The lending business must embrace a licensing initiative by state banking and mortgage regulators if it is to keep from crumbling under the weight of fraud and unethical loan brokers, a proponent of that project said here last week.

A national residential licensing system "has the potential to transform today's mortgage industry and imbue it with a level of professionalism and accountability that will make it easier for responsible mortgage companies to operate and harder for unethical companies to compete," said Tim Doyle, vice president of industry and agency relations at the Conference of State Bank Regulators.

CSBS, together with the American Association of Residential Mortgage Regulators, is building the system so state regulators can work together more effectively in supervising licensees as they move from one jurisdiction to another. All but one state -- Alaska -- requires mortgage brokers to be licensed.

Not everyone favors a uniform national licensing system. One big opponent is the 27,000-member National Association of Mortgage Brokers, which speaks for the originators of perhaps 60 percent of all home loans.

NAMB believes mortgage brokers will be singled out unfairly by the system, which is due to begin operations in 12 months. All originators, not just brokers, should be covered by the system, the group believes.

"It just doesn't make sense to include some and not others because all consumers should benefit regardless of the distribution channel chosen," says NAMB President Harry Dinham, a Plano, Tex., broker.

NAMB also maintains that the amount of information that brokers will be required to submit will be burdensome and intrusive, and make the database "ripe" for leaks of personal information.

But at Mortgage Fraud Conference in Las Vegas last week, CSBS's Doyle said the initiative would "make a profound impact on addressing fraud." It won't solve the multi-million problem, he said, but it "will dramatically improve the issue" and is destined "to become one of the significant anti-fraud efforts" of the 21st century.

Creating a standardized licensing system among the states moves beyond simply raising the profile of mortgage fraud by attempting to stem the tide of unethical and illegal behavior.

"It's time to turn the dynamic around," said Doyle, who joined CSBS recently after a stint in the public affairs department of the Mortgage Bankers Association, where he was charged with managing the issue of mortgage fraud for the association.

CSBS is a professional organization representing the state banking regulators in all 50 states, the District and the U.S. Territories. In 37 of those states, banking departments also are responsible for regulating the mortgage business as well as banks. AARMR represents mortgage regulators in all states.

The two organizations say a national licensing system is necessary for several reasons. First, up to seven out of ten mortgages come from state-licensed companies. Second, regulators are all but overwhelmed by a huge amount of licensing activity. And third, most states are way behind in automating their systems.

The electronic system envisioned by the CSBS/AARMR coalition revolves around two products: a uniform application and renewal form, and a secured database to store the information collected on the applications.

Participating states retain the right to evaluate applications and approve or deny them. The information collected on the application, Doyle told the conference, will be enough for regulators to make sound decisions about applicants wishing to do business in their states.

Applicants will be able to create and store an application within the system, and use it to apply for a license anywhere they desire. And the states where they apply for a licence or are already licensed will all see the same information.

"This is where the power of the system starts to be realized," Doyle said. "Licensees will have a single record that will stay with that licensee in perpetuity. When a license is revoked in one state, other states where that entity is licensed will be alerted."

Consumer complaints won't be part of the system, but final adjudicated orders will be part of the record and appended to that licensee's record for access by not only regulators but also the general public.

Doyle said the system is expected to go live in January 2008 with 10-12 states participating with four uniform applications -- one each for companies, control persons, branch locations and individuals.

The system will collect complete applications and transmit them to as many state agencies are an applicant wishes. It will collect and disburse any required financial statements and required fees, and assign a unique identification number to each licensee.

Published: December 20, 2006

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.