This year has produced some major legislation affecting real estate and mortgage lending practices in the State of Michigan. Earlier in the summer, I wrote about a New Disclosure Law which went into effect on July 1, 2008 for Real Estate Brokers.

This disclosure provides a clear definition of the contract for services in hiring a real estate broker. The New disclosure also requires that a Minimum Service brokerage indicate which services they are/are not providing and reveal these limits to potential clients, thus hopefully clearing some of the confusion surrounding WHAT real estate brokers actually are DOING to provide VALUE to the real estate transaction.

Within the next 6 months, another far reaching piece of Legislation, Public Act 60, will also go into effect. This impacts the lending industry. The legislation has been in process for some time and predates the current lending crisis. Public Act 60 will require that loan originators in Michigan be registered with the State of Michigan to legally conduct business. A continuing education requirement has been added which includes 24 hours of Pre-licensing education and 6 hours of yearly Continuing Education Credit on a yearly basis.

Michigan now joins a list of 26 other state which require loan originators to be licensed. The Act does not cover banks but only applies to mortgage brokers. There are on going challenges still being resolved with the implementation of Public Act 60 which will be enforced starting January of 2009. Perhaps some of the most significant questions are:

1. What the Registration Process will cost

2. What the educational coursework will contain although broad perimeters have been established

One of the most important aspects of the Act, in my opinion is the requirement for criminal background checks for all loan officers. Readers of my blog may remember a post I wrote last year in which an individual interviewed for a job as an agent in my office. He was a convicted felon and yet was processing loans. The rub was that his conviction was for...fraud and financial theft.

In an article for the Ann Arbor Business Review, Carol Marshall offers a comprehensive analysis of the impact of the new law in addition to some of the cautions in regarding it as a solution to ALL the problems the industry faces. One lender is quoted as saying that just because someone can pass a test and a criminal background check does not mean that they are a good person or an ethical lender.

Well, that's the truth. We've had licensing requirements for agents and brokers for many years in Michigan and there are still bad apples in the lot. However, the process needs to start somewhere. It makes no sense to me that hair dresser and barbers in the State of Michigan still have educational requirements much more stringent than those required for real estate professionals and mortgage lenders.