LANSING – State Representative Marie Donigan (D-Royal Oak) today voted for a bipartisan package to bolster consumer safeguards in the face of the country's subprime mortgage crisis by increasing protections for families purchasing a home. The package of bills establishes a registration process for mortgage loan officers working in Michigan.
"Especially in Royal Oak, with all of the new housing developments going up, we want people to enter into a mortgage feeling confident in buying a home and in trusting their loan officer," Donigan said. "Establishing a registration process for mortgage loan officers is just one of the ways we are working to hold the mortgage loan industry accountable and keep our working families safe from so-called loan officers only trying to fatten their wallets."
This plan — which amends the Mortgage Brokers, Lenders and Servicers Licensing Act to create a registration process — strengthens the oversight powers that the Office of Financial and Insurance Services (OFIS) has over individual loan officers. Under the plan, applicants must:
- Go through a background check.
- Successfully complete an exam on state and federal regulations governing residential mortgage lending.
- Provide information ensuring they have never been convicted of a felony involving forgery, fraud, a financial transaction, or securities.
The plan prohibits anyone who is not registered under the new system to use "loan officer" or other similar terms to describe their position, and establishes a fine of $15,000 or one year of jail, or both, for violating these provisions.
By increasing transparency and safeguarding the reputation of those in the industry who do practice with professionalism and in an ethical manner, the plan has the support of the Michigan Mortgage Brokers Association and the Michigan Mortgage Lenders Association.
"Requiring this registration will hopefully work further upstream in protecting our citizens from the risk of foreclosure," Donigan said. "By certifying Michigan loan officers, our consumers will know, and take relief in knowing, that the loan officers they do business with have passed a test on state and federal regulations and they have not been convicted of swindling their customers in the past."
Last year, House Democrats unveiled the Home Loan Protection Act, which bans predatory lending practices, such as encouraging borrowers to default, and protects consumers from being steered toward high-cost loans when they would otherwise qualify for a traditional loan. Additionally, in December, House Democrats passed a plan to establish programs to allow homeowners saddled with risky adjustable-rate mortgages (ARMs), and those who have missed mortgage payments, to refinance and secure a fixed-rate loan.