ResalesWild, Wild West: Arizona Mandates Licensing For Originators
Arizona is getting tough on loan originators.
In one of the areas hardest hit by foreclosures, the Grand Canyon State has signed into law legislation to regulate those on the front lines of mortgage making.
Effective January 1, 2010 some 10,000 employees of banks, brokerages and other lenders will have to comply with the new law.
About 30 other states already have similar laws.
The new law will allow only those who are licensed to work as loan originators.
Arizona is still hammering out administrative procedures for the new regulations. But, licensed loan originators will have to undergo background checks, pass a home loan knowledge exam and complete continuing education on the subject each year.
Arizona"s Department of Financial Institutions, which already regulates mortgage brokers and lenders, received a record number of complaints about bad loans last year.
Arizona also had the third highest rate of foreclosures in the nation in June this year, behind nearby Nevada and California, according to RealtyTrac. In June alone, the nearly 13,000 foreclosures, in what"s also called the Copper State", reflected an increase of nearly 127 percent from a year ago.
Foreclosures can undercut the social fabric of whole communities.
Critics blame the high rate of foreclosures on lenders granting consumers mortgages they couldn"t afford. In many cases the loans were approved with loan applications containing incorrect and unverified information about the home buyer"s income.
A 2007 law in Nevada made it a crime to knowingly make or use false information on a loan application.
A high rate of subprime mortgages share some of the blame for turmoil in Arizona"s housing market. Pew Charitable Trusts reported that one in every 18 homeowners in Arizona could face foreclosure in the next two years because of their subprime loan.
The new regulations for loan originators allow the state to revoke the license of originators who break the rules. That would effectively put the violator out of work in the industry.