Mass. joins new mortgage system

Seven states including Massachusetts have created a shared database to track the licensing of mortgage loan originators, including mortgage brokers and loan officers at banks.

The Nationwide Mortgage Licensing System, launched today, will allow regulators to prevent loan originators banned in one state from working in a different state. Eventually, perhaps by 2009, customers also will be able to search the database.

The system is a belated response to changes in the mortgage lending industry. Most mortgage loans are arranged by independent contractors, known as mortgage brokers, who operate outside of traditional regulatory frameworks. Until recently, most states imposed minimal licensing requirements on brokers, if any, and regulators did not know whether a broker had been licensed -- or sanctioned -- in another state.

That absence of regulation played a role in the lending excesses of the last decade, and led states including Massachusetts to tighten licensing requirements. The national database is another piece in the response, allowing regulators to track licensees across state lines.

The Massachusetts Division of Banks will use the system to license and supervise over 2,000 loan originators.

Forty-seven states have indicated an intent to join the system. The others already participating are Idaho, Iowa, Kentucky, Nebraska, New York and Rhode Island. While the system's full power depends on greater participation, Massachusetts officials said joining now was an important first step.

"We want to ensure our licensees play by the rules," Steve Antonakes, the state's commissioner of banks, said in a statement. "This new system gives us the framework and the tools we need to get the job done."