With license renewals dribbling in, state as well as trade association officials are warning lenders - who are swamped by the latest refinancing boom - that unless they can make a Dec. 1 application deadline, there's no guarantee they'll be able to continue to make loans after New Year's Day.
Of 2,500 applications mailed out this year, the Division of Financial Regulation, which oversees the mortgage industry, reported last week that only 305 - 12 percent - had been returned by Nov. 15 and that only 15 applicants had been granted renewal.
And for the first time as a part of license renewal, most lenders must attach an affidavit listing their loan officers who have complied with a new law by completing 20 hours of continuing education.
Loan officers who don't complete the 20 hours by the end of the year will be forbidden to discuss, negotiate, originate or close loans until they comply.
"We have emphasized as much as we can how fast you have to get this done," said Mary Louise Preis, commissioner of the division.
"I am worried for myself, and I am worried for the consumers," Preis added. "If we have to take drastic action about this, your refi is going to be hanging out there, and we don't want that to happen.
"We hope [the renewals] are all in the mail, but it makes us very nervous."
Preis said that although lenders have until Dec. 31 to submit their renewal, the division, which has two people assigned to process applications, may not be able to handle a mad dash at the end of the year, meaning that licenses may not be issued until January.
"In order to protect ourselves, we have said the drop-dead deadline is Dec. 1," Preis said. "If you have your stuff in, we will guarantee that we will get it out by Dec. 31. If you don't have it in, we don't guarantee you anything. And if you don't get it in before Dec. 31, you won't be able to do business."
And not being able to do business may affect thousands of consumers who have flooded lenders in the last two months as mortgage rates have drifted to their lowest point in 30 years.
"The question becomes, Will I give [lenders] some sort of grace period? and I guess the answer to that is that we'll have to make some general policy," Preis said.
Having to comply with the continuing-education law may be one of the reasons why the renewal applications are trickling in.
After several years of give-and-take with the mortgage banker and broker associations, the General Assembly passed a bill last year requiring all mortgage companies licensed by the state to make their covered employees take continuing education.
Preis said her division estimates that there are nearly 10,000 loan officers originating mortgages in the state.
Covered employees include branch managers as well as individuals who accept loan applications or who contact borrowers to negotiate or advise them regarding loan terms.
Only loan officers who work for banking institutions that take deposits and are based in Maryland are excluded from the law. For those who have at least 10 years of mortgage experience, the requirement will be only six hours of continuing education.
Gene Lugat, president of the Maryland Mortgage Bankers Association, said that 60 percent of his membership had satisfied the continuing education requirements though September, but that it's now "crunch time."
"We know there is a high sense of urgency out there in this last quarter to get these credit hours completed," Lugat said. He sympathized with loan officers who are trying to keep up with the latest wave of refinancings, but without those classroom hours or the option to take the classes on the Internet, they are risking their livelihoods as well as fines if they continue to interact with the public.
According to Preis, loan officers who don't complete the hours but continue to do business can be fined $1,000 for the first closed loan and up to $5,000 for every subsequent loan.
"There is nothing more important," Lugat said. "I don't care what loans you have in process, this should be placed at the highest level of priority."
"Anybody who put it off to the last minute is definitely going to have a much harder time now, trying to do business, take care of the loans and also get their continuing education," said Steve Papineau, president of the Maryland Mortgage Brokers Association.
However, with 2,500 lenders in the state, and the affidavits basically being filled out on the honor system, both Papineau and Lugat expressed concern that the state would not be able to enforce the law."[Preis] doesn't have the firepower to really go out there and enforce it," Lugat said. "The heavy burden then falls upon those major lenders that are subject to this law because we are a major target."
Preis realizes the problem as well.
"We don't have the resources, and [lenders] are aware of that," Preis said. "There will always be those others who think, `Well, she can't find us anyway. They'll never know.' It won't be OK if we find them."