Hundreds of mortgage brokers could lose licenses

By DEANNA MARTIN, Associated Press Writer

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By Beth Boehne

Story Created: Jul 25, 2008 at 1:19 PM EST

Story Updated: Jul 25, 2008 at 1:19 PM EST

INDIANAPOLIS (AP) — Indiana's secretary of state warned mortgage brokers earlier this month that they would lose their licenses if they didn't pass a state-required test by Aug. 5. But it appears most of them aren't worried about the threat.

Just 83 people have passed the exam since Secretary of State Todd Rokita's warning July 7, while more than 500 brokers are still on track to lose their licenses, according to an update from Rokita's office Friday.

Twenty-six brokers have voluntarily surrendered their licenses since Rokita's warning. That could help them go back into the business in the future since they will not have had their licenses revoked.

"Otherwise, they'll have a disciplinary action on their record," said Jim Gavin, a spokesman for Rokita's office.

The office does not plan to take any action against brokers not meeting the requirements until after Aug. 5, Gavin said.

Mortgage brokerage companies are not banks or credit unions that offer mortgages. Instead, brokers act as third parties that match a borrower to a lender.

A 2007 law required mortgage brokerage companies to meet certain requirements by July 1, 2008. Each company must name a principal manager — a leader with at least three years experience who has passed a state exam.

After the July deadline passed, 639 of the state's 950 licensed loan brokers still had not named a qualified principal manager. Rokita said most companies did not even attempt to have an employee take the exam. He said he would give them until Aug. 5 to name a principal manager.

Authorities say some brokerage companies may have gone out of business because of problems in the real estate industry since the 2007 law passed, while others just aren't complying.

It is not illegal for potential homebuyers to work with brokers who don't currently meet state requirements. But after Aug. 5, Rokita's office will shut down those businesses, so homebuyers whose loans have not closed by that date could have to start their mortgage process all over again with a new broker.

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On the Web:

http://www.in.gov/sos

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