New Arizona Mortgage Regulations Could Be On the Way

The Arizona Republic reports that many of the people in the Grand Canyon State who help home buyers finance what is often the biggest purchase of their lives are not licensed to do so.

In the rapidly growing Arizona mortgage industry, many of these unlicensed people who handle home loans put consumers at risk. If home buyers get a bad loan with an exorbitant interest rate and extra fees, they are stuck with it for a long period of time.

What’s worse, if unlicensed an mortgage loan officer scams customers or engages in mortgage fraud, it’s hard to hold them accountable.

It’s estimated that there are as many as 18,000 unlicensed people taking mortgage applications, negotiating home loan rates and receiving loan commissions statewide. Many are enticed by the Arizona housing market boom, exotic and often risky mortgages and no licensing requirements.

But that could change. If House Bill 2320 is passed, it will require the licensing of most Arizona home loan officers and originators, and bring more badly-needed accountability to the industry.

If the legislation becomes law, mortgage brokers and originators will have to take a class on the business, pass a test and pay a fee.

They also won’t be able to have any felony convictions anywhere in the country and will have to report whenever they move to another mortgage lender so regulators can track them.

The Department of Financial Institutions, which oversees state banks, credit unions, escrow firms and mortgage brokers and lenders, is backing the bill and would be responsible for regulating mortgage officers.

Complaints have soared from Arizona consumers getting mortgages with hidden fees and prepayment penalties and higher mortgage rates than promised. Foreclosures are climbing partly because many of those homeowners can’t afford their mortgage payments.

Kelly Lewan recently bought a home in Phoenix, securing a home loan with a 9 percent rate and a promise that she could qualify for a mortgage refinance in a few months and cut her payment. She even paid off a prepayment penalty on the loan when she closed.

Now, Lewan is struggling to make her monthly payment, and her mortgage agent isn’t returning her calls.

“There are loan officers in Arizona who aren’t educated on the business. They make mistakes and put consumers in the wrong loans. And some are committing fraud,” said Stan Lund, president-elect of the Arizona Association of Mortgage Brokers.

“This legislation will make mortgage officers more accountable,” he added.

Many experienced Arizona mortgage brokers and officers are already backing the legislation.

SOURCE: The Arizona Republic