NMLS Consumer Access website may help protect mortgage shoppers from unscrupulous loan originators


Mortgage shoppers will have a new tool that will go a long way toward protecting them from being ripped off by unscrupulous loan originators when they gain admission this month to a growing nationwide database of companies and individuals who offer home loans.

By clicking onto NMLS (Nationwide Mortgage Licensing System) Consumer Access, would-be borrowers will have entry to a single source of information, updated nightly, that will tell them whether the loan officer or broker with whom they are working is licensed, the company he or she is licensed with, the branch where the originator works and his or her employment history going back 10 years.

The fully searchable website also will list any aliases or names other than the name the individual has used since age 18, an indication of whether that person is engaged in other sidelines and his or her license status in other jurisdictions.

Borrowers in California, for example, will learn whether the person they’re speaking with about perhaps the largest financial transaction of their lives has ever had his or her license suspended or revoked in Nevada, Arizona or another state where that person has worked in the past.

Scheduled to launch Jan. 25, NMLS Consumer Access is mandated under Title V of the Housing and Economic Recovery Act of 2008. Known in the trade as the SAFE Act, which stands for the Secure and Fair Enforcement for Mortgage Licensing Act, the law requires that consumers be given access at no charge to data regarding the employment record of and publicly adjudicated disciplinary actions against state-licensed and federally registered loan originators.

“The SAFE Act is taking an important step in returning integrity and accountability to the residential loan market,” Federal Housing Administration Commissioner David Stevens said. “Implementation of this act is a critical addition to our system of regulatory protections that will benefit both consumers and financial institutions.”

Signed into law July 30, 2008, the SAFE Act builds on the national licensing system started by state mortgage regulators 18 months earlier. In effect, the law requires the states to become part of the Nationwide Mortgage Licensing System by a federally mandated July 31 deadline.

At its start, NMLS Consumer Access will not contain enforcement actions taken by regulators. That functionality is still being built into the system. But eventually it will display what, if any, publicly adjudicated verdicts have been taken against the loan company or originator in question.

Also for now, only mortgage brokers, mortgage bankers, mortgage branches and local officers working for state-licensed financial institutions will be on the system. When federal regulators finalize their registration requirements, everyone else, including originators working for federally insured banks, savings and loans and credit unions, will have to be on the system as well.

NMLS Consumer Access is separate from NMLS, the system of record that regulators now use to track every loan originator throughout his or her career. NMLS does not grant or deny licenses; that’s still left to each individual state. But it does simplify the process by providing a standardized system that includes educational requirements necessary to obtain and renew licenses and helps keep tabs of originators as they move from job to job or state to state.

Also starting Jan. 25, states will begin using the system to run a criminal-history background check through the FBI for each applicant for a mortgage originator’s license, either new or renewal. The applicant’s fingerprint will be sent electronically to the FBI, which will return a rap sheet, if there is one, to that state.

This step will serve to centralize a function that has been haphazard in some jurisdictions and help enforce a provision of the SAFE Act that bars felons from holding a state mortgage originator’s license. Under the law, someone convicted of a felony is barred from holding an originator’s license for seven years. But if the crime was related to financial abuse, the felon is counted out of the mortgage arena for life.

Although some states already search criminal databases, they are limited to actions taken only within their borders or at the federal level. Rarely does one state know what has taken place in another state. Also, most jurisdictions only ask an applicant if he or she has ever been found guilty of a crime in other places. But state regulators had no way of checking whether the applicant was truthful, so bad apples were rarely found out.

The criminal history record can’t be viewed by consumers, but it will be attached to the originator’s NMLS record that will be seen by the appropriate regulator.

Distributed by United Feature Syndicate.