Only 13 Of Floridas Mortgage Brokers Recertified

By Zachary S. Fagenson
Two months after the deadline for Florida mortgage brokers to reapply under new state and federal rules only 5,600 — 13% of the more than 42,000 brokers once licensed — have been recertified.

The new laws, effective in early October, aim to provide more transparency as to who borrowers are working with and follow a federal mandate to pass such changes under the Secure and Fair Enforcement for Mortgage Licensing Act, a section of the Housing and Economic Recovery Act, signed in mid-2008.

Applicants had to pay fees and file information through a new nationwide system before the beginning of the year to keep working but then got an extension to March 31.

As of April 20, the Florida Office of Financial Regulation had received more than 16,000 loan officer applications, about 7,200 of which are pending and another 3,100 incomplete.

Problems in Florida — widely considered ground zero for the sub-prime mortgage crisis — came to light after reports that the state’s office of financial regulation licensed more than 10,000 lenders with criminal pasts.

Legislative changes in Florida, signed in June 2009, were required to be enacted within a year and include mandatory application submissions via the new Nationwide Mortgage Licensing System and Registry.

The regulation also established annual background checks for brokers and the Mortgage Broker Guaranty Trust Fund, funded via a slice of license-application, to settle mortgage-fraud claims.

Additionally unfair, deceptive or misleading advertising became punishable and the regulation prohibited modification without the borrower’s awareness and written consent.

Meanwhile, of 6,957 mortgage businesses licensed to write loans prior to October 2010 2,125 have reapplied and 556 have been approved, with 1,202 pending. Of the 3,115 mortgage branches qualified to write loans before last fall, 174 have been approved while 873 applications remain pending.

And while applications will continue to trickle in as months pass, it appears most of those pending could be sorted out by year’s end, painting a better picture of the mortgage industry in the years after the housing bubble.

"There are some guidelines by which we have to go and those are basically in statute," said Flora Beal, state Office of Financial Regulation spokesperson. "We have 180 days to get them approved."

Despite the several thousand applications awaiting approval, it seems the cost and hassle of obtaining a license might not be worth it anymore.

"I was told [the cost is] in excess of $500," said Condo Vultures LLC Principal Peter Zalewski. "In a time like this when people are getting battered on all different fronts, the idea of… getting a mortgage license and then not doing deals doesn’t make sense."

And because mortgage financing for brokers remains tight, many banks see opportunity and are stepping in to fill the gap, adding even more competition for the brokers and making their future uncertain.

"There’s been a thinning of the herd," Mr. Zalewski added. "The question is, is the herd going to go extinct or can it make a comeback?"

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