From the Herald News:
New law would boost regulation
If New Jersey had already beefed up its requirements for loan officers, Manuel Maldonado might have avoided the fight to keep his Passaic home.
Last year, Maldonado refinanced his house with a state lender catering to those with poor credit. The loan officer assured him that the mortgage would drive down his monthly payments and repair his credit by consolidating debts.
Instead, Maldonado now pays $2,330 — more than his monthly income.
“He’s been late on several payments. We can’t afford insurance on the house,” said Wanda Perez, Maldonado’s daughter. “Every month is a struggle.”
The professional helping potential homeowners make the biggest purchase of their lives — often for hundreds of thousands of dollars — needs little more than $100 to assume that role in New Jersey. Some lawmakers think that’s a lopsided equation.
Two state senators will introduce legislation today that would require training, licensing exams and criminal background checks for loan officers. While mortgage-company owners must follow certain regulations, few of their employees do.
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Many experts think the profitable commissions and low-education requirements for loan officers help contribute to skyrocketing foreclosure rates — as homeowners are pushed into mortgages they can’t afford.“There is income potential here,” said Matthew Gratalo, a 20-year mortgage banker from Paramus who welcomes the requirements. “Some people don’t have any intention to be in the business for the long term. They don’t even care about the people they are working with.”
Housing advocates stress that licensing requirements aren’t a magic bullet. Pending legislation in Congress and some state legislatures could do more to clean up the mortgage industry, they say, by holding lenders responsible for a borrower’s best interest.
But officials and advocates agree that New Jersey’s proposal constitutes a step forward. As the housing market boomed over the last several years, the ranks of unregulated loan officers (also called mortgage solicitors) swelled. They especially flocked to the subprime market, as the high fees with such loans translate into big commissions.
In the past five years, the number of New Jersey mortgage solicitors nearly tripled — from 14,476 in 2002 to 42,433 as of earlier this year — according to the state Department of Banking and Insurance. Average salaries for state loan officers exceeded $63,000 in 2005, Bureau of Labor Statistics show.