Amy Tierce
Uncertainty creates fear – and the tension many Massachusetts mortgage brokers and lenders are feeling during these uncertain economic times was evident last week, when roughly 400 of them crowded into a Randolph forum to hear the latest on the new and ever-changing regulations they said are affecting their ability to do business.
State Division of Banks Chief Risk Officer John Prendergast tried to allay their concerns.
“I’m a capitalist, too,” said Prendergast, who was one of several speakers to address the nervous throng at the event, which was co-sponsored by the state’s two major industry trade groups, the Massachusetts Mortgage Bankers Association and the Massachusetts Mortgage Association.
“I know you have to get your work done,” he added. “I’ll commit to you that my examiners will be professional and courteous.”
But what DOB’s 40 examiners have found in the course of regulating some 1,600 broker and lender businesses statewide in the past year or two (down to 1,145 at latest count) has kept them “very busy,” he said.
“We’re going to continue doing surprise examinations, going forward,” he said. “Unfortunately, it’s necessary.”
The exams, he said, have yielded “some serious fruit.”
Reigning Them In
In the past couple of years, DOB examiners have issued more than 300 cease-and-desist orders, in part as a result of some of those exams, he noted.
Sometimes, these orders result in a company going out of business, but in other cases, a broker or lender is allowed to remain in business, albeit “on a very tight leash,” he said.
Prendergast’s remark that the foreclosures DOB is seeing these days “almost always [happened] because of fraud” drew skepticism from at least one lender in the audience.
“Did I hear you right?” one man asked.
Prendergast clarified that he was speaking about loans originated less than two years ago, on which incomes or jobs stated for applicants bore no resemblance to reality.
Today, he added, he’s seeing more fraud even on the conforming mortgage scene – and on loans originated by both banks and mortgage companies – than ever before. Examples include false verifications of employment, a borrower’s assets, or signature.
“There’s less volume, so I think people are getting pretty desperate,” he said.
Prendergast also provided unsettling statistics about the state’s new licensing law, which required all mortgage loan officers to be licensed by July 1 in order to keep working.
About 6,800 loan officers have applied to date – just one-third the number DOB had initially anticipated.
A total of 4,831 licenses have been approved, he said, but 483 applications were terminated due to the applicant’s failure to provide all the required information; 1,374 are pending.
Sixty applications were automatically denied because the applicant had committed a felony.
Those applications pending are considered “problem children,” but haven’t yet been denied, he said, responding to a question from MMBA Executive Director Kevin Cuff.
“We are handling them with as delicate gloves as we can,” he said – and DOB hopes at least some will be approved.
“The alternative is just icing a lot of people out of business.”
Airing Frustrations
Amy Tierce, president of Fairway New England Mortgage, a lender-broker company, and an MMBA board member, said the fact that regulations are putting both brokers and lenders out of business was a primary concern of hers.
“Capitalist to capitalist here,” she said to Prendergast, “My concern is that you’re regulating everybody out of business, and regulating consumers out of the ability to get a mortgage. I need to make that frustration known. There are good loans not being made – to people who are ready to buy that inventory out there.”
Prendergast said he understood her concerns, and said he hoped inexpensive credit to borrowers will continue, as it provides at least one incentive to borrowers.
