WASHINGTON — To meet new federal licensing requirements, loan officers in many states have to complete the approval process by July 31. Failure to meet this deadline could put LOs at nonbanks on ice, unable to serve their customers and originate loans. The fast-approaching deadline is raising concerns in some quarters about processing delays at state agencies. Quicken Loans chief executive Bill Emerson is pushing for a 60-day extension of the deadline, saying it would be a huge help to the industry.
He noted that LOs must be licensed in each state where they originate, which means state agencies are receiving multiple applications from mortgage professionals that operate regionally or nationally.
"They have thousands and thousands of applications, and in some cases they have only one person processing those licensing applications," Emerson said.
Speaking at a recent U.S. Chamber of Commerce forum in Washington, the Quicken Loans CEO warned that over the next 90 days licensing delays in 18 to 20 states could have an impact on the industry and consumers.
Based in Livonia, Mich., Quicken Loans originates mortgages in all 50 states and is the sixth largest retail funder overall, according to figures compiled by National Mortgage News.
Emerson told reporters that the deadline will not impact his firm as much as others because Quicken takes a "very proactive approach" to compliance.
Only a handful of states have reported processing delays to the Conference of State Bank Supervisors, according to CSBS vice president Tim Doyle.
In some states, regulators have granted conditional approvals to loan officers "so the processing won't slow them down," Doyle said.
However, CSBS is worried about processing delays with a second deadline approaching on Dec. 31.
Passed by Congress in 2008, the Secure and Fair Enforcement for Mortgage Licensing Act imposes educational and testing requirements, criminal background checks, and state licensing on nonbank loan officers and mortgage brokers.
They also have to be listed on a national registry and assigned a unique identifier.
Loan officers at banks and subsidiaries also have to under go criminal background checks to be registered with a unique identifier—but don't have to be licensed.
Bank officers also are excluded from meeting educational standards or pass tests. (Federal regulators are expected to issue final rules soon to start the process of registering bank LOs.)
The Quicken Loans chief executive said he supports the SAFE licensing requirements because it will increase the professional quality of loan officers and mortgage brokers.
But the SAFE Act also is creating disparities because loan officers that cannot pass the tests can get a job at a federally regulated bank.
"Do we really want the bad actors" and LOs who can't pass the tests "mitigating to regulated institutions?" Emerson said. "I don't think that is what the industry wants."
The National Association of Mortgage Brokers has raised this issue as well.
As one of the largest independent mortgage banks, Quicken executives want to raise the firm's profile in Washington and weigh in on legislative and regulatory issues, such as the Federal Housing Administration and implementation of the Dodd-Frank Wall Street reform bill that President Obama signed last week.
Quicken originated $24 billion in mortgages in 2009 and 35% of its business involves FHA-insured loans.
Under the SAFE Act, states that never licensed loan officers before are required to complete the approval process by July 31. Other states with established licensing requirements have until Dec. 31 to complete the approval process.
CSBS is concerned about Dec. 31 because it is the "ultimate deadline," Doyle said.
"As we have fewer and fewer months left in the year, we are concerned—if people wait until the last minute—companies and loan officers could potentially experience processing delays," the CSBS vice president told this newspaper.
Doyle noted that loan officers have done their part in trying to comply with the SAFE Act.
In the past year, 87,000 loan officers have taken criminal background checks, 78,000 have completed their prelicensing education requirements and 62,000 have passed the national exam, according to CSBS estimates.
