Mortgage Meltdown Spawns State Efforts to Prevent Abusive Lending Practices by Mortgage Brokers

Michael Eyerly

Attorney

0 CommentsPrint ArticleSubscribe

States adopt standard licensing requirements to curb abusive lending practices by mortgage brokers

The so-called sub-prime mortgage crisis (by no means have the problems and abusive lending practices been limited to sub-prime borrowers only) has spawned efforts on a number of fronts to curb abusive lending practices. The most recent effort mandates a standardized application, licensing and tracking process for mortgage brokers. Initially, seven states have adopted these uniform industry regulations, but another thirty-five have committed to join the system by the end of 2009.

Currently, regulation of mortgage brokers varies wildly from state to state. The new standard creates a uniform licensing procedure for mortgage brokers and a database to track mortgage brokers. The database will be available to consumers, who can use it to identify brokers who try to work in one state after being banned from another.

For most of us our homes are the single biggest investment we ever make, and we make it with precious little information about who is selling us our home loans. The new database will provide consumers the opportunity to do at least some due diligence into their mortgage brokers. The database will not ensure that a mortgage broker acts fairly and honestly, but it certainly won't hurt either.

The new process and the database will apply only to mortgage brokers and loan officers at state regulated banks; it will not include federally chartered savings & loans or national banks. However, congressional Democrats will likely cause the passage of federal regulation which will mandate certain licensing and training requirements applicable to all mortgage brokers in all states.