The U.S. mortgage crisis is touching just about every area of society, both here and overseas. You can bet that legislators at all levels are lining up to hold hearings and propose legislation. After all, that will often get them TV coverage which seems to be the object of so many political activities.
In New Jersey the mortgage crisis has spawned a call for background checks, this time on mortgage brokers. The Press of Atlantic City reports that there are bills working their way through the New Jersey Assembly and Senate that would raise the requirements bar for people who want to become mortgage brokers.
Currently in New Jersey you don’t need a license to solicit mortgage business as long as you’re working for a licensed mortgage company. The proposed legislation would change that by requiring the mortgage solicitors obtain individual licenses.
The licensing process would require taking an examination, undergoing a criminal background check, and completing instruction in “the legal, ethical and business aspects of the field.” I’m not impressed.
Legislators would do us all much more good if they would delve into the entire process of securitizing mortgage loans. Securitization removes any incentive for the loan originator to be concerned about whether a loan will be paid back or not.
Legislators would also serve us better if they looked into the deceptive practices of the industry. I’m talking about offers that entice unsophisticated people who want to own a home to take out loans they won’t be able to afford.
But since the legislators in New Jersey or elsewhere aren’t likely to do that, let’s look at how they could make their legislation better.
They should require both a criminal background check and a credit check. Credit scores below a certain point or debt levels above a certain point would require review before a license is granted.
Don’t just do ethics training. Just about anyone warm to the touch can sit through training and pass a test. Put some teeth into ethics regulations and then enforce them.
I’m not sure that a couple of more laws and still more regulations are what we need. But if we’re going to pass some laws, let’s make them good ones.