Licensing of loan officers may cost borrowers

Borrowers might have to spend more time and money to get mortgages as New York and the nation begin licensing and national registration of loan sales officers.

New federal and state laws aimed at preventing fraud and other abuses allow consumers to check up on loan officers, but they also have ratcheted up the cost of business. As of Aug. 1, New York State requires licenses for loan officers, and the cost to them can surpass $1,000 for classes, background checks, license certificate, surety bond and tests.

At the same time, the new rules and the lending crisis have slashed the number of people making loans. Despite a state estimate two years ago of 40,000 applicants, the number is closer to 15,000, and just 1,800 have met requirements so far. Tentative approvals have been given to 400 out of about 2,700 applicants on Long Island, where big firms Lend America and American Home Mortgage closed in the crisis.

Higher fees, more licenses

"You will see fees go up only because it's costing us more money," said Farmingdale mortgage broker Rich Biondi, who's thinking of raising his $350 fee per loan to $475.

Mike McHugh, head of Continental Home Loans in Melville, said his firm has spent $300,000 to hire extra compliance officers and train workers.

And charges add up when loan officers want to sell in several states. For example, Massachusetts' license fee is $500.

"Many state regulators were not sufficiently equipped to handle the volume of applications packages they received," said Shawn Krause, executive vice president at major online lender Quicken Loans. "The whole process has been expensive and burdensome."

Out of 120 salespeople at Bohemia-based lender Mortgage Concepts, three have their licenses, another 80 can make loans pending final license approval and 40 have failed or have yet to meet other requirements.

Founder Steven A. Milner expects to lose several Spanish-speaking salespeople - because the test and classes were in English only - and to lose those who were making loans in several states: "I'm beside myself."

His compliance officer, Marilyn Lang, said many salespeople did procrastinate but the state was also responsible for delays: "When somebody sends in fingerprints in April of 2008 and then just got them back saying they were smudged and have to do them again, it's difficult."

Deadlines extended

Rholda Ricketts, New York State deputy superintendent of banks, said the state has not been slow but procrastinators faced delays due to fully booked classes and test centers.

"For the most part, for us, we would consider it's all gone smoothly," Ricketts said.

Banking officials have extended deadlines for loan officers to meet requirements and will hold off processing new applications until Oct. 1.

Preapproved and looking for a home under $250,000, Benjamin Cooper of Farmingdale is against higher fees but sees a trade-off: "The deck is stacked against me, being a first-time home buyer with not enough money to put down on this crazy, expensive island . . . But on the flip side, it would be good to know that some people that maybe have not been held accountable for certain things . . . are now going to have to be."

Consumers can check on their loan officers by going to nmlsconsumeraccess.org, the Nationwide Mortgage Licensing System (NMLS), which is expected to include all loan officers working in the country. The database generates a unique registration number for each loan sales officer, a way of fighting fraud by allowing employers and the public to track individuals.

When the database is fully running, the public will be able to type in a loan officer's name or NMLS number and see when and where he or she got licensed, and complaints and enforcement actions against the person. The site will also give details of the loan officer's firm, from locations to other names used by the firm.

At mortgage.nationwidelicens ingsystem.org, the public can also check each state's licensing or registration mandates for loan sales officers, including fees and training.