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Posted Tuesday, May 7, 2008
New registry makes it easier for regulators to spot the mortgage world's con artists
By Michelle Singletary / The Color of Money

There are lots of proposed remedies to prevent another mortgage catastrophe like the one we're going through now. Most of the suggestions I've seen won't fix the loopholes that allowed so many borrowers to take on loans they couldn't afford. more stories like this Good mortgage news Housing rescue package set for House vote Mass. foreclosure activity continues to surge Business Highlights UBS, Fannie Mae among big market movers

But there is one solution that may help stem fraud in the mortgage industry and reduce the number of unscrupulous or unlicensed brokers and loan officers.

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators have launched the Nationwide Mortgage Licensing System, to help state officials keep track of individuals and companies. The system streamlines the regulatory process by allowing state-licensed mortgage lenders, brokers, and loan officers to use one form to apply for, amend, update, or renew their licenses online. The registry brings uniformity and transparency to the mortgage industry.

Often, unsavory individuals and companies can continue their unlawful practices because there are no uniform rules. What they are prohibited from doing in one state might be allowed in another.

Clearly, this new registry won't catch people who choose to escape detection by not applying for a license. But the database could be used by responsible lenders, brokers, and eventually consumers to check whether someone who claims to have a state license to arrange loans actually does.

With the mortgage registry, applicants have to disclose a great deal of information, ranging from their Social Security number to any criminal or civil actions against them. They also must provide fingerprints and identify affiliations with lenders, brokerages, and title companies.

The database is also designed to track those who do business under various names.

"From this single record it allows the regulators to see the entity exactly the same as other regulators," Matthews said.

What a great tool this will be once all the states participate. Imagine state investigators being able to check the status of a questionable applicant nationwide without having to search databases in 50-plus jurisdictions.

This uniform licensing source will be a crucial tool for regulators trying to determine if someone is participating in an unlawful activity that got them banned from mortgage activity in another state.

So far, seven states -Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York, and Rhode Island - are participating. By year's end, 18 state agencies are scheduled to be part of the system, although 42 state agencies representing mortgage regulators in 40 states have indicated their intent to come on board.

Matthews said he expects all 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands to be part of the registry in three to five years. By 2009, consumers will have access to the database, he said.

Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com.

Copyright 2008 Globe Newspaper Company

2008 NY Times Co.

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