“I like to talk about good news,” said Massachusetts Office of Consumer Affairs and Business Regulation Director Janice S. Tatarka, following the Mortgage Summit her office and the state Division of Banks, which is under its umbrella, co-hosted Nov. 14.

While rising foreclosure rates are bad news to homeowners and the economy in general, summit participants seemed to agree that ideas put on the table at the day-long gathering of some 50 banking, mortgage industry, government and nonprofit leaders at the Westborough Doubletree Hotel could head them foreclosures off in the future – and help those in dire financial straits now – if they’re properly implemented.

The plans include licensing the 30,000-40,000 individual Massachusetts mortgage loan originators – rather than just the companies they work for, as is current practice. Also under consideration is establishing a “rescue pool,” or emergency fund that borrowers who meet certain criteria could dip into, for example, by qualifying to refinance a loan that’s gotten out of control or carried unfavorable terms to begin with.

The city of Boston recently announced the establishment of such a pool – of “up to $100 million” worth of refinancing products, put up by six major Boston banks – meant to help certain homeowners in the city secure more “stable” mortgages.

Massachusetts Commissioner of Banks Steven L. Antonakes said last week’s summit, which was closed to the press to allow for “free-flowing discussion” among participants, “was something I viewed as a starting point more than a finishing point.”

He and Tatarka started talking about it in the late summer, according to Tatarka, after it became clear that a bill to license mortgage loan originators wasn’t going anywhere in the most recent legislative session.

“It [the summit] followed a convergence of events,” added Deputy Commissioner of Banks David Cotney. The DOB had observed a rise in the number of nontraditional mortgage products and so-called reduced documentation loans (in which a borrower’s income doesn’t have to be documented as fully as in more traditional loans) being originated, he said. Interest and foreclosure rates are rising in Massachusetts and nationally, he added, lending further urgency to the need to discuss the issues and take action.

In recent months, following a number of surprise inspections, the DOB shut down several broker and lender offices after finding they were unlicensed or, the agency said, may have led consumers into loans they could not afford by inflating their incomes.

Eight licensed mortgage brokers and nine unlicensed mortgage-related entities in Lawrence, Malden, Marshfield, Somerville and Everett were ordered to “cease and desist” operations.

In September, the DOB issued emergency amendments to regulations governing mortgage lenders and brokers that “significantly expand the number of existing prohibited acts and practices” which, if a broker or lender engages in them, could cause a license to be revoked. Following a public comment period, DOB officials said they expect the amendments will be made permanent by Dec. 1.

And for the past 18 months, the division has worked toward developing a nationwide database of mortgage professionals that is intended to “reduce fraud” by providing local licensing officials with a listing of enforcement actions taken by state regulatory agencies from across the country.

That will give regulators a better chance of ensuring that a lender or broker in Connecticut can’t simply cross a state line and have a clean slate, Tatarka said.

Summit participant Jim Blake, chief executive officer of $3.3 billion HarborOne Credit Union in Brockton and chairman of the Massachusetts Credit Union League board, said Antonakes is “leading the effort” to create the database.

Following last week’s summit, the Office of Consumer Affairs also announced it has launched a new Web site, www.mass.gov/homesmart, with information on “everything from getting pre-qualified for a mortgage to hiring a home inspector.”

The DOB also has established a “mortgage fraud hotline” for consumers (800-495-2265, ext. 1501).

Many participants at the summit applauded the diversity of interests at the table.

“A lot of good will come from this, because you had every facet of industry there,” said Denise Leonard, executive director of the Massachusetts Mortgage Association and owner of Constitution Financial Group in Wakefield. MMA supports licensing of all loan originators, Leonard said. In fact, the trade association filed a bill in 2003 that would require licensing of all individual loan originators and include passing an exam and continuing education as part of the ongoing licensing process.

It would fund monitoring and enforcement with a license fee, Leonard said. MMA is working on a revised version for the next legislative session, she said, which will propose a dollar amount for the fee.

“I look at it this way,” Leonard said. “Everyone else in [a real estate sale] transaction is licensed. Your home inspector, your attorney, your real estate agent Â… we really do want to advance higher standards for mortgage professionals and create better results for consumers.”

