When you’re in the market for a mortgage, you’ll want to check rates and fees on any loan offered. You’ll also want to check on the person making the offer.
Illinois is one of a growing number of states licensing or registering individuals working for mortgage brokerages, says Uriah King, policy analyst at the Center for Responsible Lending, an advocacy group in Durham, N.C.
In most states, Illinois included, owners of mortgage brokerage firms have already been required to secure a license to operate their companies. A mortgage brokerage has employees that extend loans to borrowers. The brokerages usually don’t provide the money for the mortgages, but act as agents for other companies funding the loans.
It’s crucial to register individual brokerage employees, says King, because there have been many instances when unscrupulous employees have supplied borrowers with loans with unfair terms — known as “predatory loans.”
King gives high marks to the Illinois registration requirement. “Illinois has enacted a strong predatory lending law,” he says, noting that the law here bans loans with certain abusive provisions. “Some other states don’t have a specific predatory lending ban. They just are registering individual loan originators and that’s not enough,” King says.
Tom James, senior assistant attorney general for the Office of the Illinois Attorney General, also thinks registering individuals should help protect borrowers. It should help cut down on many types of fraud, like dishonest loan originators who misrepresent how high monthly payments can rise with some types of loans, James says.
Registering individuals allows law enforcement officials to track someone who has committed fraud, even if he moves from one mortgage firm to another, James explains. Before registration was required, enforcement officials might have gotten a complaint and began investigating, but the individual would disappear from one firm, only to re-emerge at another.
But consumers don’t have any protection if they aren’t aware that individual loan originators working for mortgage brokerage firms should be registered — and that they can look up their status.
At the Web site run by the Illinois Department of Financial and Professional Regulation, www.obrelookupclear.state.il.us, consumers can check on whether a loan originator is registered, meaning he or she has passed all the state background checks and testing requirements.
Loan originators, who review mortgage applications and offer mortgage loans, should be registered, notes Reynold Benjamin, acting assistant director of the Bureau of Residential Finance at the professional regulation department. Moreover, loan “solicitors” are also required to be registered. These solicitors take information from customers, but don’t provide the mortgage offers.
The regulators can’t ensure that everyone functioning as a loan originator is registered, Benjamin acknowledges. If someone is functioning without the required credentials, “we can learn about it from consumers,” he says. He encourages consumers to lodge complaints with the Illinois Department of Financial and Professional Regulation — through its Web site or a consumer hot line, 877-793-3470.
To become registered, originators are required to pass an exam and criminal and credit background checks. Loan solicitors must pass background checks.
The passing rate for originators first sitting for the exam, which contains a section on ethics as well as other mortgage finance questions, is about 56.8 percent, according to Benjamin. Loan officers at banks, savings banks and credit unions are not required to be registered. These institutions have their own separate regulatory structures, Benjamin says.
However, Darren Weisberg, president of the Illinois Association of Mortgage Brokers, thinks the registration requirement should also be extended to originators at banks and other financial institutions. He says that there have been cases of mortgage-related fraud by individuals working at these institutions.
The mortgage brokers group supported the law requiring registration of originators at brokerage firms, Weisberg says. In fact, the association would like to see stiff state enforcement of the requirement.
William Harris, president of Hyde Park Mortgage Co., Chicago, likes the registration because he thinks it will boost the professionalism and image of the business.
However, King contends that the registration could be stronger, if it made loan agents responsibility to make an affirmative effort to find a reasonably designed mortgage for the client. While it does provide some protection against dishonest operators, consumers must still spend time researching loan options and do comparison shopping, he adds.
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