New mortgage loan originators in Wisconsin will have to pass a competency test and criminal background check before receiving a state license under a recently enacted state law.
And if the lawmaker who sponsored that legislation gets her way — Wisconsin’s 13,000 existing loan originators will have to take the same test.
State Rep. Sue Jeskewitz, a Republican from Menomonee Falls, has filed a bill that “requires a person who was registered as (mortgage) loan originator before July 2, 2005, to pass the competency examination,” according to an analysis of the bill posted on the Wisconsin’s legislature Web site.
The new law, also sponsored by Jeskewitz, is designed to provide better scrutiny of the state’s booming mortgage market and is welcomed by the state’s Department of Financial Institutions.
“We’re very glad to see it,” Kathryn Carlson, executive assistant to Wisconsin Department of Financial Institutions Lorrie Keating Heinemann, said through a spokeswoman.
“Getting a mortgage is a complicated process with a lot of different options,” Carlson said. “You want to know that the person working with you is competent.”
The Wisconsin Association of Mortgage Brokers backs the legislation, according to Carlson’s office.
The law went into effect July 1.
Carlson said the state is not trying to punish originators, just do a better job protecting the public from predatory and unscrupulous lenders.
The test will be designed to check originators knowledge of finance, real estate and mortgage laws. New applicants will be also be required to take 16 hours of continuing education classes every two years, according to a written copy of the legislation.
“At least two of those hours must be met by education in the area of new developments in the law, practice and procedure,” the legislation mandates.
The background check is designed to find applicants that may have broken financial and mortgage laws in the past, regulators said.
Other states are also trying to crack down on problems with tougher laws designed to halt and punish mortgage fraud.
Most notable is Georgia, where the legislature has passed legislation stiffening the penalties for mortgage fraud. The FBI has identified Georgia and Florida as having the worst mortgage fraud problems in the nation.
Under Georgia’s law a felony conviction for a first-time mortgage fraud offender is punishable by up to 10 years in prison and a $5,000 fine. Repeat offenders could get up to 20 years and a fine of $100,000.
Since it was approved in May Georgia authorities have already used the law to go after some large mortgage fraud cases.
In June, state and local investigators cracked an alleged fraud ring operating out of suburban Atlanta that involved 14 houses and cost lenders nearly $4 million.
Ohio and Kentucky are among the other states that have beefed up mortgage laws.
