Suggested mortgage regulation is unneeded
RE: State may seek to regulate mortgage broker industry (SDN May 16)As a mortgage broker, I have serious issues with the implication that this legislation will do anything to “pare a system riddled with fraud.” In the article, the writer presents pieces of “evidence” that imply that fraud, foreclosures and other mortgage problems exist due to the absence of state regulation. Nothing could be further from the truth. For instance, the writer implies that Colorado has “skyrocketed” to fifth in the nation in foreclosures, due to mortgage brokers going “unchecked.” If the lack of regulation is responsible for this trend, isn’t it logical that states with regulation would rank better than us? Yet, there are four states that have a higher foreclosure rate than Colorado, and they’re regulated. And I would like the writer to explain (instead of just gloss over) the fact that the 240 mortgage firms in northern Colorado only received 25 complaints to the BBB. Approximately 1 out of every 10 offices received one complaint. When you consider that this represents thousands of mortgage loans, it would appear that there wasn’t much of a problem before this legislation. The sponsor of the bill, Rep. Val Vigil, D-Thornton, claims that regulation will put every mortgage broker’s name on a “list.” He goes on to claim that being on this list will be sufficient as a deterrent, because now “people can report you.” Excuse me, but mortgage fraud has always been illegal and punishable. Does adding another law make it any more illegal and punishable? And if regulation truly eliminates the bad guys, how do you explain the huge fraud cases that have taken place in other states where regulation is present? By the way, who will be responsible for maintaining this list? Who will keep it accurate? Will this information be easily available? Somehow, I’m afraid that we will see the typical government bureaucracy when it comes to answering these questions. Here’s another question. If a mortgage broker commits fraud, how does $25,000 (the amount of the required bond) do anything to compensate the victim? When was the last time you saw a mortgage of $25,000. As one of the owners of a mortgage company stated in the article, requiring a bond will only drive up costs to consumers, and make the bonding companies a lot of money. It will do nothing to keep fraud from occurring. It will also be insufficient as compensation. What about the other provisions of the bill? Do you know why loan officers with banks and credit unions are exempt from this legislation? It’s because they are covered under federal charters. Aren’t our legislators worried about fraud being committed by them? Of course, the answer to that question is no, since banks and credit unions are beyond their ability to regulate. They realize they can do nothing about them, so they control what they can. As a result, small local brokers (you know – Colorado small businesses) will have the burden placed on them, allowing the banks and credit unions to provide products without those burdens. This will make it impossible for the little guy to compete against the big banks. Another provision of the law deals with a review after five years to “review” the program to determine it’s worth. Supposedly, the legislature could create a bill at any time to change the program. Now, let me ask you, when was the last time a politician admitted that a law they presented was a bad one? Give me a break. This provision is simply a “pacifier” to those who oppose the legislation, in order to look fair and balanced. In reality, if there are any problems with the law after five years, we will see further restrictions, not fewer. Let there be just one case of mortgage fraud anywhere in the country over those five years, and you will see the clamps come down even harder on the small broker. As many in the industry have expressed, I am not opposed to licensing, even to include some sort of background check and continuing education. The personal information a broker obtains on a borrower should require some sort of oversight, but this legislation in it’s present form will only serve to drive the small business broker out of business. It will result in fewer choices and higher costs to the consumer, and will line the pockets of big banks, credit unions and bonding companies. In the end, the politicians can claim they did something to address a problem, all the while ignoring the consequences of those actions. But hey, whatever gets them re-elected, right?
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