Nonprofit Lenders Remain Exempt From Licensing | Division of banks recognizes government redundancy, high costs
Nonprofit organizations that provide home loans with public money have caught a break from a state Division of Banks regulation which last year began requiring that all such organizations become licensed mortgage brokers.
Some local nonprofit organizations say they would’ve stopped their loan programs altogether if they had been required to get mortgage brokers licenses. Others said the requirements involved in becoming licensed mortgage brokers would’ve made it difficult to recruit volunteer board members.
The division issued a decision this summer exempting nonprofits that write mortgages with public money from licensing.
Onerous Rules
The regulation enacted last year did away with an old exemption and required that any nonprofit organization that writes more than five mortgages each year be licensed. However, the Massachusetts Association of Community Development Corporations, which represents many of the state’s CDCs, said the new requirement was simply too much for nonprofits that write mortgages with public money to handle.
“When organizations are lending the government’s money, that money has a lot of requirements tied to it. It’s already heavily regulated,” said Matt Wally, executive director of Worcester Community Housing Resources. WCHR’s mortgage writers must be licensed brokers because the organization writes more than five private mortgages per year, Wally said.
But there is an entire set of nonprofit organizations that are hired by government agencies to provide money for down payment assistance, or lead paint abatement, for example. In most cases, those loans are non-amortizing, non-interest loans that do not get paid off until a home is sold, explained Joe Kriesberg, president of the MACDC.
“That process is highly regulated by the agency that does the hiring,” Kriesberg said. “They’re already receiving substantial government oversight.” For those organizations, the broker’s license requirement was “a waste of time and money for the nonprofits and the division of banks. It’s not mortgage lending of the kind the legislature was trying to get at” in the Act Protecting And Preserving Home Ownership, under which the nonprofit exemption was canceled.
Joseph Leonard, the division of banks’ general counsel, said last year’s regulation would have required volunteers at nonprofit organizations that write mortgages to get licensed as loan originators. And along with the license come requirements for individuals to disclose net worth, and costly education and continuing education requirements, he said.
“There were a number of issues,” Leonard said.
Work Around
Mullen Sawyer, executive director of the Oak Hill Community Development Corp. in Worcester said it decided before the division’s decision to direct its lending of public money through the WCHR, which is already licensed.
Sawyer said it would’ve cost $3,000 to have Oak Hill’s staff licensed. “It’s very difficult to comply with for small nonprofits,” he said. “We’re very fortunate to have the (nonprofit) infrastructure here in Worcester. If both Oak Hill and WCHR had been required, it would’ve been too onerous.”
“There were a couple of tricky parts to the regs,” said Mark Dohan, executive director of Twin Cities Community Development Corp. in Fitchburg, which writes about 20 loans each year. Without the exemption, nonprofit organizations that were becoming licensed mortgage brokers would have had to make extensive, personal financial disclosures about their boards of directors.
“It would’ve been very, very burdensome to have to make those disclosures,” Dohan said. “We were less concerned about the licensing for mortgage originators.” Out of Twin Cities’ 10 employees, three or fewer would’ve been affected by the licensing requirement and Dohan said he didn’t have a problem making his own financial information available.
But “you’re going to volunteer on a board, and our board has people of all different incomes, and they would’ve had to disclose all your financial information, income and assets. I don’t know if we would’ve been able to recruit people.”
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