Regulator gets mixed reviews in mortgage cleanup

Kevin Rademacher

Monday, June 7, 2004 | 11:21 a.m.

The process of developing new regulations for Nevada's mortgage industry will not be easy.

That much was clear during a hearing last month on the proposed regulatory changes crafted by Scott Bice, the state's new Mortgage Lending Division commissioner.

The hearing, held in a small state hearing room on East Sahara Avenue, went less than three hours before Bice adjourned the meeting to the delight of an overflow crowd. He agreed to reschedule the meeting at a larger venue.

Disgruntled real estate agents and mortgage company representatives agitating in the halls outside the meeting characterized the event as a "circus" and a "rodeo."

Attendance at the event was bolstered after industry groups sent out e-mails to members encouraging attendance. In the abbreviated meeting, a major point of contention was a proposed regulation that would limit the ability of an individual to represent a potential buyer as both a real estate agent and a mortgage lender in the same transaction.

Nevada regulations currently do not prohibit real estate agents from representing buyers as a mortgage lender on the same transaction and earning commissions in both capacities.

Current state real estate regulations only require that real estate agents handling loans disclose the relationship.

An early draft of the new regulations proposed by the Mortgage Lending Division would have banned the practice. A new version of the regulation unveiled at the meeting would only ban the agent/lender from receiving a commission on both activities. That would match rules governing federally backed loans. Federal laws also prohibit real estate agents from receiving referral fees from mortgage lenders.

"I think you have a lot of courage to propose new regulations," Gary Coles, owner of Venture Realty Group of Las Vegas, told Bice during the hearing. "Some of these things are not going to be very popular. ... But if you really go out on the street, there are problems (in this industry.)"

During a break later in the hearing, Coles said with a smile that he thought his comments in support of Bice were going to lead to his own lynching.

Bice contends that allowing real estate agents to also handle the loan makes buyers susceptible to artificially high loan fees because those buyers are not receiving comparative loan quotes. The problem is magnified in the Las Vegas market, he said, where many buyers may not be aware that there is no obligation to use a specific lender.

"Up until very recently this market has been dominated by first-time buyers that do not have a lot of experience," he said.

Kathy Hunsaker, who handles both real estate transactions and mortgage loans for her clients, said she offers both services because of demand from customers.

"Please don't take away our rights or the rights of consumers to deal with a one-stop shop," she said.

Jack Woodcock, owner of a Prudential Americana Group branch in Las Vegas, agreed with Hunsaker.

"It's a concept that has been developed over the last year or two, and it's been driven by the consumer," he said.

Other issues tackled in the new regulations involve increased regulation of mortgage lenders working out of their homes and regulations requiring companies with multiple entities to disclose the records of affiliated firms with potential "impacts on the transaction."

Bice, who has been on the job since December, explained the new division was created by the Legislature in 2003 amid concern over several spectacular failures in the Nevada mortgage industry.

"There have been enough games," he said.

Still, members of the large crowd questioned the efforts of the Mortgage Lending Division to notify the effected industries of the hearings.

Bice emphasized that the division followed all state procedures in noticing its meetings on the creation of new regulations. He also pointed to an April workshop attended by little more than a dozen industry representatives.

A lobbyist for the Nevada Association of Mortgage Brokers, John Vergiels, was diplomatic in describing the commissioner's efforts.

"Mr. Bice was brought in to clean up the industry," Vergiels said. "He is doing an excellent job."

He added, however, that some of the proposals, like those limiting the ability to manage real estate transactions and loans, could make it harder to get business done in the bustling industry.

"(Bice) has shown himself to be reasonable," he said. "Regulations protecting the consumer are what this is all about, and many have been long overdue. ... It might be difficult to do all at one time."

Keith Kelley, president of the Nevada Association of Realtors, agreed that there may not be enough time to thoroughly address all the topics being taken up in the proposed regulations.

Bice has rescheduled the hearing for June 11 at the Sawyer State Office Building. An additional hearing will be held in Carson City on June 16. He also indicated that he intends to try to meet a timetable set by the Legislative Counsel Bureau to have final regulations submitted by June 30.

"I don't want to get into a position where we have temporary regulations and we have to come back and do this all over again," Bice said.