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Contact: Jim Gavin
Indianapolis (July 7) - Indiana Secretary of State Todd Rokita announced today that a majority of Indiana's mortgage brokerage industry has failed to comply with a phase-in period of a 2007 law and therefore will be unable to continue doing business in Indiana as of August 5, 2008, unless compliance is achieved prior to that date.
Responding to a need to reform the mortgage brokerage industry even before the bulk of the sub-prime mortgage crisis hit, Rokita worked with leaders in the General Assembly to pass a law requiring each licensed mortgage office doing business in the state to employ a Principal Manager to supervise the business affairs of the office and the staff. A Principal Manager is a mortgage professional with at least three years experience in the industry. Furthermore, these the 21st century business and lending practice reforms now mandate that each principal manager take and pass a practice standards examination (Principal Manager Assessment) that is based on Federal regulation, Indiana statute and industry best practices.
Despite the July 1, 2008, effective date for the Principal Manager requirement, roughly 70 percent of Indiana's licensed mortgage brokers are being operated by leaders who have not even attempted to take the state's Principal Manager Assessment. The Secretary of State's Securities Division is, therefore, notifying more than 600 loan broker companies that their licenses are being revoked effective August 5, 2008, should the office continue to operate on that date without a properly credentialed Principal Manager in place. Some of these companies are located outside of Indiana, but are licensed to offer mortgage to Indiana homebuyers.
"Mortgage brokers are being held to a higher standard, and they need to understand the importance of the new requirements they face" said Rokita. "The mortgage and real estate industries are facing unprecedented and deserved scrutiny, and I intend to make sure Indiana homeowners have the opportunity to hire professionals that can do a competent job."
Soon after the law passed in 2007, Rokita's office sent notice of the required test to all loan brokers licensed in Indiana in June of 2007. Another notice advising of the July 1, 2008 deadline was sent in May of 2008. The Secretary of State's office also led town hall meetings in the spring of 2008 in several Indiana cities to discuss the new law with industry professionals.
In announcing the August 5th effective date of the revoked licenses, Secretary Rokita encouraged mortgage professionals to take advantage of a series of preparation courses to be conducted by the Indiana Association of Mortgage Brokers in several cities around the state. The courses are specifically tailored to help prepare mortgage professionals for the Principal Manager Assessment.
"The Indiana Association of Mortgage Brokers developed the test questions for this Principal Manager Assessment that its industry leaders are expected to pass to do business in Indiana," said Rokita. "Mortgage professionals should welcome the additional time they have to comply with this law and should use the time to demonstrate their ability to serve Indiana's homeowners competently."
Secretary Rokita also explained how Indiana consumers can search for loan brokers in a database found on the Secretary of State's Web page - www.in.gov/sos - to determine if the company has a registered Principal Manager in place. After August 5, 2008, records for loan brokers who have not complied with the Principal Manager requirement will no longer be available on the database.
"We believe the Principal Manager Assessment is a fair assessment of the competency of a Principal Manager with three years experience," said Mike Monaco, president of the Indiana Association of Mortgage Brokers. "As an association, we stand by the decisions Secretary Rokita, as our regulator, has made to raise the level of professionalism in the mortgage broker industry in Indiana."