During the past year, some states have enacted or scheduled the introduction of new regulations which apply to mortgage brokers. These have included Colorado, Massachusetts, and Alaska. Such regulations have focused on eliminating deceptive practices and requiring brokers to become registered with the government. It is also possible that additional regulations will be introduced at the federal level.

Most recently, in mid-October, the Attorney General of Massachusetts issued new regulations of this type. According to a press release issued by the Attorney General’s office on the 17th, the new regulations prohibit some types of broker and lender practices which are considered to be deceptive or unfair. Expanded regulations which apply to mortgage brokers include the prohibition of initiating a loan for which the broker does not have a “reasonable belief” the borrower will be able to repay it, and the requirement of greater disclosure by the broker regarding “no doc” and “stated income” loans. The new laws also ban brokers from brokering mortgages which are “not in the borrower’s interest” or in which the interests of the borrower and broker are conflicted.

Much earlier in the year, the state of Colorado enacted new regulations applying to mortgage brokers and required many of them (with some exceptions) to complete a process to become registered as a broker. The Rocky Mountain News published an article on the subject in January, indicating that the new law requires FBI and CBI criminal investigations, fingerprinting, a two-hundred dollar registration fee, and other requirements before someone can become registered as a mortgage broker.

The state of Alaska will bring about new mortgage broker regulations in July, 2008. According to the official State of Alaska web site, brokers and lenders will be required to become licensed and meet various requirements to do so; among other changes, a fund (supplied by lenders) will be established to help provide compensation to borrowers who fall victim to mortgage lending activities considered not to be ethical and/or legal.

New regulations are also possible in the federal government; according to an Associated Press report in late October, the Office of Thrift Supervision’s director spoke of the need for national broker registration and license requirements, so that dishonest brokers would not be able to relocate from one state to the next and continue their unethical practices. The recent sub-prime mortgage crisis, along with the related foreclosures and bankruptcies, seems likely to spur additional regulation in this field.