WASHINGTON — A year to the day after Congress passed a law requiring states to implement a national registry for mortgage originators, 46 states and the District of Columbia have complied and three more states appear poised to act soon.
The Nationwide Mortgage Licensing System is designed to help establish a standardized process for all state-licensed originators and to increase transparency and accountability in the mortgage industry. The registry was begun in January 2008 with a handful of states and is likely to expand soon to all states.
The Secure and Fair Enforcement for Mortgage Licensing Act, whose one-year anniversary is today, required each state to pass a law imposing registration, and state regulators say it exemplifies how quickly states can act.
"It's pretty amazing that virtually all 50 states can legislate in one year on not an easy issue and adopt something that can create much greater uniformity," said John Ryan, executive vice president of the Conference of State Bank Supervisors.
So far, 26 states are active registry participants, covering 66,469 individual originators and 11,459 mortgage broker and lender companies. Seven more states are scheduled to participate this year, and 13 more are to come on line by January. Three states — California, Pennsylvania and Massachusetts — have not yet passed bills but have legislation pending. The last state, Minnesota, is expected to address the issue in 2010, according to a spokesman for the state banking commissioner.
Though the SAFE Act was intended to assure licensing uniformity among the states, some differences remain, according to CSBS. Still, it said, most states now have standardized definitions of relevant terms, continued education and testing of originators and criminal background standards.
Bill Matthews, the president of State Regulatory Registry LLC, discounted the differences.
"Did they all do it exactly alike?" he said. "No one would expect them to, given the nature of the state process and level. The real story is how much the state legislatures accomplished in such a short period."
One hotly debated topic remains whether officials performing loan modifications should be subject to the registry. The law defines a mortgage loan originator as someone who takes an application and negotiates the terms. The industry is still debating whether that should include a servicer and a loan modification officer. A proposal by federal bank regulators for banks and thrifts would encompass loan modification officers, but many bankers remain opposed to including these companies.
John Ducrest, bank commissioner for the Louisiana Office of Financial Institutions, said the national registry would help stop fraud because state regulators can now more efficiently track bad actors. His state began voluntary registration five years ago and officially joined the national registry in August 2008.
"The big benefit is, states can talk to themselves through the system," he said. "If [a state bank regulator] in Mississippi revokes someone's license, that person can't come across the border without me knowing."
But Joe Pigg, senior counsel for the American Bankers Association, said the real issue is how the law will be enforced. He also pointed out that the examination of nonbank mortgage originators is still very much a patchwork among the states rather than uniform as it is for national banks.
"Passing legislation is not the same as enforcing legislation," he said.
