A nationwide lending law aimed at curbing the excesses of so-called predatory lending practices is having effects widely felt by those in the mortgage business, but local lenders say the long-range benefits should ultimately outweigh the present-day headaches of implementing all the changes.

Among the requirements outlined by the Secure and Fair Enforcement (S.A.F.E.) for Mortgage Licensing Act of 2008, mortgage brokers have until early next year to register with a newly-created nationwide database to track those in the business. They will also have to be fingerprinted.

Local lenders said these and similar changes are much more visible to those in the business than to consumers in the market for a home loan, but that doesn’t mean the new rules don’t have profound implications for borrowers over the long haul.

“When everything get smoothed out, it’ll get better I’m sure,” said mortgage banker Lynda McGriff Hankey and owner of Mortgages by Lynda. “But, if you can buy something now, you still better jump on it. In some ways, it’ll be very good for the customer—there are things that do need to be regulated and guidelines that need to be followed—but on the other hand, you’ve got people who’ve been in this business for 30 years, and this has had a big impact on them.”

The impact on mortgage originators is coming in the form of testing and certification requirements that did not exist prior to this decade’s housing crunch. The S.A.F.E. Act, in part a response to the so-called predatory lending practices that plagued once-booming housing markets in larger cities and on the West coast, now requires all mortgage originators to pass a background check and obtain a license—and to pay all the associated fees out-of-pocket.

“None of it is free,” said Hankey. “You have to pay for every bit of it, and you’re having to do it at a time, in the mortgage industry, that has been rough. If you’re used to closing 40 mortgage loans a month, and now you’re doing 5 or 6, you’re talking about having to find a way to have to absorb that added expense. Even though in Cullman and in Alabama we weren’t in a place where it was such a big issue, we’re all having to pay for it.

“But,” she added, “some of it can help the customer. [For example], we now have to fill out a sheet of paper that says that it’s a benefit to the customer to do the loan. That can give people confidence, and with interest rates what they are now, it’s already a great time to go ahead—if you’re one of the people lucky enough to get qualified—and buy something. Especially for young people; not necessarily people wanting to get into a $200,000 house, it’s a good time, because your house payment can easily be less than what your payment is going to be if you’re renting.”

The timeline for the various stipulations set forth under the S.A.F.E. Act differs among the 50 states. According to the Nationwide Mortgage Licensing System (NMLS) website, the fingerprinting deadline for Alabama mortgage originators passed on June 1, with new applicants required to submit prints at the time of application. The prints allow for a criminal background check.

Starting in October, licensees will be required to authorize a credit report through NMLS that must be completed before March of 2011. In addition, mortgage originators must pass the two-part Mortgage Loan Originator test—comprised of both a state and national component—before submitting their 2011 licensing applications to the state.

While mortgage officers at federally-chartered banks are keeping a close eye on the changes, they are not required to follow the S.A.F.E. Act guidelines aimed at independent mortgage originating businesses.

“Right now, if you are not part of a federally-chartered institution, you have to take the test,” noted Traditions Bank vice president Debbie Aaron. “If there’s no bank connected with a mortgage business, they are required to do it. Eventually, I expect that they’ll make everybody do it, though.”

Aaron said the Cullman area avoided the bandwagon effect of new mortgage lenders getting into a hot market before the real estate market crash of 2007. “I don’t think Cullman had a lot of it going on here,” she said. “This area has been safe in that regard. But industry-wide, a few years ago, it was absolutely terrible.”



* Benjamin Bullard can be reached by e-mail at bbullard@cullmantimes.com or by telephone at 734-2131 ext. 270.