Mixed Views on License Registry

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators issued a set of principles for states to consider as they propose enabling legislation to participate in their Residential Mortgage Licensing System.

The system, which has been in the works for the past two years, would provide uniform applications over a secure Web site for mortgage lenders and brokers to request a license or annual renewal with one or more state agencies through a single application, according to announcements. The system would hold the information in a secure database for use by regulators in the supervision of licensed companies and professionals and licensees amending existing or applying for new licenses in other states, the Conference said.

“Our hope is that by issuing these principles, we can dispel many of the concerns that have been raised to date about the System and begin working with industry in developing legislation that will help to build a modern state licensing system” said George Kinsel, American Association president, in a written statement.

The principles assert that state law decides who must be licensed or registered in the system, not the system itself.

The Mortgage Bankers Association said it supports the Statement of Principles and Related Sample Legislation for the Residential Mortgage Licensing System, including the reaffirmation that the system is not intended to alter who is and is not licensed by a participating state agency.

“Determining who is subject to licensure should be considered outside” the system, said John M. Robbins, MBA chairman, in a written statement.

The National Association of Mortgage Brokers, however, has expressed opposition to the registry system, citing that it solely focuses on the mortgage broker community and excludes originators at banks and other federally-regulated financial institutions from participating.

“We support a nationwide license registry only if it includes all mortgage originators,” NAMB President Harry Dinham said in an announcement. “It just doesn’t make sense to include some and not others because all consumers should benefit regardless of the distribution channel chosen.”

The principles also state that licensing information within the system will be owned by the state agency through which an entity is licensed and access to the data will be governed by a particular state’s privacy laws, the Conference added. Meanwhile, the system will be managed by the Conference subsidiary, State Regulatory Registry LLC, which will have a Mortgage Advisory Council of mortgage banking and brokering industry representatives who will meet regularly and be briefed on major issues under consideration by the subsidiary.

Additionally, the principles assert that State Regulatory audited financial statements will be made available to system users, state agencies and licensees, and that State Regulatory will charge “reasonable” processing fees to pay for the system operations. State Regulatory will determine the fees with input from the council.

As the system is developed, the Conference and American Association said they will work with the mortgage industry in developing standard statutory and regulatory policies that would be endorsed for use in all participating states. State Regulatory already started forming a working group of state regulators and industry representatives to work towards national standards on pre-licensure testing and continuing education requirements.

The two agencies also said they also provided sample legislative language for states that deem existing statutory language is insufficient to adhere to the principles.

Among other things, MBA applauded that the principles make clear that state regulators will continue to work with the mortgage finance industry.

“These principles and sample legislative language are a key step toward making sure the [system] serves as an effective tool to share information about licensed lenders and brokers from state to state,” Robbins said. The system “will allow state mortgage regulators to have information at their fingertips that will help them enforce existing laws that protect consumers from those in the lending process who have a proven track record of abuse.”