A nationwide licensing system that’s intended to help states track mortgage brokers and lenders under their jurisdiction launched today with seven states participating and 31 more expected to join by the end of next year.

The Nationwide Mortgage Licensing System (NMLS) creates a single file for each state-regulated mortgage lender, broker, branch and loan originator, simplifying the process of licensing and monitoring companies and individuals who do business in more than one state.

First proposed in 2004, the NMLS launched today with New York, Massachusetts, Rhode Island, Idaho, Iowa, Kentucky and Nebraska on board. All told, 38 states, plus Washington, D.C., and Puerto Rico, have committed to participate in the system by the end of 2009.

Developed by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators, the system has drawn fire from the National Association of Mortgage Brokers, whose members have complained that it excludes originators at banks and other federally regulated financial institutions.

But lawmakers in the House of Representatives endorsed the idea by incorporating it into HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007.

Approved Nov. 15 in a 291-127 vote, HR 3915 would also restrict yield spread premiums and other incentives used to steer borrowers into higher-cost loans, require lenders to determine that borrowers have a reasonable ability to repay a loan, and create limited liability for companies that bundle mortgages for sale

Although the bill’s chances in the Senate are uncertain, most states have already committed to join the NMLS.

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