New mortgage sales licensing law goes into effect

About 400 mortgage sales officers on Long Island got newly-mandated licenses to make loans, while another 2,300 here have at least one more month to pass tests and complete other requirements, the state banking department said.

Starting July 31, mortgage loan officers who want to work in New York state must be licensed and be listed in the Nationwide Mortgage Licensing System and Registry, which allows the public to check the license status of a loan officer. The licensing laws and national system have taken years to implement, and it’s an attempt to crack down on fraud in the industry and track workers who jump from job to job after being fired for making bad loans.

“New Yorkers can now rest assured when they meet with the MLOs sponsored by mortgage bankers and mortgage brokers that these are qualified, licensed professionals who have been subject to background checks and educated in mortgage law,” said Richard H. Neiman, state superintendent of banks. “What’s more, consumers now have resources at their fingertips to confirm for themselves that these individuals are properly licensed to originate mortgages.”

Statewide, about 1,800 people are now licensed as mortgage loan officers and about 9,740 applicants must complete their requirements, either by the end of this month if they work for a state-chartered institution or Oct. 1 if they work for a federally-chartered firm, the banking department said.

In the past, only mortgage broker firms were licensed, not the individual loan sales person. But as more exotic and bad loans came to light in the mortgage crisis, state lawmakers passed a licensing law in 2006. Congress then passed the Secure and Fair Enforcement for Mortgage Licensing of 2008.

Anyone who wants to sell loans in New York state must take 20 hours of training and pass tests and criminal and financial background checks.

But some critics had said the bar was too low, with other licensed professions required to get a lot more training under the state. For example, a real estate agent needs 75 hours of training and so does a hair waxer, while a shorthand reporter gets 1,300 hours of classes.

Borrowers who want to check make sure their loan officer is licensed may go to nmlsconsumeraccess.org.