WASHINGTON — In a bid to better coordinate supervision of mortgage originators and brokers, several state regulators launched the Nationwide Mortgage Licensing System this week.
The system, which offers a one-stop shop for license applications and information on mortgage originators, currently includes seven states and is expected to add at least eight more by yearend. Twenty-three other states have pledged to sign on eventually.
Officials say the goals of the system, which was created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, are threefold: devising a more efficient licensing system for the industry, enhancing supervision among various state regulators, and improving overall consumer protection.
"We need to drive more uniformity among regulatory requirements and … create a central repository for licensing and supervisory data," Bill Matthews, the president of State Regulatory Registry LLC, the bank supervisor conference subsidiary that operates the system, said in an interview.
Currently the system is set up to allow individuals and companies to enter their state mortgage license information. Once they do so, mortgage originators can use the system to apply for other state licenses participating in the system. Any information already entered into the system is automatically applied to any future applications, with the ability to add necessary supplementary data.
The system is not open to the public yet, but state officials said that by next year they expect some data to be available on mortgage originators. For example, consumers and regulators will be able to quickly find out where a mortgage broker is licensed, what type of license the broker holds, and whether the licensee faces any disciplinary actions.
"It empowers the consumer with better information," Mr. Matthews said later during a conference call to demonstrate the system.
Officials with the bank supervisor and mortgage regulator groups said they worked for four years on the system. The first step was creating a uniform mortgage license application, which was completed in 2005. Since then they have worked to create an Internet database that can link the various applications across state lines, as well as a single user ID for each registrant.
In its first day of operation Wednesday, officials said 289 companies or individuals began the process of entering their license information. Of those, 55 submitted their data. State officials project that more than 500,000 companies and individuals will eventually register with the system.
The system could gain in importance if the mortgage reform legislation championed by House Financial Services Committee Chairman Barney Frank passes the full Congress. The Massachusetts Democrat's bill, which the House passed in November, would create minimum standards for mortgage licensing and require federal authorities to coordinate with the state system.
Officials said that when the registry is fully implemented, it will make life harder for scam artists.
"All of this gets tied together," said John Ryan, the bank supervisor conference's executive vice president. It will be "a lot more difficult to commit fraud and reinvent yourself. … Over time, we plan on being able to share background checks so you can have a really comprehensive review before granting the license."
Officials said they have taken pains to allow the system to keep up with adjustments to state licensing laws and federal requirements.
"State regulators have worked hard not to build the NMLS in a vacuum," said Steven Antonakes, the state banking commissioner for Massachusetts, one of the first states participating in the system. "We believe we've built a flexible system that can change over time."
Industry representatives said they welcome the database as a way to ensure the integrity of brokers.
"I know banks are extremely wary of the broker channel," said Joe Belew, the president of the Consumer Bankers Association. "It won't go away, but it will be subject to more oversight."
Regulators also lauded the new registry. The system "will enhance the ability of state regulators to share information about mortgage lenders and mortgage brokers," said Federal Deposit Insurance Corp. Chairman Sheila Bair in a press release.
