I just recently heard about the National Mortgage Licensing System (NMLS) and cannot believe that state regulators are finally taking a step in the right direction.  NMLS started in January 2008 with seven states and has since added seven more.  The idea is to streamline mortgage broker and lender licensing through one clearinghouse application process.  In an ideal world, a person/business wishing to make or broker mortgage loans would be able to file one application and get a license in all fifty states.  But, we have often laughed at this prospect because this would require state regulators to cede some power to a federal type authority.  Here, the regulators themselves, through their association, decided they did not want to give up any power to a federal authority and just create a uniform application process.  The states will still have complete regulatory authority, but this system will allow a licensee to get licensed in multiple states at one time. 

While thinking about this great step for mortgage lending, I am reminded of a similar licensing situation that can cause incredible headaches for a start up.  That is selling insurance.  So often a person/business, which wants to sell insurance to clients in several states, spends so much time getting the proper license from each state.  The funny thing is that in this situation most states grant reciprocity to insurance agents from other states.  But, to get to that point you have to weave your way through the maze that is state beauracracy.  Maybe its time for the insurance regulators to step up and work together to create a national licensing system.  If they don’t, the feds might just put them out of a job.

I am not saying that a federal authority would necessarily be better.  I think a locally based regulator, in the mortgage situation, may be more in touch with borrowers and be better equipt to protect them.  You can see how the feds handled mortgage lenders that they already regulate…or don’t regulate as the case may be. However I also think it seems silly that a person trying to broker loans in say Pennsylvania, New Jersey and Delaware must follow potentially different regulations to do virtually the same thing.  I think the same is true for insurance brokers.