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Mortgage Regulatory System Now Operational

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According to a press release from the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AAMR), the Nationwide Mortgage Licensing System (NMLS) about which we have written in the past finally became operational on the first business day of the New Year.

NMLS is an Internet-based system modeled on the registry used to regulate securities brokers and dealers. It will provide a basis for coordination among the states for mortgage supervision and consumer protection and will prevent, for example, mortgage originators or brokers with complaints or violations on their records from moving to a different state and starting over.


According to CSBS Executive Vice President John Ryan, NMLS is the culmination of a four-year effort by state regulators to provide a new and more solid foundation for mortgage supervision and consumer protection. "NMLS provides the underpinnings of a regulatory framework to address the weaknesses of our current fragmented and complex system of mortgage origination and supervision."

Seven states are initial participants in the program; Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York and Rhode Island, but 42 state agencies in 40 states have stated their intent to use the system. CSBS expects that eventually all 50 states will use the system and projects that more than 500,000 company and professional licensees will ultimately be registered through the NMLS program.

On its first day of operations, NMLS reported that 10 percent of the 2,500 companies that were pre-registered with NMLS logged into the system and entered information into the standard mortgage application forms, resulting in a total of 289 filings created in the system. Fifty-five filings were processed by NMLS and submitted to an agency for approval. One filing was approved. The call center took 133 inquiries

Bill Matthews, president of State Regulatory Registry LLC, the CSBS subsidiary that operates NMLS, explained that, "Through the System, mortgage companies will apply for and manage their licenses electronically. In addition, NMLS is designed to reduce industry and department costs for processing licenses and will streamline the licensing application and renewal process for companies and professionals and thereby reduce industry costs." It also will centralize redundant state agency operations through the use of more uniform mortgage licensing requirements.

NMLS is only part of a multi-faceted plan being implemented by CSBS and AAMR to improve regulation and bring about greater uniformity in mortgage supervision among states. Other efforts include coordinated supervision, improved regulatory practices and consistent standards for testing and training for mortgage originators. To accomplish this, many states have changed or are in the process of changing their laws and regulations.

The National Association of Mortgage Brokers has strongly opposed implementation of NMLS on the basis that not all lenders are covered by it and its underlying inter-state compacts. CSBS and AARMR have argued in turn that Federal financial institutions are exempt from state regulation, a legal situation that was upheld last April by the Supreme Court in Watters v. Wachovia.

Consumers will eventually have access to the system's public licensing and enforcement information which will mean they can check on the history and credentials of a mortgage loan officer or lender before they commit to patronizing him. This component should be in place by next year.



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Comments (3)

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Overall, creating a barrier of entry for folks wanting to represent and or sell mortgage loans to consumers is long overdue. I am not an advocate for more regulations. In fact a smaller government and less regulation is almost always better in my opinion, but we've had to many uninformed mortgage loan officers representing themselves as "experts" giving uninformed, trusting consumers wrong information and committing fraud that their lack of self-control, self discipline and self-regulation has finally caught up with them. Sad thing is that had these loan officers been truthful and submitted loan apps including the "liar loans" truthfully, the system would have worked and the current credit contraction wouldn't be headline news. There has been a long history of trust more often than not between financial professionals and clients. Traditional bankers and traditional mortgage professionals have usually taken an interest and a fiduciary responsibility in the advice that they've given their clients. This recent breed of mortgage loan officer - less than 3-4 years of experience has caused havoc in the market. A Higher barrier of entry, more fiscal accountablility, more financial risk to them personally, better legal penalities and more of a consumer-reports or better business bureau or watch-list style of tracking to keep these financial sales schmucks out of this market - all the better. The market and the individual consumer has to much at risk to let inept pretend professionals and financial preditors into this market. The employess from the 250 banks and credit unions and the 30,000 brokers, across the country making mortgage lending their living and career don't need a glut of transitory minimally experienced salesman in the market playing havoc. The worst company I heard about was the multi-level marketing, recruit your friends and neighbors mortgage company using "networking" in its worst form to originate loans. The other was the local B paper mortgage company who preyed on their fellow immigrants. They hired my son's 19 year old friend who barely graduated high school and in 30 days was on a run rate to making $80K a year in commissions because he could "sell" and "close" loans. I am glad it's time that we make it just a little harder for folks to get into this business and have the penalties for these white collar crimes be simliar to other kinds of crimes. Just my opinion.

Above Posted By: Michael Dantonio | Mon, 4 Feb 2008 11:00:16 EST

I keep hearing that the government is going to help to people about to loose their homes. When if ever can we actually get the loans? Or is this just another false promise. It would be so simple for the government to fund a interest only loan for up to 5 years at the current rate they lend to banks or a 5% interest only loan for primary home owners in trouble. This I am sure would save thousands of home owners now facing forclosure. Please advise me if anything is available currently.

Above Posted By: Douglas M. Thomson Sr. | Wed, 9 Jan 2008 00:26:24 EST

Wow finally more government. Just what I wanted. Now I can almost not even think for myself and big brother will protect me.

Above Posted By: manic | Tue, 8 Jan 2008 19:10:52 EST


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