The number of licensed mortgage brokers in Washington state is apparently dropping dramatically, with only 66 percent of previously licensed mortgage brokers and 42 percent of previously licensed loan originators fully renewed and approved to do business in the state. “The low number of renewals — compared to the number practicing prior to December 31, 2007 — is a concern,� Washington Department of Financial Institutions director Scott Jarvis said, “particularly in light of the numerous notices issued.� “We understand that the reduction reflects a dramatic drop in loan activity due to the downturn of the mortgage industry and a number of firms going out of business or dropping their state license,� Jarvis continued, “but the reduction is still a concern.� Washington state brokers are required to be licensed, per legislation passed in 2006. From the the Seattle Post-Intelligencer:

“We’re concerned that people will be doing business without being licensed,” said Deb Bortner, head of DFI’s consumer division. “We want to know where they are. I think we were a bit surprised.”

State records indicated that in 2007, 1,261 mortgage brokers and 13,722 loan originators (agents of mortgage brokers) applied for and received a license after the 2006 passage of legislation requiring loan originator licensing. The Department denied 170 licenses for criminal histories, bad credit, or character and fitness issues. While 6,139 have passed the competency test so far, the number of completed renewals is only 5,720, the agency said. DFI has processed all licenses with complete applications and the Department expects hundreds of applications to arrive in the first weeks of 2008. I’d written last week about similar problems in Maryland, where state regulators have been ill-prepared to enforce a state-wide licensing effort for mortgage brokers.