New law for home loan consultants poses hurdle

Nevada's emerging home mortgage modification industry is running into a big hurdle just as it starts to operate under a new law.

A new state law required home loan modification and foreclosure consultants to obtain licenses from the mortgage division. While 50 applications are being processed, none of the applicants has posted the required $75,000 surety bonds, according to the division.

The deadline to post the bonds is Thursday, and anyone that continues operating without a bond could be fined.

Those that have not already started the process to post a surety bond probably will miss the Thursday deadline, said Elisabeth Daniels, a spokesman for the Mortgage Lending Division.

AAA Home Rescuers made arrangements to obtain the required bond on time for about $7,500, managing partner Mandy Peacock said.

However, Peacock doubts many other mortgage modification and foreclosure consulting firms will meet the deadline.

"Many people weren't aware of the deadline," she said. "This whole process, because it's brand new, hasn't been clear on deadlines and guidelines."

Mortgage Division Commissioner Joseph Waltuch in a statement said the division has reminded the industry about the bonding requirement at least three times.

"Our goal is to do all we can to help businesses meet their legal obligations and at the same time ensure that Nevadans receive the services to which they are properly entitled," Waltuch said.

The state requires the bonds so that consumers have additional sources of compensation if a broker, mortgage modification or foreclosure consultant violates the law and causes them damages.

Peacock said some competitors wrongly think the bonds they posted to operate as consumer credit counselors would allow them to operate as mortgage modification counselors, too. In addition, the division has 326 licensed mortgage brokers that are required to post bonds by Thursday.

These include businesses that originate home mortgage loans for consumers and also hard-money lenders, who solicit investor money to make short-term loans to developers and others with real estate collateral.

The division has received bonds from six mortgage brokers plus another 12 bonds that have deficiencies. Mortgage brokers must obtain $50,000 bonds for their principal office plus $25,000 for one or more branches.

The typical $50,000 bond for a mortgage broker costs $3,500 to $7,000, leading some to wonder whether many brokers will allow their licenses to lapse.

Vestin Mortgage, one of Las Vegas' larger hard-money lenders, is obtaining a new bond, spokesman Steve Stern said.

"I do not believe that (the bond requirement) will have that much effect on mortgage brokers," Stern said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.