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Department cleans up Mortgage Originator licensing with 87 enforcement actions

June 15, 2009

Department cleans up Mortgage Originator licensing with 87 enforcement actions

For Immediate Release: June 15, 2009

Many companies had let their bonds lapse, leaving consumers unprotected

(St. Paul, MN) The Minnesota Department of Commerce has taken action against 87 mortgage originators for a variety of license infractions.  Licensing regulations enacted in 2007 required, for the first time, all mortgage originators to show financial responsibility, such as a surety bond, to enhance the integrity and reliability of the industry.

"Increased financial requirements of licensees were put in place to protect consumers," said Commerce Deputy Commissioner Kevin Murphy. "We are not going to let these companies continue to do business unless they comply with the law."

On March 9, 2009, a Notice and Order for Prehearing Conference with an Administrative Law Judge was sent to 92 licensed residential mortgage originators because the Department of Commerce had received notice that their surety bonds had either lapsed or been cancelled.  Each of these 92 licensees failed to respond to an earlier request from the Department to provide evidence of compliance with bond requirements or other financial assurances.  In addition, none of the 92 had voluntarily surrendered their license.

At a Prehearing Conference on April 28, 2009, 51 of the licensees defaulted by failing to appear.  The Administrative Law Judge recommended that formal actions be taken for one or more alleged violations:

  1. Failure to maintain, at all times, either a net worth of at least $250,000, or a surety bond or letter of credit in the amount of $50,000.

  2. Failure to notify the Commissioner of any change in its surety bond within ten days.

  3. Failure to respond to the Department's information request 

Of the remaining 41 cases:

  • 30 licensees voluntarily surrendered their license and paid a $250 civil penalty.

  • Two licensees agreed to a $250 civil penalty and had their bonds reinstated.

  • Four licensees agreed to revocation of their license.

  • Five cases were dismissed because documentation provided by the licensee resolved the matter. 

Commerce Department officials believe the unresponsiveness of these companies is a result of reduced or closed operations, given the current state of the mortgage industry.

Prior to the 2007 law, there were over 4,100 licensed residential mortgage originators in Minnesota. By the end of May 2009 that number had dropped to 1,074.  The Department anticipates that, including the 51 companies which defaulted at the Administrative Law Judge hearing and the usual attrition during a license renewal period now underway, there will be even fewer originators by the beginning of August when they are required to renew their licenses.

The specific actions taken by the Department can be found on the Commerce website at by clicking on Enforcement Actions.