A mortgage consumer protection bill has been introduced that would allow the policing of mortgage brokers in Mississippi, but supporters are concerned it will not make it out of committee.
Introduced similarly as House Bill 1264 and Senate Bill 2978, the act would require licensure of mortgage companies by the state department of Banking and Consumer Finance. Procedures and criteria for licensing applicants would be established, continuing education for license renewal would be imposed and mortgage companies and brokers would be subject to periodic examinations every two years.
“We’re trying to structure a fair, accountable lending environment that protects borrowers in the state of Mississippi,” said Dan Bruns, co-owner of Eagle Mortgage in Gulfport and president of the Mississippi Association Mortgage Brokers. “Currently, there is no specific law that licenses the approximate 400 to 500 companies that exclusively provide mortgage services to consumers in the state.”
The ethnic make-up of the state combined with the current environment creates the opportunity for discrimination against minority borrowers, Bruns said.
“The environment in Mississippi creates restrictions on charges to consumers by the mortgage companies,” he said. “It discourages mortgage companies from providing loans to persons borrowing lesser amounts of money, in the $20,000 to $40,000 range.”
In 1997, the legislators amended the Consumer Loan Broker Act to attempt to create some regulation over mortgage companies without success, Bruns said.
“That’s when the Mississippi Association of Mortgage Bankers started the process toward this legislation,” he said. “What we attempted to do with our licensing bill was to bring Mississippi up to par with most other states in the nation that require licensing.”
Called the Mississippi Mortgage Consumer Protection Act, it is supported by Ronny Parham, commissioner for the state Department of Banking and Consumer Finance.
“There are restrictions on an old law called the Consumer Loan Broker Act, but no provision for licensing,” Parham said. “It puts my department in an unusual situation, having to enforce a law where it has no jurisdiction because we don’t have a licensing procedure for mortgage companies and mortgage brokers.”
Mississippi, Alabama and New Mexico are the only three states that do not license and regulate mortgage companies, Parham said.
“It is my understanding Alabama is also proposing legislation in their current session to address the problem,” he said.
Opposition to the bill is from “three or four major Mississippi-based companies…who have been in the driver’s seat so long they’ve fallen asleep at the wheel,” said Bruns. “These companies are accustomed to running a significant portion of the small loan and mortgage business. If I were one of those selective large companies, I would be glad to have oppressive regulation in place that discriminates against a certain segment of the business community that competes with me. If I can push more and more of them out of business, there’s a bigger piece of the pie left for me.”
The bill requires background checks of people requesting a license and posted bonds, he said.
“If there is wrongdoing, the posted bond is something they could very well lose,” Bruns said. “A person providing mortgage services should provide a verifiable background to give advice on what’s going to be, for most Mississippi consumers, the single largest expenditure they will make.”
Because a few mortgage companies operate out of grocery stores, and, at one point, a mortgage company operated out of a taxi cab, the bill would also require that mortgage companies operate in a location “that conforms to zoning and has the proper facilities,” Bruns said.
Requiring out-of-state companies to locate offices in state will eliminate solicitation from mortgage companies that do not have a vested interest in Mississippi, he said.
“Right now, our association is handling five complaints that are very serious,” Bruns said. “In the absence of a licensing agency, there’s no place for the Mississippi consumer to go other than to the federal government. It’s comparable to driving drunk because there are no police officers.”
A consumer perk included in the bill is a simplified disclosure of costs associated with obtaining a mortgage, he said.
“A federal form has 40 to 50 line items, but our disclosure is very simple,” Bruns said. “For example, if you’re borrowing $100,000 at 6.75% interest, but my fees are $10,000, the annual percentage rate could be 8.2% because of all the fees I’ve added in. Our bill provides a simplified disclosure of costs associated with obtaining a mortgage. It’s a very simple, powerful and effective shopping tool for the consumer.”
Getting the bill out of committee and onto the floor “where the voters get to decide what’s good for them, I think we can get it passed,” Bruns said.
Danny Guice Jr. (R-Ocean Springs), chairman of the Banks and Banking committee who introduced House Bill 1264, said he is doubtful the bill will become law this year, but is hopeful that it will become law within the next several years.
“I am in favor of this concept and I’m in the process of studying House Bill 1264,” said Guice. “I have been in contact with several groups that would like…the opportunity to work with and have some input in developing this legislation.”
Because a new license would be created, Guice would like to see the House and Senate banking committees hold a joint study committee this summer “so the final bill will be perfected and we can garner support form as many interested parties as we can,” he said.
“Timing is very important in the passage of new legislation, and the timing for House Bill 1264 seems to be a bit premature,” Guice said.