Key Facts: Loan officer licensing will increase education for lending professionals, assuring their ability to inform customers about loan products. Through licensing, the Commonwealth will have the authority to suspend and revoke licenses for predatory lending and other practices. The mortgage lending industry would become more in line with the real estate sales industry, in which brokers and their sales agents must be licensed to practice. MORTGAGE LENDER LICENSING POSITION: The Northern Virginia Association of REALTORS (NVAR) supports legislation that would require licensing for mortgage loan officers in the Commonwealth of Virginia. BACKGROUND: In recent months, concern has risen that the financial well-being of thousands of American homeowners may be in jeopardy due to the growing demands of their mortgages. The danger for such homeowners is found in a combination of sagging home values and "exotic" mortgage loans that many buyers sought during recent years of rapidly rising home values. In the ensuing search for answers, the mortgage lending industry has been heavily scrutinized by lawmakers, the media and the public alike. Critics claim lenders have focused on their own bottom lines and not the best interest of their customers. Various solutions to this problem have been proposed. One that has gained attention is a "suitability" standard, by which lenders would be required to show that a borrower can meet payments on a loan both before and after any potential interest rate adjustments. Stockbrokers in the securities industry have been required to follow a suitability standard for decades; however, a suitability standard is subject to much interpretation and has not been tested for applicability to the mortgage industry. A more straightforward approach is lender employee licensing. While mortgage brokers and mortgage lenders must be licensed in Virginia, other employees of licensed mortgage companies are not required to obtain their own license. Loan officer licensing will increase the mandatory level of education for lending professionals, which will in turn guarantee lending professionals' ability to adequately inform customers about loan products. It would also serve to build a higher level of trust between consumers, REALTORS and the lending industry by ensuring that clients have been guided with sound financial advice. In addition, loan officer licensing will give the Commonwealth the authority to suspend and revoke licenses for transgressions. Mortgage brokers also could be held responsible for the actions of their loan officers, thus increasing the motivation for brokers to adequately train and advise their employees. Loan officer licensing will bring the mortgage lending industry more in line with the real estate sales industry, in which brokers and their sales agents must be licensed to practice. NVAR believes that the mortgage lending industry is, by and large, led by the right ideals and that the prevalence of predatory lending, while dangerous, is restricted to a small contingent of ill-intentioned individuals. However, given the proliferation in the last decade of a wide variety of loan types, the need to ensure that consumers enter into in safe borrowing situations is ever more important. STATUS: The State of Maryland began licensing mortgage loan officers in 2005. Under this law, Maryland considers all loan officers paid by 1099 tax forms to be independent contractors not covered by the company's business license. Mortgage companies are prohibited from hiring unlicensed independent contractors. The Maryland Commissioner of Financial Regulation is charged with monitoring the activities of licensees and investigating complaints. The Commissioner is granted broad investigative and subpoena powers to allow for access to files and other documentation. Though Virginia ranked 39th in the nation in the rate of foreclosures in 2006, NVAR urges the General Assembly to take a proactive approach to the predatory lending trend. With similar legislation in Virginia, the Commonwealth could join its neighbor and stand out as a leader on this issue.