State Rep. Curt Cobb (official photo) [Click to enlarge]

A bill sponsored by State Rep. Curt Cobb that was signed into law last week will create new requirements for individuals engaged or seeking to operate in the mortgage industry in Tennessee, including background checks.

Last week, Gov. Phil Bredesen signed SB 4160, which was designed to establish educational requirements and a method for criminal background checks on individuals working in the mortgage industry who must be licensed or registered with the Tennessee Department of Financial Institutions.

The bill, sponsored by Cobb and Sen. Andy Berke of Chattanooga, also allows the department to join the Nationwide Mortgage Licensing System (NMLS) created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).

"Background checks, along with participation in the NMLS, will enable the department to identify bad actors that may not merit licensing or registration in Tennessee's mortgage industry," said Cobb.

Comprehensive criminal background checks will be performed on individuals applying for a new license or registration with the department. The mortgage business is nationwide in scope, and state banking departments are coordinating their resources to establish a common database of licensees. Eventually, participation in NMLS will allow all states to have the most current information possible on individuals seeking licensure.

"It is important to maintain close scrutiny on the industry," said Financial Institutions Commissioner Greg Gonzales. "This legislation complements that goal by giving the department additional tools to determine initially who should engage in the mortgage business.

The department's increased regulatory efforts over the last four years have seen our number of examiners in this area more than double, leading to an increase in enforcement activity."

"These new requirements will protect consumers from abusive lending practices and improve the overall safety and soundness of the mortgage industry," said Berke.

In 2007, the department's efforts garnered $5.5 million dollars in refunds for Tennessee consumers, with half of the refunds coming from a joint effort with the Tennessee Attorney General's office to participate in a nationwide settlement and the other half from department examinations.