Special to American Banker

An attempt by the mortgage brokerage community to police its own ranks has two companies going head to head.

At issue is the contract to create and maintain a national registry of participants in the mortgage process - part of an effort by the National Association of Mortgage Brokers to stamp out mortgage fraud.

One firm, the Mortgage Asset Research Institute of Reston, Va., appears to have an inside track on the job, for which a request for proposal has been issued. Its programs have been endorsed by the Mortgage Bankers Association.

But another firm, Affinity Corp. of West Hills, Calif., claims it has already accomplished much of what the brokers association has set out to do. Affinity, headed by former Los Angeles police investigator Richard D. Ward, claims it has registered - and started to monitor - some 441,000 people involved in loan origination nationally. "What we have is already up and running, working," Mr. Ward says." In essence they're delaying the whole process, duplicating what we already have. It makes no sense."

Affinity has a prestigious list of clients, including the IMX Exchange, HomeSide, First Alliance, Headlands Mortgage, and General Motors Acceptance Corp. It also has endorsement agreements with the Illinois Mortgage Brokers Association and the California Mortgage Bankers Association. "We're up and running with Affinity," said Marve Stockert, executive director of the Illinois group. "We've had a wholesale lenders' meeting and pushed them to require members to be part of the Affinity system."

The Mortgage Asset Research Institute has been working on a pro bono basis with the brokers trade group on the technical aspects of how brokers and others in the origination community would be registered and how their performance would be measured and tracked.

Though the institute does not have a registry for brokers and others, it does run a nationwide fraud data base - the Mortgage Industry Data Exchange, or Midex - for about 170 subscribing lenders, agencies, and mortgage insurers. The system tracks reports on fraud by both individuals and companies. The institute says its data base includes information on roughly 350,000 cases of fraud and public disciplinary actions.

The institute claims that its subscribers, who use the exchange primarily to check on their brokers, account for 65% of all wholesale lending in the country. "We receive information from approximately 100 federal, state, and self-regulatory organizations involved in issuing sanctions in the mortgage, real estate, and financial services industries," said D. James Croft, executive director. "Most of our 170 subscribers also use Midex to exchange information among themselves about the incidents of misrepresentation in the industry."

The Mortgage Bankers Association endorsed the Mortgage Asset Research Institute's programs in early 1998. In a March 24, 1999, letter to members, the trade group said it was "pleased with the results of our first year cooperative relationship."

An undertext of the conflict seems to be East Coast versus West Coast, "inside the Beltway" connections versus a lack of them. And because Mr. Ward has been clear about his desire for Affinity to be the "keeper of records," as he said Friday, he is an easy target for criticism.

"The industry can't have two registration numbers" Mr. Ward says. "We will continue to be the national registry for brokers and the lending community."

Backers of the Mortgage Asset Research Institute say they are skeptical that there are 450,000 originators to be registered nationally. Wholesale Access, a research firm in Maryland, recently estimated that there are only 30,000 brokers and mortgage companies nationally. Some wonder how Affinity could have acquired its list of 441,000 originators in such a short time, and wonder whether the brokers themselves know that they have already been assigned an arbitrary registration number.

Another concern is whom Affinity is charging for its services. The firm is collecting fees from mortgage brokers as well as originators, and critics say this could lead to conflicts of interest.

Mr. Ward accused Mortgage Asset Research Institute of mudslinging. "Our competitor has been spreading the rumor that we are broke and will not be around for long," Mr. Ward said. "Instead of approaching [Mr. Croft] about this matter, we have continued to develop new technology-related mortgage products.

"We believe that lenders should utilize whatever products are available to lower their risk and reduce fraud," he says. "Unfortunately, our competitor believes that his company is the only game in town."

For the moment it is unclear which firm will receive the contract from the brokers trade group to build and maintain its registry data base. Mr. Ward acknowledges that his data base has been built by buying information from the 47 states that regulate brokers. (Colorado, Montana, and Alabama do not regulate brokers.)

He also acknowledges receiving fees from both brokers and originators, depending on who requests information from Affinity. Mortgage Asset Research Institute charges Midex subscribers $2 to $12 for each name researched, depending on volume.

Mr. Ward acknowledges further than that only a small number of those who have been assigned a "U9" registration number by his company know that they have been given such a number, or that they may have to use it to do business in the origination industry.

All of which makes it easy for Mortgage Asset Research Institute's Mr. Croft to take the high road. The trade groups are addressing the matter in the right way, he says. "When you are developing something that is essentially a self-regulatory process, it is paramount that that you get broad industry input as the task force is going. It takes time, but getting buy-in is essential."

Mr. Quinn is a freelance writer in Arlington, Va.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.