If you are looking at a home mortgage loan, Watchdog Nation wants you to know that next year you will be able to do a more thorough background check on your loan officers than ever before.

Courtesy of riskontrol.org

Here’s a little background. Although this focuses on Texas, every state in the nation is going to implement its own rules about how to handle its part of the new system.

A year ago, President George W. Bush signed into law the Secure and Fair Enforcement Mortgage Licensing Act, which creates a Nationwide Mortgage Licensing System and Registry.

The system is designed to make sure loan originators “act in the best interests of the consumer.”

For the first time, consumers will have access to loan originators’ employment history and any discipline or enforcement actions taken against them. Employees with federally licensed lending institutions will not need individual licenses. But others will be licensed by the state. About 5,000 Texans are expected to get licenses next year that didn’t need them before.

The new process includes submitting to a background check, taking a qualifying exam, posting a surety bond, getting annual license renewals and taking eight hours of continuing education each year.

For the past decade, says Chris Schneider, director of enforcement for mortgage loans in Texas, most mortgage brokers and loan officers in Texas were licensed. But loan officers had to be sponsored by a licensed mortgage broker.

Next year, almost all loan officers will be licensed as residential mortgage loan originators. The distinction between mortgage brokers and loan officers will disappear, Schneider says.

The change starts April 1, 2010.

This new layer of licensing is designed to clean up the industry. In Texas, for example, the Texas Department of Savings and Mortgage Lending has five full-time mortgage fraud investigators. The Texas Insurance Department has three members in its fraud unit. Local prosecutors investigate and prosecute, too.

Currently, licensed brokers and loan officers in Texas who engage in illegal practices can be suspended or lose their license. In the past year, Savings and Mortgage Lending handled close to 900 complaints; as a result, 61 people were told to cease and desist and six were suspended, records show.

Among the most common violations: unlicensed activity, false statements in loan documents, failure to produce required documents, and improper disclosure of all fees and other costs.

The attorney general, who can either prosecute violators or refer them to local prosecuting agencies, reports receiving close to 400 complaints in the past two years. Of those, 89 were forwarded to 14 local prosecutors for further action.

Increased licensing sounds like very good news for all consumers.

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To go more in-depth, Watchdog Nation recently shared the story of a shrewd businesswoman who thought she was paying $4,000 for a down payment to a loan officer. Actually, the man says he is a credit counselor. He promises to refund the money but hasn’t. Read that story in this Dave Lieber column.

The above information is based on a longer version of the September 11, 2009 Dave Lieber column in the Fort Worth Star-Telegram.

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Mortgage fraud

Mortgage fraud can involve a broker, real estate agent, appraiser or buyer.

For complaints, contact your state’s attorney general, the Federal Trade Commission, U.S. Housing and Urban Development Department, your county prosecutor and the government agency that regulates the lending institution.

Complain about a mortgage company to the agency in your state that regulates mortgage lenders.

For national bank complaints, contact the federal Office of the Comptroller of the Currency. For help on finding the right agency to file a complaint, check with your state’s banking department, headquartered at the State Capitol.

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