Arizona law now requires loan officers to be licensed

Arizona Republic

Jul. 6, 2008 12:00 AM

Arizona's nearly 10,000 loan officers will have to have a license starting in 2010.

At almost the end of the state's legislative session in the wee hours of the morning, lawmakers approved a bill that requires loan officers and mortgage originators to pass a test, pay a fee and notify the Arizona Department of Financial Institutions where they are working. The move follows at least three failed attempts to pass similar legislation.

Many from the state's mortgage and real-estate industries backed the bill and even protested when it appeared it had stalled.

"This will bring more accountability to the lending industry and is the start of repairing that badly damaged industry," said Sen. Jay Tibshraeny, R-Chandler, who introduced the legislation.

The Department of Financial Institutions, which already regulates mortgage brokers and lenders, received a record number of complaints about bad loans last year.

Absent from the late-night debate and vote over the bill was Sen. Pamela Gorman, R-Anthem, who argued that government regulation wasn't necessary. She had introduced legislation that called for a voluntary registration of mortgage originators with the secretary of state.

A civil settlement has been reached in Phoenix with Wells Fargo Bank and Ticor Title Agency of Arizona over alleged false claims submitted to FHA on "pre-foreclosure sales."

The U.S. Attorney's Office of Arizona has worked out a deal for Wells Fargo to pay $4 million, and Ticor to pay $265,370, though both firms deny the government's allegations. The government contends it suffered losses of $2.1 million from 70 false claims to the FHA.

That housing agency's pre-foreclosure sales program sometimes allows homeowners with federally insured loans to avoid foreclosures by selling their homes for less than what is owed. Then the lender can submit an insurance claim to FHA for the balance of the loan.

The investigation leading to the settlement was conducted by the U.S. Department of Housing and Urban Development and the Office of Inspector General.

Indicted broker

Phoenix mortgage broker Rick McCullough has pleaded not guilty to fraud and theft charges, according to the Arizona attorney general. McCullough, president of CactusCash, was indicted by a state grand jury in late June for the charges.

The indictment alleges he devised a fraud scheme to tap the equity of homes owned by elderly Phoenix residents. He supposedly persuaded homeowners to refinance their homes through his business and then invest most of that money into the real-estate market through him. Then McCullough supposedly failed to invest the homeowners' funds in real estate and didn't have assets to guarantee the loans.

McCullough's next court appearance is scheduled for Aug. 4. He was released on $46,000 bond.

If convicted of all charges, McCullough faces up to 25 years in prison.

The indictment is the result of an investigation by the Securities Division of the Arizona Corporation Commission and the Department of Financial Institutions.