Thursday, December 4, 2008

How long does it take to get a mortgage license?

Mortgage Licensing can be a very arduous process. Any time we deal with the government, the likelyhood of getting great customer service is very slim. The reason being that the state or federal government employees are not compensated with bonuses or commissions for processing more applications each month. Most government employees that I have worked with are just doing the minimum needed to stay employed so that they can receive their check each month and their retirement at the end of their career. There are some exceptions though. A few states have great management and helpful licensing analysts. New Mexico, Idaho, Utah, Delaware, Tennessee, and Wyoming are few examples.

With that being said, processing times for new license applications can greatly differ. If you apply for a New Mexico license on a Monday, it is possible to have it approved by Friday. However, if you apply for a New York license on January 1st, it is possible that you won't have the license by the following year. They are just very unorganized and the red tape can stop you in your tracks at times. Generally though, most states take about 2 month to process a license application, because the state regulations require them to provide you with a response within 60 days. As long as you submit everything correctly the first time, you can expect to have your license in that time frame. If items are missing, the time can easily double to 4 or more months.

Having a complete application is one of the most important steps to reducing the time for the state to process the application. For example, when you submit a loan to a processor, if the file is missing half of the documentation, the processor can easily get frustrated and confused on what is needed. The processor will likely put your file on the bottom of the stack and work on it later. It can go back and forth for a long time. The same situation occurs with licensing. If the file is missing major items, then the state analyst has to request those items, and your application is put on the bottom of the pile. Again, a process that should take a couple months turns into 4 or 5 months very easily.

Another very important aspect of how long it will take to get a mortgage license is the time to prepare the application. I have seen applications completed in a few days, and I have also seen applications take numerous months to be completed. When I prepare mortgage license applications, I will send a list of needed items to the mortgage company. If the company does not provide me the items, I cannot complete the application. Usually the needed items are simple such as resumes, credit reports, and financials on the owners or formation documents, financials, and reference letters on the company, however, if they are not provided, the application will just sit and the timeframe for the state to process the application will never start.

Usually most companies are able to provide the needed documentation within 2 to 4 weeks. And the states take 8 to 12 weeks to process the application. So the average time to obtain a mortgage license from start to finish is between 10 to 16 weeks. But remember, you need to make sure the application is complete and to provide the needed documentation right away or it could easily turn in to a 9 to 12 month process.

Friday, October 24, 2008

November 2008 Mortgage Licensing News

With the S.A.F.E. Mortgage Licensing Act passing on June 30, 2008, there are a lot of changes expected to happen soon in mortgage licensing. At this time, only about one third of the states are in compliance with the federal law, and since most states are not going to want to hand over their licensing to the federal government, you can expect for many new laws to be passed in the near future. Here are some recent changes to be prepared for.

Michigan Loan Originator Licensing
As of January 1, 2009, Loan Originator must be licensed to originate mortgage loans. Prior to that date, Michigan only required Loan Originators to be w-2 employees of a licensed mortgage company. The new law requires the Loan Originator to have either 4.5 years of experience originating loans in the last 5 years or take a 24 hour live education course. Once either experience or education is met, then the Loan Originator is required to take a Michigan Loan Originator Test. The test just became available on October 21, 2008. Loan Originators must then complete fingerprint cards or live scan fingerprinting and go on to the Nationwide Mortgage Licensing System (NMLS) and submit a Loan Originator (MU4) application and then mail all of the previous documentation directly to the state. Everything is currently due to the state by 12/4/08 to guarantee that a Loan Originator License is issued by 1/1/09, however, details on the fingerprinting process has not been released yet, so I expect them to give Loan Originators an extension. Keep in mind, that it is just my opinion, so don't delay in following the state requirements and meeting the deadlines.

Delaware Loan Originator Licensing
Delaware House Bill 508 becomes effective on January 1, 2009, but mortgage loan originators will not be required to obtain a license until the State Bank Commissioner adopts regulations implementing the new licensing laws. At this time, there is nothing on the states website implementing the Delaware Loan Originator Licensing requirement, so it will probably not be requred until later in 2009. HB 508 defines a mortgage loan originator as an employee or independent contractor of a licensed Delaware Mortgage Broker or Lender. The legislation requires a mortgage loan originator to apply to the Office of the State Bank Commissioner for a mortgage loan originator license, establishes initial and continuing education requirements for licensees, and authorizes the Commissioner to adopt regulations to facilitate participation in the Nationwide Mortgage Licensing System. The bill requires that loan originator licensees have at least 18 hours of education courses within the five years prior to licensure, or within one year following licensure. Applicants may work as mortgage loan originators upon initial employment on a temporary basis until the person is either licensed or the application is denied. Applicants must submit a $250 investigation fee and a $250 annual license fee.

Rhode Island Loan Originator Licensing
Licensing requirements for Rhode Island Loan Originators are now posted on the Nationwide Mortgage Licensing System (NMLS) website. A Loan Originator license must be obtained by January 1, 2009 in order to continue originating in the state of Rhode Island. The application requires fingerprint cards, 20 hours of pre-licensure education, a personal financial statement showing a positive net worth, a copy of a valid photo ID (for example, driver's license), and the submission of a Loan Origiantor Application (MU4) on the NMLS. Applications are due by 11/1/08 in order for applications to be approved by 1/1/09. Also, starting in the 2nd quarter of 2009, Rhode Island expects to have a testing requirement.

