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Uncovering Troubled Mortgage Lenders Is Not Easy For Homebuyers

This article is more than 10 years old.

In the throes of the housing crisis, potential homebuyers should make sure they are not turning to mortgage brokers and lenders that have been disciplined by state regulators. However, consumers who need this information more than ever to protect themselves from predatory lenders and brokers have no easy way of obtaining it.

Currently, the only way to find sanctions taken against mortgage companies and professionals is to contact the states where the company or individual operates and mine through data the states make available on their Web sites — something student reporters at the New England Center for Investigative Reporting at Boston University spent weeks doing to determine how often licensed brokers and lenders in New England were sanctioned.

The students found a lack of uniformity and transparency among the states in how they compile and disseminate their regulatory actions to the public and no national database to make their jobs easier.

"There is a lack of data and good comparable data from the states," said John Ryan, executive vice president of the Conference of State Bank Supervisors, which is an advocacy organization for state banking divisions.

Homebuyers will have access to a national database of disciplinary actions next year, but until then NECIR-BU student reporters had to comb through a maze of online state data and spend hours on the phone with New England mortgage regulators in an attempt to analyze each state's disciplinary action data.

Students found the Web sites of banking regulators in each of the New England states were all formatted differently and listed actions regulators had taken against all companies under their purview, not just brokers and lenders.

Also, Massachusetts refused to release all the actions they took against mortgage firms, and Maine and Vermont failed to post all of the actions they had taken online.

The Massachusetts' Division of Banks keeps secret hundreds of actions that it takes against mortgage brokers and lenders according to Chief Operating Officer David Cotney. During the past two-and-a-half years, the agency has taken more than 200 informal actions — ones that are not made public.

The division said its policies forbid the agency from describing the nature of these private actions and releasing the names of the brokers and lenders who have had secret actions taken against them.

Maine only lists approximately 20 percent of the actions its Bureau of Consumer Credit Protection levied against brokers and lenders during the past two-and-a-half years on its Web site. The actions that aren't posted online can only be accessed by traveling to the Bureau of Consumer Credit Protection offices in Maine.

Rhode Island's Department of Business Regulation adverse actions database only recently posted the actual enforcement documents, the reasons for the actions and the type of company the action was taken against.

Vermont does not list online the actions it has taken against mortgage brokers and lenders, and although a spokeswoman for Vermont's banking department says the state is working toward posting the actions online, no completion date has been set.

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This program aired on September 14, 2009. The audio for this program is not available.

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