Loan originators face tighter rules as more look to refinance

‘‘I am actually overwhelmed,” said Carrington, a senior loan officer with Freestate Mortgage Services in Bowie. ‘‘And we don’t spend money on advertising. It’s all by referral.”

When the licensing law was passed in 2005, the Department of Labor, Licensing and Regulation estimated that about 12,000 mortgage loan officers would need to be licensed, said Joseph E. Rooney, deputy commissioner of the department division of financial regulation.

The application process started in July 2006, and about 5,500 loan officers were licensed by January, he said. As of April 24, the department has received about 11,400 loan officer applications and licensed close to 8,700.

‘‘We’re getting 20 or 30 new applications a day,” Rooney said.

Close to 40 applicants have been denied.

‘‘This law was initiated by the industry itself,” Rooney said. ‘‘They believed they had a lot of rotten apples and they went to the General Assembly and they requested this law.”

If an employer fired a bad loan officer, that person could go from company to company and nobody would know, Rooney said.

‘‘There was no way to weed them out,” he said.

‘‘I believe that the licensing statute that recently was put into effect here in Maryland will push many of the ‘bad apples’ out of the marketplace ...,” said Douglass, owner and president of Douglass Mortgage Advisory Group in Upper Marlboro, in a statement. Douglass and his staff of five loan originators are all licensed.

Before the new licensing requirement, many loan officers were touting low monthly payments without fully disclosing all the details of the mortgage, said Carrington, who is also licensed.

Licensed loan officers must either have three years of experience or take 40 hours of continuing education and pass an examination, Rooney said. Loan originators at banks, savings and loan institutions, and national banks are exempt because they are regulated by other institutions, he said.

Loan officers in Maryland also may no longer work on a freelance basis, Rooney said, and they must be affiliated with an licensed mortgage broker or banker.

Rooney has heard about unlicensed loan officers trying to move loans through a licensed employee, and said his department is actively investigating companies trying to skirt the regulation.

Operating without a license carries a $25,000 maximum penalty for each violation and-or up to five years in prison, he said. The department has been finding violators through complaints, tips and its own examination process, Rooney said.

Investigations are in the early stages, and the department has actively issued cease-and-desist orders, fines and charges, Rooney said. ‘‘We have several dozen cases in the works right now,” he said.

Consumers can call the department or check its Web site at www.dllr.state.md.us for a list of licensed loan originators.