Fantasy Land Mortgages

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The state – and the public – will soon be able to follow the bad apples and the good in the mortgage lending business wherever they go and whatever they do.

Under the SAFE Act passed by Congress in 2008, federal and state regulators of the mortgage business were charged with jointly developing and maintaining a system for registering residential mortgage loan originators.

“The registry is working right now,” said Mark Pierce, deputy N.C. commissioner of banks.

“About half the states are on it today,” and all will join in the next 18 months, he explained.

Public access, however, “is still being developed.”

Eventually the state and the public will be able to check on a mortgage originator or other individual in the business and see whether he or she had been disciplined, for instance, or lost a license.

The SAFE Act responded in part to concern over mortgage fraud, which spiked during the housing boom and kept going after it collapsed.

The number of reported incidents of mortgage fraud jumped 26 percent in 2008 compared with 2007, reaching an all-time high, according to a report last year by the Mortgage Asset Research Institute. The report was compiled for the Mortgage Bankers Association trade group.

That came as the number of home loans being issued shrank, the report said.

The mortgage fraud issue has moved closer to home.

Two Whiteville men were sentenced Tuesday in U.S. District Court in Raleigh for their part in a mortgage fraud scheme. Three others involved, including a mortgage broker, were sentenced earlier in 2009.

The broker’s conviction would be trackable on the new database.

North Carolina has since 2002 licensed mortgage professionals who don’t work for commercial banks, Pierce said. But the state does not license mortgage employees at commercial banks, which fall under regulation of federal agencies.

But all mortgage professionals – licensed or not – will have to register with the national database.

“When we take a regulatory action, states can look at this national data bank,” Pierce explained. The database will also track the individuals’ employment and geographic moves.

“The database will help follow people around.

“People were going from one bank to another and one state to another. People would go from a non-bank company to a bank,” he said. The registry will allow the states to coordinate when they find a bad apple.

The SAFE Act affected North Carolina in another way. It changed its licensing law to conform to the law’s requirements, including minimum standards for licensing people in the mortgage business, Pierce said.

The state changes went into effect July 31.

The new law retains requirements for criminal background checks and fingerprinting of mortgage professionals that the state licenses.

Changes to the old law were few, however. Pierce said that the state’s law was already “95 percent” in compliance with federal rules.

What was changed included bonding amounts, which rose. Bonding for mortgage brokers rose to a range of $150,000 to $250,000 from $50,000. Bonding for what the state calls non-bank mortgage lenders, rose to a range of $150,000 to $500,000.