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Nationwide mortgage licensing system in the works

Licensing for mortgage lenders and brokers will be streamlined with the ability to purchase licenses online via a new proposed nationwide licensing system that will also help regulators root out bad players in the industry.

Mississippi Banking Commissioner John Allison said the Mississippi Department of Banking and Consumer Finance (MDBCF) plans to participate in the Residential Mortgage Licensing System now under development by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR). The system is designed to improve the efficiency and effectiveness of state supervision of the U.S. mortgage market, fight mortgage fraud and predatory lending and unify and streamline state license processes for mortgage lenders and mortgage brokers.

“This system, when up and running, will accomplish something that is unprecedented in the mortgage industry,” Allison said. “Mississippi plays a critical role in regulation of a significant segment of the lending industry, and our participation in the system will accrue significant benefits to mortgage practitioners and the consumers of our state.”

Plans in place by 2010

Plans are for the system to process national, uniform license applications and renewal forms to be in place by the end of 2009. Allison said the nationwide Residential Mortgage Licensing System will be especially useful for companies operating in multiple states because they will be able to go one place and renew licenses in all states at one time.

By having a national system, regulators will be able to see if a company applying to do business in their state has had complaints filed against it in other states.

“When one of these names comes up, we will be able to see if they have been good players in other states,” Allison said. “If there are problems, it could be cause not to license them here. And vice versa — if a problem child in Mississippi tries to get licensed somewhere else, the other state would know its record here. It strengthens the whole industry by keeping the bad players out and good players in. This registration system is very similar to how security dealers and brokers are now licensed among the 50 states. There is one-stop permitting. The company that wrote the program to do that is working to do our program.”

Cutting paperwork

The system will also reduce the amount of paperwork that has to be filed and saved. Allison said the MDBCF is redoing its databases because it has been inundated with paperwork in everything it does. With the new system, applicants will be able to renew licenses online and the department will be able to e-mail the license to them. Mostly electronic documentation will be used, except for background checks and proof of surety bonds.

“We need physical proof from the insurance company for the surety bonds and physical proof from the Highway Patrol and FBI on the background check,” Allison said. “But 75% of the paperwork can be committed to imaging, doing away with paper. It will save a lot of time and motion with my staff having to enter information in manually. Right now in Mississippi, you can renew your driver’s license, nurse’s licenses and CPA licenses online. Several agencies have this in place right now, so we will be tying in with that part of the electronic age.”

Allison said the system will have a number of advantages:

• Improve the efficiency and
effectiveness of state supervision
of the U.S. mortgage market.

• Fight mortgage fraud and predatory
lending that costs consumers and
the mortgage industry hundreds
of millions of dollars in losses
each year.

• Increase accountability among
mortgage industry professionals.

• Unity and streamline state license
processes for mortgage lenders.

Thus far, 28 states have stated their intention to participate in the nationwide licensing system.

‘Creating the critical mass’

“The importance of this initiative is underscored by the number of state agencies indicating their intent to come on the system during the initial development phase,” said George Kinsel, president, AARMR. “These states are creating the critical mass necessary for state supervision of the mortgage industry to become more uniform, more efficient and more effective.”

Legislation was recently passed in Mississippi that renews and strengthens state laws for regulating mortgage companies. Allison said Senate Bill 2350 has provision for additional protections for consumers including heavy criminal penalties for abuse. It also allows Mississippi to be a participant in the nationwide registration of professionals involved in mortgage activity such as brokers, originators and lenders.

The state banking department also has adopted new regulatory guidance covering nontraditional mortgages sold by state-licensed entities. The intent of the guidance for the subprime mortgage market is to make sure that risks are disclosed and consumers know what they are getting into when they get a nontraditional mortgage.

“The guidance is intended to promote consistent regulation in the mortgage market and to clarify how residential mortgage providers can offer nontraditional mortgage products in a way that clearly discloses the risk borrowers may assume,” Allison said.

While it is only guidance now, plans are in the future to incorporate it into regulation.

Another effort is also planned to help prevent mortgage fraud or abuse. There is a proposal to add a $1.25 fee to filing a deed of trust. Twenty-five cents would go to the county for processing costs, and $1 would go into a special fund controlled by the Mississippi attorney general and the banking department to hire special investigators and prosecutors to go after people who commit mortgage fraud and abuse. Allison said other states that have adopted a similar system have proven it works very well to prevent mortgage abuse.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

About Becky Gillette

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