The Minnesota Department of Commerce said Friday that the number of mortgage originator licenses in the state has dropped about 70 percent, from 4,000 to 1,202.

The decline isn't unexpected, given the state of the mortgage industry. However, the percentage change likely isn't an accurate reflection of how many people are still in the business. Many smaller companies have closed shop and gone to work for larger companies that hold their own licenses.

That's because changes in state law that went into effect Aug. 1 have made it more difficult for individuals and smaller companies to do business in Minnesota. The legislation, for example, raised the initial license fee for a mortgage originator from $850 to $2,500, and the renewal fee went from $450 to $1,125. Those entities must also have a higher net worth and carry a $50,000 surety bond.

"It's not surprising and it is a good thing for consumers," said Bill Walsh, a commerce spokesman. "This is the desired result of the Legislature passing this law -- those still in the marketplace have a lot more skin in the game."

About 50 percent of the decline can be attributed to changes in market conditions, Walsh said.

The department, which had extended its two-year renewal period from the end of July to the end of October to give companies more time to comply with the new rules, said that more than 900 individuals who formerly held their own licenses formed a Minnesota company or went to work for a company that already had its own originator license.

The decline likely has run its course over the two-year renewal period, with some of the originators stopping business before this fall but not immediately notifying the department.

Wade Abed, a past president of the Minnesota Mortgage Association and CEO of Northwest Mortgage Co. in Bloomington, said that, given the declines in mortgage originations and challenges facing refinancing prospects, more declines are expected.

"The cost to do business has gone up," he said. "And many smaller brokers and bankers have merged and consolidated with larger companies."

Jim Buchta • 612-673-7376