The bad part is that, despite all this government regulation, criminals can and do find their way into the lending industry and defraud large numbers of homeowners. Now that the economy has collapsed, some states have purged hundreds or thousands of mortgage licensees from the rolls who either had shady backgrounds or did not keep up on the requirements to hold a license. And all of the costs of licensing are passed along to the end consumers who buy properties and take out loans to finance them.
Thus, simply being licensed is really no guarantee of legitimacy or good faith dealing. And governments are often not equipped to go after small companies that break licensing laws, because it will cost the state much more than they can ever recover by prosecuting individuals not operating a scam on a large scale. Small time crooks who sell a few predatory loans may cause individual families thousands of dollars of damage, but may be too small of white collar criminals for government regulators to dedicate many resources to catch and prosecute.
However, it is still a good idea for homeowners to make sure that every party they deal with during their mortgage transaction is properly licensed. If they find out that no license was in place, and the lender knew about this factor or should have known about it, it may have a difficult time proving its right to foreclose on a property. And it may be vastly easier for borrowers to show conspiracy or predatory lending if parties acted together to create a situation in which it was impossible to pay the loan.
Mortgage brokers and real estate agents are currently licensed at the state level. There has been some talk of creating new federal mortgage broker licensing regulations, but this has not been put into place yet, and it is unlikely that the federal government will take over this much power from the states. Various federal agencies, though, do investigate financial and white collar crimes and may have some jurisdiction over practices engaged in by a mortgage or foreclosure scam company. Appraisers are similarly licensed at the state level, if at all.
Banks may be licensed either by the state or the federal government, depending on how large the institution is, how many states it operates in, and if it decided to be a federal or state bank. Banks, though, will often be regulated at both levels to some degree. The largest banks will be regulated more at the federal level by the Federal Reserve and the Office of the Comptroller of the Currency, while smaller banks will be licensed and overseen by state banking departments.
Although filing complaints with the proper regulatory agencies may not help in a current foreclosure lawsuit, especially if the unlicensed party has left the business and left town to avoid prosecution, it may help prevent that person from taking advantage of others in similar businesses and situation. As well, if homeowners can show that they were given a loan or sold a home by someone without a license, it may help bolster the rest of their case as to why the foreclosure is invalid.
on October 28, 2009, 5:52 pm