Horizon, Host: Ted Simons

April 21, 2008

Host: Ted Simons

sB 1028 Loan Originator Licensing

  • State Senator Jay Tibshraeny talks about his bill which would establish a loan originator program within the Department of Financial Institutions. A person would then be prohibited from acting as a loan originator unless licensed as one by the department.
  • Jay Tibshraeny - State Senator, Chandler
Category: Business/Economy   |   Keywords: Legislature,

View Transcript
Ted Simons:
Good evening, and thanks for joining us on "Horizon." I'm Ted Simons. The state senate today approved a bill that would require city and county law enforcement agencies to enforce federal immigration law. The bill was approved by a vote of 20 to 9 and now heads to the governor. Police departments could meet the bill's requirements by building a relationship with federal authorities to solve the problem of illegal immigration, getting immigration training for their officers, or by embedding federal immigration agents in their departments. The bill would also prohibit local governments from having policies that prevent sharing immigration status in certain cases.

Ted Simons:
The sub-prime mortgage mess has produced quite a few casualties. Today a story in the Arizona Republic reports that some homeowners in the Phoenix area are choosing to walk away from their mortgages, even when they're not immediately facing foreclosure. They're walking away because they owe more than their home is worth. Still, foreclosures have quadrupled from a year ago. And some blame mortgage lenders for a good part of the problem. Joining us to talk about his efforts in the state legislature, Senator Jay Tibshraeny of Chandler. His bill would require that mortgage lenders be licensed in Arizona. Good to see you again, thanks for joining us on "Horizon."

Jay Tibshraeny:
Thanks for having me tonight.

Ted Simons:
Licensing of loan originators, why would that make a difference?

Jay Tibshraeny:
The loan salesman. I guess the reason it makes a difference -- that person is the person selling you a very expensive instrument, the loan on your house. And in that industry, the real estate salesman that you deal with is licensed. The architect that drew the house is licensed. The home builder that built the house is licensed. Yet the person that deals with all your confidential information, your tax returns, your finances, has no licensing requirement, no requirement that looks at, is this person qualified to sell me a 200, a 300, a 400, a 500,000 mortgage. I think the time has come to put them under some professional regulations and ethics and accountability in an industry that's sorely in need of it right now.

Ted Simons:
Why haven't these folks been regulated heretofore?

Jay Tibshraeny:
I'm not sure. A lot of other states do regulate loan officers, loan salesmen. Arizona, for whatever reason, has lagged behind. I know last year there was an attempt to do it, and it didn't happen. I ran mortgage fraud legislation that I concentrated on last year, and that did get through. But this year I've concentrated on this loan officer licensing, and it's been moving through the process pretty good. But I think the timing is good for it now at the legislature. It passed out of the House about two weeks ago, 48 to 4. It's going through the Senate as we speak, and it'll be in caucus tomorrow morning. We'll have a vote in the Senate within the next week on it. Because of the tremendous problem we're having with the housing industry in this nation, and how mortgage loans and the lenders and the lending industry has related to it, I think people say, its time for a little regulation, a little ethics, a little regulation in this industry right now.

Ted Simons:
When you talk about regulation, what are we discussing here? Is it education? Is it -- what would regulation involve?

Jay Tibshraeny:
It'll involve a couple of things. But obviously it's going to require a test to be taken before you can get your license. So you'll have to do some education and then take a test to get your license. There will be ongoing education, much like the real estate industry has, where you have to take so many classes every year to get your license renewed. It'll require background checks to look into the background, and things that are shady in your background, or if you have a felony in your background, are all going to be reasons not to issue a license to that person right now. Right now we don't have that. Education, a look into your background, and ongoing education.

Ted Simons:
You originally tried to get this through, and it seemed to stall in committee. What happened?

Jay Tibshraeny:
The bill initially that I dropped in the Senate, because it didn't get a hearing in the Senate, that's not an unusual occurrence in the Senate. Chairmans have the decision of hearing or not hearing bills. My particular bill didn't get a hearing in the Senate. Much like the mortgage fraud legislation from last year. But using an instrument that we call a striker, I was able to use one of my bills that had landed over in the House on a different subject, and working with the chairman of the financial committee in the House -- I was able to get a hearing on it and get it through the process over there, and then it circled back to the Senate where it sits today.

Ted Simons:
On the Senate side though, wasn't there a competing bill, a differing bill, that said maybe voluntarily these folks could go ahead and be licensed, and you go out of the secretary of state's office instead of a different avenue? Why was that a bad idea, or not as good as your idea?

Jay Tibshraeny:
I liked my idea, I'm sure the sponsor of that bill liked her idea better. But that's voluntary, it's strictly voluntary. So if you're a salesman, you can volunteer to go register. There's no enforcement and there's no real other teeth to that registration, other than I'm listed in the Secretary of State's website that I'm going to sell mortgages. Versus mine which has regulations, which has enforcement, and which has ongoing education, which has enforcement to where, if you violate the law, you can have your license suspended. The thing that you make a living at, selling those mortgages, you're licensed. If you are a bad operator, you could lose that ability to make a living.

Ted Simons:
What about the brokers who have used some of these -- some are pretty fly by night characters over here, and that's obviously the reason you've got legislation. What about those who have used these people in the past? Is there not some responsibility on that end?

Jay Tibshraeny:
There is. A lot of people don't realize brokers are currently licensed in the state. The mortgage brokers. But the people working under them are not licensed. And the real estate industry, the broker's licensed, but so is the real estate salesmen. The brokers have responsibility, but that responsibility, I think, breaks down at the sales level by not having really any enforcement there. So I think broker licensing will continue, but I think you need that extra added step of the salesperson being licensed. Yes, we can penalize and hold brokers accountable, but you still have that salesman out there, even if the broker gets rid of them, if you don't have a way to track them and now who those operates are, and have a system, they can go from broker to broker without any knowledge that they're not really a very ethical person.

Ted Simons:
Quickly, what kind of response are you getting from the real estate industry?

Jay Tibshraeny:
This particular bill is getting very, very good response from the real estate industry, the banking industry, the lending industry. It pretty much has unanimous support from the business community and the related businesses that this is the time, the time to do it, and we need to do it now.

Ted Simons:
Alright Jay, thank you so much for joining us, good to see you again.

Jay Tibshraeny:
Thank you.

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