Mass. Originators, Brokers Exit Industry

Non-bank loan originators in Massachusetts were required to apply for a grand-fathered license by May 27.

The state received 5,726 grand-fathered mortgage loan originator applications as of the deadline, David J. Cotney, chief operating officer for the state’s Division of Banks told MortgageDaily.com in a statement.

The division had estimated that between 15,000 and 25,000 non-depository loan originators were active in Massachusetts prior to the deadline, Massachusetts Mortgage Bankers Association Executive Director Kevin M. Cuff told MortgageDaily.com in an interview. The trade group was in agreement with the state’s estimate of potential licensees.

Cuff speculated the discrepancy between the initial estimates and the final number was a combination of flawed estimates, a number of originators exiting the mortgage business and many who have not yet elected to file for a license.

“The far-reaching and most telling element is that we have a dramatic loss of production coupled with what I call the zero to 60 formula,” Cuff said.

He explained that the state has gone from no regulation for non-bank originators to required licensing. The grand-fathered license involves a $150 background screening check, a $500 license fee and eight hours of education at a cost of around $800.

For new originators, 24 hours in education is required.

Cuff speculated many of the strictly sales people that entered the industry between 2001 and 2004 will now find some other industry in which to utilize their sales backgrounds.

“They are not professionally committed to mortgage origination,” Cuff said.

While regulators first began focusing on loan origination in 2005, Cuff said debate did not turn into regulation until late last year.

The state also received 1,184 mortgage broker license renewal applications by a May 31 deadline, the Division of Bank’s Cotney said.

Denise M. Leonard, executive director for the Massachusetts Mortgage Association, said her group was informed that 25 percent of brokers did not renew.

The decline in mortgage broker license renewals also reflect stiffer licensing requirements.

Cuff said the net worth requirement has gone from a positive $1 to $25,000. In addition, a $75,000 bond is now required.

“I think all of us can admit at this stage in the game that the mortgage environment is under a microscope and changing daily,” Cuff stated.

He said many of the problems are the result of over-zealous national lenders and correspondent lenders that are not located in the state.

“At the end of the day, the most affected person in the Commonwealth of Massachusetts was not the one that was causing the problem and are being forced out of business,” Cuff said. “The end result is going to be, unequivocally, that low- to moderate-income consumers in the Commonwealth of Massachusetts are not going to get access to credit, at least like they once did or like they ever will in the foreseeable future.”

He added, “The people that were providing that access and that pathway … that pathway to homeownership is gone away completely. And that’s unfortunate.”