2008 at the beginning of the housing crisis. It enabled the establishment of the Nationwide Mortgage Licensing System and required that all entities and individuals engaged in mortgage lending activity be registered. As an industry professional, I welcomed it because I thought it would provide a much needed set of guardrails and weed out unscrupulous individuals.
Recently, the NMLS has embarked on expanding the use of their registry to include non-mortgage industries such as pawnbrokers, debt collectors, payday lenders and even used car financing companies. Currently, 12 states have signed up to require these businesses to register with the NMLS. Many cash-strapped states will most likely see this as a good way to provide oversight without the expense.
These non–mortgage businesses will share the same NMLS identifier adjacent to their registration number as mortgage lenders and MLOs. The NMLS identifier must be on all mortgage marketing materials, including business cards, and is unique to the mortgage industry. I cannot think of anything more damaging to my profession and confusing to the public.
All mortgage lenders and originators should voice their objection. This is an issue that transcends the registered / licensed mortgage industry divide, because it damages the credibility of our profession.
At the inaugural Independent Mortgage Bankers Conference hosted by the Mortgage Bankers Association, I had the pleasure to be part of a panel which took up the topic of mortgage loan originator licensing. The current Rube Goldberg set up involving regulations, different state exams and federally supervised lenders exempting themselves from licensing needs to end, simply to protect the public.
Under the current guidelines set forth in the SAFE Act, the rules are confusing for the borrowing public. For example, consumers may not know that a mortgage loan originator who works for federally supervised banks are exempt from licensing. Thus, they are not subject to pre-license education, state and federal testing and continued education, like their counterparts who work for a state-regulated mortgage entity. It's the same job, but different standards. Furthermore, if the non-licensed MLO wished to demonstrate their professionalism and obtain a license they are prohibited from doing so while working for an entity that does not require one.
To the MBA's credit, it is actively supporting a single exam for those operating in multiple states. The industry needs across the board licensing, education and testing requirements for everyone who is reviewing financial documents for a residential loan. Furthermore, the SAFE Act should be amended to include that any mortgage loan originator regardless of affiliation have a license. Perhaps the Consumer Financial Protection Bureau could handle the licensing of entities and MLOs. In addition, there should be one exam for all 50 states. In other words, we need one set of professional requirements for anyone dispensing mortgage advice.
Today's licensed or registered mortgage loan originators have paid dearly for the sins of those who are no longer in the mortgage business. The Conference of State Bank Supervisors, which oversees the NMLS, needs to correct this immediately and give these non-mortgage entities a separate identifier. The residential lending community and the public deserve better.
Richard Booth is a Certified Mortgage Banker and mortgage industry consultant located in Neptune, New Jersey. He can be reached at firstname.lastname@example.org.