National Mortgage Licensing System Protects Consumers

Based on the state of the industry these last few years, it was completely necessary to remodel the licensing system. Prior to the recent changes, tracking the quality of lenders/brokers and originators was challenging. Those individuals/companies committing suspect or illegal business practices were tough to track leaving individuals vulnerable to deceptive loan officers.

While the system continues to evolve, it has experience a few setbacks along the way to improvement. While still a great success, understaffed states are lacking the preparations to change over. Poorly trained individuals end up with unanswered questions as to how to adhere to the law while some states even have conflicting or duplicate standards. Some of these issues are still being worked out. However, since the playing field has been leveled (so to speak) by having originators at big banks becoming NMLS registered it reassuring that any loan officer you work with should be registered regardless of minor kinks in the system.  These changes are probably the most important piece of pro-consumer legislation introduced to the residential lending industry. The barriers of entry into this field were too low previously and almost anyone could originate mortgage loans with little or no training or education. In the first half of the 2000’s, thousands were entering the industry yearly as a part time job with little ramifications for the quality or ethical standards of their work. 

Recently, The National Mortgage Licensing System, or NMLS, has begun requiring the licensing, certification and registration of loan officers in all 50 states. Individuals and companies looking to apply for, amend, renew, and/or surrender licenses managed by NMLS for the state(s) licensed by the loan officer or mortgage lender/broker are required to use this system. The NMLS initiative was begun by state mortgage regulators in 2004 in response to the increased volume and variety of residential mortgage originators, and the need to address these changes with modern tools and authorities. The proliferation of the mortgage business had added to the urgency of a standardized licensing system which required a system of criminal background checks, education, and testing of loan originators and the lenders/brokers where they are employed. The overall goal is to tract, monitor, and remove unscrupulous originators when necessary.

Today loan officers are held accountable and have to abide by these new regulations. Consumers can check the license status of the originator as well as the lender/broker at one simple website. On this website, consumers are able to easily find pertinent information about the loan officer, company affiliations, as well as any applicable investigative measures.