New Massachusetts regulations on reverse mortgages and foreclosures should go into effect Oct. 14, representatives from the state’s Division of Banks said at a panel Thursday at the New England Mortgage Bankers Conference.
The regulations were part of a law passed last year, which required face-to-face counseling for reverse mortgages and extended the right-to-cure period for delinquent homeowners to 150 days. The agencies had public comments sessions on them earlier this month. The division intends to pass the rules on to the Secretary of State by the end of the month, said Cynthia Begin, senior deputy commissioner for the Division of Banks.
Regulators from five of the six New England states as well as the Mortgage Bankers Association sat for the panel, reviewing tweaks to licensing regulations as the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) enters into its first renewal period.
The Massachusetts mortgage sector is "beginning to see stabilization" for lenders and mortgage companies, said Greg Short, a deputy commissioner for mortgage supervision at the division. Brokers were still in decline, though the 5 percent drop in their numbers was a much more moderate one than in 2008 and 2009, which saw drops of more than 20 percent. Overall loan originator numbers were still registering significant drops, with MLOs down about 20 percent to around 3,700 licensees in 2011 versus 2010, said Short.
In Connecticut, regulators will be adding a new licensing requirement for employees of debt negotiators and loan modification companies, said representatives from the state’s Department of Banking.
"We’re going to require the individuals performing those services obtain mortgage loan originator licenses, and be held to all of the same standards that mortgage loan originators are," said Melanie Mannix, division director for the department.
The department has also created a new license type for loan processor/underwriters, separating them from loan originators, and is considering requiring branch managers to obtain licenses. It has also made it possible for entities like State Farm, which are exempt from the statutory licensing requirements, to register on NRMLA and has tweaked its definition of appraisal fraud.
Regulators for several states said they were continuing to see unlicensed loan activity, with Connecticut saying they were considering fining individual originators for violations occurred after January 2011.
"It’s about creating a culture of personal responsibility," seconded Short.
All states said they were beginning to examine loan officer compensation issues in their current audits, though none had issued fines for violations yet, following a federal law which decoupled loan officer compensation from mortgage pricing and went into effect this spring.
The session also highlighted long-standing tensions between bank loan officers and independent loan originators. The former are not required to comply with National Mortgage Licensing Standards. Andrew Szalay director of state government affairs for the Mortgage Bankers Association explained that one of the groups’ current lobbying goals was to make it easier for bank loan officers to obtain a transitional license to work for other mortgage lenders, as well as to reconcile different licensing requirements between states.
Connecticut regulator Mannix implied her state might have reservations about this, saying she was aware of individuals who had failed the NRMLA licensing requirements who had gone on to obtain positions as bank loan officers.
Remarks from other panelists and the audience emphasized that the discrepancy was a cause of tension, with Bill Lund, superintendent of the Maine Bureau of Consumer Credit Protection, said his office had received calls from angry bank executives demanding he prevent independent loan originators from emphasizing their more strenuous licensing regime as a marketing tactic, and some bank representatives admitting that their own LO’s had obtained NRMLA licenses in order to blunt this criticism.
