Shady characters are already poking around for loopholes they can slip through of a new Maryland law.

Effective January 1, 2007, Maryland's home loan originators must be licensed if they are employed by mortgage brokers.

The requirements include an application, a criminal background check and if they've been in the business less than three years, a 40-hour course on regulations, ethics and other trade information.

Some mortgage lenders are also required to get the new license, but loan originators working for banks and licensed mortgage brokers are exempt because they are otherwise regulated by the Old Line State's Department of Labor, Licensing and Regulations (DLLR)

Those who pass the licensing requirements must pay $300 for a two-year license, remit a one-time investigation fee of $100 and, if necessary, pay up to $500 for the 40-hour course.

It will cost a lot more to operate without a license, which is a felony offense under the new law. Beginning next month, originating loans without a license can come with fines of up to $25,000 and as much as five years in jail.

Apparently, that's not enough to send all those required to get a license to the licensing window. Some loan originators believe they can skirt the new law with impunity.

Joseph E. Rooney, a DLLR deputy commissioner reports that his enforcers are already planning visits to license violator suspects' offices in January. He says some 10,000 to 12,000 people originate loans in Maryland -- perhaps more -- but only some 8,000 applications have been received. Chances are, those who haven't applied aren't closing up shop, despite the decreased demand from the housing boom gone bust.

Rooney's office has been getting tips that some companies plan to license only one loan officer and then funnel to the one licensed mortgage originator paperwork that requires signatures. Other loan officers, who should also be licensed, will do the paperwork but stop short of signing anything. Not signing papers is not an exemption from the new law, the office says.

Silver Spring-based mortgage trainer Christopher Cruise told the Baltimore Sun some of his students informed him they plan to originate loans in Maryland without a license. That's because, the wannabee loan officers believe the state is too short-staffed to keep tabs on them and enforce the law.

Cruise says, to the contrary, the state plans to make an example of any outlaws.

Maryland regulators, supported by the Maryland Association of Mortgage Brokers got tough on mortgage makers after an era of illegal flipping, including mortgage fraud swept parts of the state in the late 1990s. Much of the nation saw an increase in fraud during the housing boom. The majority of the thousands of complaints sent to the Maryland's DLLR each year are mortgage related.

Nationwide, most home loans are originated by mortgage brokers who typically employ mortgage originators.

The mortgage brokers association is advising strict compliance with the new law and is even tipping off the state to potential violators.

In addition to those who plan to violate the law, other originators could face charges because they waited too long to apply. The state has only issued about 2,000 licenses, which are typically delayed by a six- to eight-week background check.

Conditional licenses were available to those who applied within a now expired grace period.

Companies with loan officers who haven't applied are instead getting letters from the state warning them not to do business after Dec. 31 until they are fully licensed and in compliance with the new law.

Published: December 28, 2006

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.