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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Loan specialists face new standards

Idaho adopts federal rules that include national registry, FBI background checks

From Staff And Wire Reports

Roadside signs in Idaho promising to save homes from foreclosure could disappear after July 1 as people who claim to be loan modification specialists face new licensing requirements.

New federal standards adopted this year by the Idaho Legislature will require that mortgage professionals:

• Undergo FBI criminal background checks with fingerprinting.

• Have no felony convictions within the past seven years.

• Score 75 percent or higher on a national test of their knowledge of mortgage-related laws, ethics and products.

Within the next year, consumers seeking home loans will be able to check the experience and background of mortgage originators in Idaho and across the nation through the new National Mortgage Licensing System and Registry.

“It’s an excellent plan,” said Dennis Harvey, a licensed loan originator with First Mortgage Co. of Idaho in Nampa. “The problem is without this national system, the bad guy in one state could transfer to another state and continue his shenanigans.”

Currently, Idaho’s application asks people to disclose criminal convictions and civil or state regulatory actions against them, but if they don’t disclose, the omissions might not be caught.

Under the new system, a license revoked in one state will be revoked everywhere, said Mike Larsen, consumer finance bureau chief of the Idaho Department of Finance, which licenses loan originators. And borrowers can see if a loan originator is jumping from company to company or in and out of the profession, he said.

“That’s the beauty of the NMLS system,” Larsen said. “It’s making these things more transparent.”

Harvey said transparency is vital in an industry that handles people’s personal financial information, including Social Security numbers and bank accounts.

“This whole business is built on relationship and trust,” Harvey said. “It’s not just getting a loan. I would want my clients to feel complete trust in me.”

The state does not track mortgage fraud. It tallies complaints but not their type or resolution, Larsen said.

But two recent cases show Idaho has had some problems with loan originators and mortgage modification advisers.

In April, a Boise man was barred from acting as a loan originator after a judge found that he did not have a license but was accepting mortgage applications. Also, the attorney general’s office sued Apply 2 Save Inc., a Kootenai County company, saying it advertised mortgage modification services but instead exploited homeowners across the nation, pushing some into foreclosure. The suit seeks almost $900,000 in penalties.

Apply 2 Save closed its doors last month.

Legitimate loan originators and state officials say homeowners who need to modify their mortgage rates or payments should go to their lenders directly instead of calling a number found on handwritten roadside signs or in slick ads.

Idaho has been licensing mortgage professionals since 2006. State officials also have been involved in creating the national database system and the test, which will have a state component.

“Idaho has been very proactive in moving in this direction,” Larsen said.

The licensing requirements go into effect July 1. Mortgage professionals have a year to qualify. Components of the database will roll out over a couple of years.