States Developing National License Registry

The system will be used by residential mortgage regulators to process licenses for mortgage lenders, brokers and professionals who register online through uniform mortgage license applications currently being used by several states for new licenses, the Conference of State Bank Supervisors announced.

The State Regulatory Registry LLC has been formed to run the pending online licensing system, which is scheduled to be in operation in January 2008 and is the result of a 21-month effort involving conference, the American Association of Residential Mortgage Regulators and the industry, according to the announcement.

In addition to being a licensing venue, the system will serve as an online public database or central repository of licensing and publicly adjudicated enforcement actions that will enable consumers to check on the licensing status and enforcement history of firms and individuals, the group of states said.

“The national licensing system and repository will enhance state regulators’ ability to protect consumers by increasing their ability to hold industry professionals accountable for their actions,” said the new registry’s President and Chief Executive Bill Matthews.

But the Mortgage Bankers Association, which has been working with the state regulators for over a year trying impose its own licensing reforms, said the formation of the State Regulatory raises serious concerns.

“While the program is well-intentioned and has great potential, we still have serious concerns about its operation and benefits to regulators, consumers and mortgage bankers,” said Paul Richman, MBA senior director of government affairs, in an announcement. “We have communicated our concerns to the state supervisors and hope they will work with us to resolve them before they get much further down the road.”

Among the concerns raised by the proposed license database are potential privacy and security breaches, as it will contain a large amount of personal information and will be managed by a third party vendor, making it unclear who will be held accountable for the breaches, MBA said.

MBA also questions whether the estimated $6.5 million annual cost to operate the program will realize cost benefits and efficiencies.

The trade group said it has also expressed concern that the program favors brokers at the expense of large lenders who engage in employee screening, background checks, in-house training, and accountability for bad behavior.

Furthermore, the proposed forms for the program are overly burdensome because the rely on the most complex state requirements, MBA added.

“Any new licensing system that is imposed on the industry should also reflect the fact that the mortgage banking industry is no longer a state-based industry, but one that operates on a national and international scope,” Richman added. “Any regulatory regime ought to be designed to promote greater uniformity and offer reciprocity among the states when it comes to licensing requirements. Its goal should be to create a one-stop shop where licenses can be obtained from a state utilizing standardized background checks, one set of fingerprints, and standardized education requirements. The program should also recognize the concept that there are fundamental differences between mortgage bankers and mortgage brokers.”

Another effort the group of states and the mortgage regulator group have been working on is nontraditional mortgage guidance for state-licensed mortgage bankers and brokers. Michael L. Stevens, a the group of states vice president and director, said it is a “matter of weeks, not months” until the guidance is issued.

The group of states considered the state guidance because the nontraditional mortgage underwriting guidance issued by federal regulating agencies on Sept. 29 only applies to insured financial institutions and their affiliates. The state guidance will be a modified version of the federal guidance focusing on residential mortgage underwriting and consumer protection.

Wile MBA was not happy with the federal guidance because it seemed like “regulatory overreach” and restricted competition, Washington Mutual said state regulatory agencies should issue the same guidelines as the federal regulatory agencies “so that consumers receive consistent disclosures and lenders have an even playing field.”