Most professionals that home buyers work with are regulated by the state, including real estate agents, appraisers and home inspectors.
But loan officers are a lingering exception.
Members of the state's mortgage-lending industry say it's about time to change that. A bill in the state Legislature would require "loan originators" — loan officers who deal with the public and generally work on commission — to be licensed. The state currently requires mortgage-lending businesses to have licenses but doesn't require licenses of the employees who interact with customers.
"Mortgage brokers are pushing this on ourselves," said Stan Lund, president of the Arizona Association of Mortgage Brokers, a longtime supporter of licensing requirements. "We want our industry to be regulated and licensed."
More than 30 states now require loan officers to be licensed, said Felecia Rotellini, superintendent of the state Department of Financial Institutions. The licensing requirements would require basic education standards and background checks and would allow the Department of Financial Institutions to keep track of loan officers, Rotellini said.
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Those requirements would help ensure loan officers can properly explain the products they're selling and keep fraudulent operators out of the business, she said.
"It's important that Arizona protect its citizens from all those people who can't get work in other states," Rotellini said.
Sponsors of the bill said there have been some attempts to pass similar legislation in past years, which were stymied by opponents to expanding government. But this time around, "I anticipate it going all the way to the governor's desk," said sponsor Rep. Bill Konopnicki, R-Safford.
The so-called "mortgage meltdown," which has created turmoil in the country's credit markets, is serving as added impetus to get the bill through, said Sen. Jay Tibshraeny, R-Chandler, another sponsor of the legislation.
"I'm not a huge regulator, but there are some industries where regulations are necessary to protect the consumer," he said.
A lack of a licensing requirement makes it easy for criminals to do business as loan officers here, said Richard Hagar, a Washington real estate appraiser who helps law enforcement with mortgage-fraud cases.
"That's what I see is crooks that were in other states — when they get disciplined, those people leave and move to Arizona," Hagar said.
But local mortgage lenders say that a lack of education among loan officers has probably been a more widespread contributor to sales of bad loans and rising foreclosure rates. Some loan officers sold complicated creative financing products to people without properly explaining the risks, local mortgage lenders said. Others may have helped participate in fraud schemes without knowing it, Rotellini said.
If loan officers were required to be tested, "I'm sure by the hundreds many of them would fail because they had no training," said Mike Jones, a branch manager for Tucson Mortgage Co.
Rotellini said the fact that mortgage lenders themselves are asking for the regulations is proof that there is a broad base of support for the bill. Gov. Janet Napolitano has also championed the bill this year.
"There are no industry or consumer groups who oppose it. None. Everyone thinks it's a good idea," Rotellini said.