Arizona is getting tough on loan originators.

In one of the areas hardest hit by foreclosures, the Grand Canyon State has signed into law legislation to regulate those on the front lines of mortgage making.

Effective January 1, 2010 some 10,000 employees of banks, brokerages and other lenders will have to comply with the new law.

About 30 other states already have similar laws.

The new law will allow only those who are licensed to work as loan originators.

Arizona is still hammering out administrative procedures for the new regulations. But, licensed loan originators will have to undergo background checks, pass a home loan knowledge exam and complete continuing education on the subject each year.

Arizona's Department of Financial Institutions, which already regulates mortgage brokers and lenders, received a record number of complaints about bad loans last year.

Arizona also had the third highest rate of foreclosures in the nation in June this year, behind nearby Nevada and California, according to RealtyTrac. In June alone, the nearly 13,000 foreclosures, in what's also called the Copper State", reflected an increase of nearly 127 percent from a year ago.

Foreclosures can undercut the social fabric of whole communities.

Critics blame the high rate of foreclosures on lenders granting consumers mortgages they couldn't afford. In many cases the loans were approved with loan applications containing incorrect and unverified information about the home buyer's income.

A 2007 law in Nevada made it a crime to knowingly make or use false information on a loan application.

A high rate of subprime mortgages share some of the blame for turmoil in Arizona's housing market. Pew Charitable Trusts reported that one in every 18 homeowners in Arizona could face foreclosure in the next two years because of their subprime loan.

The new regulations for loan originators allow the state to revoke the license of originators who break the rules. That would effectively put the violator out of work in the industry.

Published: July 21, 2008

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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.