Playing it SAFE



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New Hampshire lost more than half its mortgage loan officers on Jan. 1, when a new law went into effect requiring them to be licensed.Some decided not to apply; others failed the test.Before the champagne toasts on Dec. 31, there were 2,665 loan officers on record with the New Hampshire Banking Department. When the clock struck midnight, there were 1,296.“It’s not surprising,” state Banking Commissioner Peter Hildreth said. “Now that housing sales have gone down, not as many people are working in the mortgage industry.”Loan officers, also called loan originators, take mortgage applications and record a customer’s financial information before a loan is processed. Loan officers at companies that practiced the kind of unscrupulous lending that led to the subprime crisis and economic meltdown — which were present, but not prevalent, in New Hampshire — falsified income and asset information to close deals that shouldn’t have been made.There was so much pressure from Wall Street to approve loans, according to Jon Wentworth, a loan originator at Profile Mortgage in Nashua, that mortgage lenders were encouraged not to bother verifying the financial information before giving their stamp of approval.The federal Secure and Fair Enforcement for Mortgage Licensing Act was passed on July 30, 2008. It gave states one year to pass legislation requiring mortgage loan originators to be licensed. It also requires loan originators to submit fingerprints, agree to an FBI background check and take annual continuing education courses.Until the SAFE Act went into effect this year, loan officers weren’t regulated by the state at all. The Banking Department simply asked that mortgage companies provide them with a list of every loan officer on staff.“There were no barriers. You could just graduate from high school and start working as a loan originator,” said Meg Malette, executive director of the Mortgage Brokers and Bankers Association of New Hampshire.Now, loan originators must take 20 hours of classes, pass two tests — state and federal versions — and undergo background and credit checks in order to get licensed. The law applies only to mortgage companies that are regulated by the state, not banks with federal charters, which are regulated differently.Transition periodSeveral mortgage professionals said the new requirements are a welcome change in the industry.“It’s good for the consumer, which makes it good for the companies that are doing things the right way,” said John Harvey, director of operations for Lights On Mortgage in Nashua, which has been in the business for 12 years.Wentworth, a 26-year industry veteran, said the reputable people in the industry have been pushing for regulations for a long time.“We wanted the reputable people to stay and the not-so-reputable people to go,” Wentworth said. “This should be a message that the people that are left are the professionals.”The drastic drop in loan officers when the licensing law took effect doesn’t suggest all of the loan officers were writing bad mortgages. The state has certainly felt the effects of subprime lending, with a record number of foreclosures in the last few years, but the situation never reached crisis level here, as it did in many states.Hildreth pointed out that the number of mortgage companies also has dropped in half since the onset of the recession.Wentworth, of Profile Mortgage, said some people were forced out of the business because of the real-estate market’s downward spiral.“When property values decrease 20 percent, so does income,” Wentworth said. “There were a lot of people that just couldn’t make a living out of it.”Despite a general feeling that licensing laws are good for the mortgage industry in the long run, transitioning to an era of strict regulation hasn’t been easy for the industry. Even loan application paperwork has to be filled out differently now, forcing industry veterans to relearn parts of their job.“At first, I was a little bit like, ‘I’ve been doing this my whole life and now I have to go back to school?’” said Jay Kerrigan, president of First New England Mortgage in Nashua.Kerrigan, who has worked in the industry 23 years, said his company didn’t find out until last September that loan originators had to be licensed by year’s end, which left little time for 20 hours of education and to study for two tests.“When you’re working and have families, that’s tough,” he said. “But I think it’s a good thing. I think the industry basically needed some attention.”Harvey, at Lights On Mortgage, said he has heard from other people in the industry that the licensing tests are difficult. Some longtime industry veterans thought they could take the test without studying and didn’t pass, he said.But on the upside, Harvey said, the SAFE Act put everyone in the industry on a level playing field and forced loan originators to realize they do have something to lose. — ASHLEY SMITH/THE TELEGRAPH

 

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