Web registry to help states track mortgage lenders

Rhode Island will be one of the first states to join a national database aimed at keeping better track of mortgage companies, particularly ones with a history of writing bad loans.
When the National Mortgage Licensing System is launched in January, Rhode Island is expected to be part of an initial group of about seven or eight states participating.
More states are expected to join the voluntary registry in 2009. Steven Cayouette, Rhode Island’s chief bank examiner, said as many as 40 states have expressed an interest in signing on.
Advocates of the Web-based database say it’s a move toward better consumer protection because a company that might get into trouble in one state will have more difficulty changing names and opening in a new state.
While the R.I. Department of Business Regulation already conducts criminal background checks at the state level on lender and loan broker applicants, the new system will allow for national criminal checks through the Federal Bureau of Investigation, Cayouette said.
Consumer protection isn’t the only benefit of the national registry. Local officials said it will make it easier for lenders to apply for licenses in multiple states, since license applications for participating states will be largely the same.
“The administrative costs and the various requirements of each state have made the licensing process very expensive,” said Paul Cappello, president of the Rhode Island Mortgage Bankers Association. “A national registry will make it easier for our members with multi-state licenses to file annual renewals, branch applications, annual reports, eliminating the mundane tasks of filling out redundant applications in various formats.”
This is the latest of several steps the state has taken to curb predatory lending in the last year or so.
Earlier this year, state legislators passed a law that requires individual mortgage originators to be registered by next March, and to be licensed by January 2009. The law also mandates extensive training on the laws and regulations governing loans.
That measure followed the Home Loan Protection Act passed in 2006 that limited the fees that could be charged on loans as well as the requirements that could be attached to subprime loans to people with poor credit.
The National Mortgage Licensing System was developed, at the cost of $10 million, by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.
“The NMLS will save the division significant time and resources in processing licenses and will provide better supervision of the mortgage loan industry as Rhode Island links with other states to protect consumers,” A. Michael Marques, DBR director, said in a statement.
Although criminal information won’t be made public, much of the data collected for the licensing system will be made available to consumers via the Internet.
Initially, the state’s 331 licensed lenders and 493 licensed loan brokers will be required to participate in the database. In fact, Cayouette said, licensees must submit a form to the DBR’s Division of Banking and Securities requesting an account on the NMLS by Nov. 15.
When the system is launched on Jan. 2, the division will require licensees to create a full record in the national system and submit it to the state for approval, Cayouette said.
Individual home loan originators will be required to participate in the system after the state law requiring their licensing takes effect in March. That affects an estimated 10,000 to 15,000 people, Cayouette said. •