Editorial: Mortgage reform is imperiled

Wednesday, May 5, 1999 | 11:57 a.m.

Two important bills have been introduced in the 1999 Legislature in response to the collapse of the Harley Harmon Mortgage Co. in Las Vegas, in which 700 people had $23 million in investments jeopardized. A court-appointed receiver has been able to recover about $17 million in these investments, but some elderly investors say they have been left destitute. The Assembly Ways and Means Committee last week recommended passage of one component of the mortgage company reform package, but unfortunately a key companion measure appears dead in that same committee.

The first piece of legislation, Assembly Bill 64, establishes minimum licensing requirements for mortgage companies and their agents. Under the legislation, authored by Assemblyman David Goldwater, D-Las Vegas, companies also must meet minimum net worth requirements. In addition, the legislation gives added powers to the attorney general, allowing that office primary jurisdiction in prosecuting criminal and civil suits against mortgage companies. This is excellent legislation that received the blessing of the Ways and Means Committee and was approved by the Assembly on Friday.

The second component of the reform, Assembly Bill 72, would give the secretary of state's office more authority in regulating securities transactions by private mortgage companies. Secretary of State Dean Heller's legislation would require much more disclosure of the financial details for prospective investors before the securities are marketed. Heller makes a persuasive argument that every other state has similar regulations, so mortgage companies here are overstating their claims that the legislation is onerous. But the Ways and Means chairman told the Sun's Cy Ryan there isn't any appetite on his committee for Heller's proposal.

The regulation of mortgage companies is a balancing act. The state Financial Institutions Division plays a critical role in making sure that the health of the mortgage industry, for which it has oversight, is preserved. It is equally important, though, to make sure there are adequate regulatory safeguards for consumers. Undoubtedly Goldwater's legislation will help, but it will be a shame if Heller's bill is allowed to die.

Sometimes half a loaf of bread is better than none, but this is a situation where the Legislature has an excellent opportunity to make it less likely that in the future mortgage companies could take advantage of investors. State legislators should comprehensively tackle this issue this year by including Heller's bill among the reforms, instead of addressing mortgage company investments in a piecemeal fashion.