Montana Mortgage Oversight May Be Expanded
The Billings (Mt.) Gazette observes, correctly, that buying a house and signing mortgage papers can be one of life’s most stressful times.
Just ask Traci Collett. Merely asking a Utah mortgage company she found on the Internet questions about refinancing her East Helena home turned into three years of trouble.
“I was very upfront with the lady in Salt Lake City and said I’m naive about this,” said Collett, then a single mother of three.
Instead of getting more information about mortgage refinancing options, the lender sent her paperwork to sign and the fine print mentioned fees. She assumed any legitimate company would tell her before charging fees.
Not the case.
After she decided to instead seek a mortgage refinance with a local company she could visit in person, the Utah company demanded a $1,100 cancellation fee. Collett disputed the charges and refused to pay.
“A little over two years later, I get an invoice and they wanted $2,403 through a collection agency. Ultimately, I feel they took advantage of me saying upfront that I’m not savvy,” she said.
Montana is one of only six states that doesn’t regulate mortgage lenders except state-chartered banks or credit unions. People who deal with non-regulated companies and feel wronged can’t ask the state for help.
A bill being considered by the Legislature would change that. House Bill 69 requires every lender and mortgage broker to be licensed and audited after October 1.
“Mortgage fraud and predatory lending is on the rise throughout the U.S. and in Montana. We see a need to regulate mortgage lenders who are making loans to Montanans,” said State Banking and Financial Institutions Commissioner Annie Goodwin.
Real estate values in the United States increased by double digits in 2003 and 2004, according to a report by the FBI’s Financial Crimes Enforcement Network. The sharp appreciation and low mortgage rates brought a flood of new home loans and more reports of suspicious lending.
In 1997, U.S. financial institutions reported suspected fraud in 2 percent of all suspicious transactions. By 2005, home loan fraud made up nearly 5 percent of these reports to the FBI.
“In Billings, one closing within the last two years had excessive fees and interest rates,” Goodwin said. “Because we had no jurisdiction, we have to refer that consumer to a private attorney.”
The bill was debated in the House Committee on Business and Labor on January 12.
“Yeah, it’s needed,” said Walt McNutt, R-Sidney, the bill’s sponsor. “I’ve heard about two or three situations around our county where a mortgage lender has done some fraudulent lending on home loans.”
Montana’s banking regulators receive no money from the state’s general fund. They are financed through fees on the companies they oversee.
“Therefore, this bill would charge a licensing fee on mortgage lenders to run this program,” Goodwin said.
Freshman Rep. Ernie Dutton, R-Billings, who is a real estate agent, also thinks it will pass, but he wanted more time for mortgage lender and home mortgage broker groups to respond because some didn’t even know about the hearing.
“They’ve only had a couple of weeks to look at this,” Dutton said. “I don’t think they have big concerns.”
The bill was amended to reflect one of the lenders’ main concerns - Montana mortgage brokers that already pay a fee to the state won’t have to pay a second fee in order to conduct mortgage lending.
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