‘A Receptive Ear’
The idea of licensing loan originators got plenty of support at the summit, participants said – although not everyone agreed that all originators share the blame equally for deceptive practices, and some think fewer licenses should be issued, at least for the moment.

Others, including Antonakes, said licensing individual originators would be meaningless unless the Division of Banks has the staff and the power to enforce them.

The Massachusetts Mortgage Bankers Association has suggested a moratorium on new applications for mortgage brokers “until the industry can adapt to these changing times.”

It also supports “restrictions or changes to some lending products,” MMBA Executive Director Kevin Cuff said in a prepared statement, but did not elaborate on details.

He said his organization did not support the 2003 MMA bill because it would have included mandatory licenses for loan originators employed by banks. Banks have the resources on their own to cure a bad loan, he explained.

Blake, of HarborOne and MCUL, said fraudulent mortgage loan activity “is absolutely not an issue for traditional lenders in Massachusetts. “These are not credit unions and banks. These are out-of-state companies, and companies that come and go,” he said.

He and other summit participants described a Federal Reserve Bank presentation that showed that the most foreclosures in Massachusetts, 1.3 percent of all owner-occupied units with mortgages, are taking place in the state’s “old, industrial cities” such as Brockton, Lawrence, Lowell, New Bedford and Springfield. One summit session dealt with “how do we control the kind of people who do business that cause less sophisticated buyers to get in trouble – typically immigrants and minorities,” Blake said.

While customers have to sign mortgage loan documents, he said, they might not be aware of the fine-print provisions in “inch-deep” piles of paper.

“For someone with English as a second language, if that isn’t criminal, it should be,” he said.

Boston Department of Neighborhood Development Deputy Director William F. Cotter, who’s in charge of the city’s refinancing consortium and attended the summit, said the top four originating lenders or brokers of loans that resulted in Boston foreclosures 2005 and 2006 were Ameriquest, Fremont Savings & Loan, Meritage and Option One. None are Massachusetts-based. “It’s encouraging to see [suggestion of a similar funding pool for victimized borrowers] on the statewide level,” said Cotter, although he noted, as did others, that the main problem with instituting such a pool is determining who will fund it.

Presentations by FRB and NeighborhoodWorks America’s New England District noted that “multiple underlying causes” for foreclosures also include home price fluctuations, job loss, consumer mis-use of credit and rising interest rates.

Nontraditional loans such as option-payment adjustable-rate mortgages, called “option ARMs,” in which a consumer has a choice, each month, to pay a minimum payment that’s lower than even the interest due on a mortgage, have been around since the 1980s but came into vogue in 2004 when the local housing market was especially hot and investors were buying homes with the intention to “flip” them within a year or two, Blake said.

But when a first-time homebuyer sees a billboard that says, “You can own a $350,000 house for $800 a month,” – at least for a year or so under certain types of loans – “the zeal to own takes over.” Blake said.

“These billboards are still around,” he said, and low initial payment enticements are still advertised on the radio.

Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance, said his agency has filed legislation that would apply the Community Reinvestment Act to mortgage lending companies.

“The key phrase in CRA is that lenders [in Massachusetts, i.e. state-chartered banks and credit unions] have an affirmative obligation to lend to all aspects of the community, including low- and moderate-income people,” he said. “I think what it does is force lenders who have to comply with it to take lending in low- and moderate-income neighborhoods seriously, and to have good and responsible products.

“There are certainly trustworthy mortgage companies,” he continued, “but it’s hard for consumers to distinguish between them and those that aren’t so trustworthy. For the most part, you aren’t going to get scammed by a bank. I would attribute that to CRA.”

Callahan said many of the ideas floated at the summit aren’t new. “The challenge,” he said, “is going to be to organize them into something more coherent.”

The DOB is forming task forces to deal with the issues raised. Tatarka said it’s too soon to say if new legislation will result: “Clearly, I cannot speak for the governor-elect. But I have no doubt there will be a receptive ear in the new administration.”