Mortgage brokers protested on Thursday a provision of a House bill that would require individual licensing and registration in a national database for them but not bank loan officers.
The bill, co-sponsored by Ohio Republican Bob Ney and Pennsylvania Democrat Paul E. Kanjorski and introduced in March, would create national protections against predatory lending to replace the patchwork of state and local protections. Lenders have generally supported it.
Joseph Falk, the chairman of the National Association of Mortgage Brokers' government affairs committee, argued that all originators who interact with consumers - including loan officers at mortgage banks - should be licensed and tracked through the proposed database.
"Anyone working with a consumer" can break the law, he said at a hearing of House Financial Services' housing subcommittee.
There is a lot of turnover among both bank loan officers and mortgage brokers, Mr. Falk said. They "go from company to company, entity to entity."
If they engage in "bad behavior," the only way to "root them out" is to include all originators in the database, he said.
Joseph A. Smith Jr., North Carolina's commissioner of banks, seconded Mr. Falk's depiction of the market's high turnover. Testifying on behalf of the Conference of State Banking Supervisors, Mr. Smith said:
"My experience in North Carolina, after three years of regulating lenders and brokers," is that "there is a free-agent situation in terms of originators. People commonly go between not only brokers and lenders but also … dare I say, subsidiaries of depository institutions."
Teresa A. Bryce, a senior vice president at Nexstar Financial Corp. of St. Louis and its director of legal and corporate affairs, testified on behalf of the Mortgage Bankers Association. She argued against extending the licensing provision to loan officers.
"Most [mortgage banking] companies have pretty extensive screening requirements in hiring," to start with, as well as "extensive compliance and quality-assurance programs," Ms. Bryce said.
Mortgage banks are more tightly regulated than brokerages and typically have more at stake in a loan's performance, she said.
But Mr. Smith said lenders are less consistent than Ms. Bryce suggested in rooting out bad apples. "In our experience, the background checks you go through as you change employment varies considerably" from company to company, he said.
Daniel F. Hedges, the director of Mountain State Justice, a West Virginia nonprofit that counsels low-income borrowers, said the bill as written would exempt almost all the brokers in his state from key West Virginia consumer-protection measures, such as bonding requirements.
Such measures help weed out unscrupulous players, he said.
