Louisiana Law Cracks Regulation Whip over Originators’ Heads

A state bill that took effect July 31 is changing how mortgage originators operate in Louisiana. State lawmakers passed Louisiana Act 522 (HB 810) — or the Louisiana Secure and Fair Enforcement of Mortgage Licensing Act of 2009 — which requires loan originators, including lenders and brokers, to register with a state-approved licensing system. The act aims to increase transparency in originations and provide for more efficient regulation of originators. The law requires both mortgage originators and certain loan processors to obtain a license to operate, although the language exempts certain parties including real estate investment trusts (REITs), any state or federal agency and depository institutions regulated by a federal banking agency. The law also makes certain requirements regarding education, examinations, renewals, advertisements and disclosures. “[I]t is in the best interest of the citizens of the state to protect consumers in the most important financial investment most will make, the purchase of a home, by requiring the licensing and regulation of residential mortgage lenders, brokers, and originators,” the law reads, in part. The requirements are the latest wave of state compliance with the national trend of originator registration. They indicate greater regulation of Louisiana mortgage players, who face their own challenges working in a state still recovering from a different type of housing disaster in 2005. Lenders originated $15.4bn of mortgages in the state in 2006, a 0.7% decline from 2005, the year Hurricane Katrina plunged New Orleans houses underwater with more than just negative equity. Originators closed $15bn of mortgages in 2007, a 2.6% drop from the previous year. But originations declined across the US at the same time. Louisiana’s originations compared with other states actually boosted its standing from the No. 30 ranked state in 2006 to No. 29 in 2007, according to the two most recent years of data from Inside Mortgage Finance, an industry publication. Write to Diana Golobay. HousingWire magazine looks in depth at a Louisiana market — New Orleans, four years after the devastating Katrina — in the August issue, which is still available here.