Nationwide Mortgage Licensing System
New states transitioning onto the NMLS on November 1, 2008 are: Arkansas, Indiana, Pennsylvania, and Wyoming. Michigina began transitioning on October 1, 2008. All of these states require transitions to be completed by December 31, 2008. Also, most states already on the NMLS will be using the NMLS for renewals. There are currently 19 states on the NMLS and all states are expected to be on by 2010.

Friday, August 1, 2008

How do you obtain an FHA License?

It has been about a year since FHA became a major part of the mortgage market. Many mortgage companies that do not have FHA Approval are finding it difficult to survive. So what is required to get an FHA License?

There are 4 major requirements that must be met. Everything else is just paperwork. These 4 requirements are audited financials, commercial space, 3 years origination experience, and decent credit. Let's explain these items in detail.

Audited Financials
Audited Financials are usually the largest barrier for most companies. Brokers need to show $63,000 in net worth and lenders need to show $250,000. For both brokers and lenders, 20% of the total net worth must be liquid, so basically cash in the bank. Many people confuse this to mean that the owners of the company need to have this net worth. It's actually the company not the individual owners. So, often owners will invest cash, cars, investment properties into the company to show as net worth on the financial statement. The even more difficult part about this requirement is that the financial statement must be audited. If you have ever had your taxes done, you know that can be a lot of work, but for your taxes, the account does not verify every assett and liability or every income or expense. For an auidted financial statement, the CPA has to verify every number on it. Most CPAs will charge $7,000 to $10,000 for this type of financial statement. Some CPAs that specialize in these types of audits have made the process very efficient and charge as little as $2,500 to $3,500, but that is still a lot of money, especially with the way the market is.

Commercial Space
Most companies work out of a commercial space, but with the market the way it is and often for convenience some companies have chosen to start working out of their homes. HUD will not allow that. There are a few exceptions if the home is commercially zoned, or if it is near a commercialy zoned area and has easy access to the public, but in most cases, a residence will not work. Another issue with the commercial space is that it has to be separate from all other companies, except for possibly a shared receptionist. A good way to determine if your office is separate is to walk from your car to your office. If you have to pass by employees in cubicles for other companies then you are not separate.

Three Years Origination Experience
One of the senior officers must have 3 years of origination experience. This requirement is usually no problem, but is worth mentioning. If your company does not have anyone working for it that has been in the mortgage origination field for over 3 years, then you can not get approved. You will either need to hire someone or check with all of your employees to see if you can make one of them a senior officer if they have the 3 years of experience.

Decent Credit
All senior officers and all owners of 25% or more of the company will need to provide their credit reports. If any of these credit reports show major derogatory items in the last two to three years, then you will have a problem getting approved. HUD uses FHA Underwriting guidelines to determie if the owners and officers of the mortgage company are financially fit. If any of these individuals have had a recent foreclosure, bankruptcy, tax liens, or numerous lates, they will need to be removed as senior officers and have their ownership reduced to below 25% before you can apply.

If you meet all of these requirements, then you should have no problem getting approved. The paperwork is difficult and I recommend getting some assistance putting it together. You will also need to find a CPA that is not too expensive, but like I said, everything else is just paperwork if you meet these 4 major requirements.

Monday, June 2, 2008

June 2008 Mortgage Licensing Update

The activity in the states continues to rise. Numerous states are considering legislation to curb the foreclosure crisis. Nothing of course can stop it at this point, but the states seem to feel that increased regulation of mortgage companies will at least help the situation. Mortgage Licensing is one of the hotly debated topics in the states. Consumer groups feel that there should be increased licensing, education, and bonding requirements for the mortgage companies and their employees. Many people think that too many requirements may increase the difficulty of a borrower to find the right loan for the right price as mortgage companies have to spend more money to comply with these requirements. Let's take a look at the recent regulatory activity as it relates to mortgage licensing.

Washington Mortgage Lender Licensing

What activities can a licensed mortgage broker engage in under the Mortgage Broker Practices Act (MBPA) without triggering the license requirements of the Consumer Loan Act (CLA)? As a licensed mortgage broker you may act in these capacities:

Broker – assisting borrowers, or holding yourself out as able to assist borrowers, in obtaining a residential mortgage loan. Loans close in the name of the lender.

Table Fund – "Table-funding" means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. The mortgage broker originates the loan and closes the loan in its own name with funds provided contemporaneously by a lender to whom the closed loan is assigned. WAC 208-660-006.

Non-delegated Correspondent – You close loans in your name with funds provided by a lender through a line of credit. The lender provides the underwriting criteria the borrower must meet and makes the final underwriting decision.

Masachussetts Loan Originator Licensing


Any natural person who: (a) is employed by or associated with one (1) and not more than 1 mortgage lender or mortgage broker licensee regulated by the Division; and (b) negotiates, solicits, arranges, provides or accepts residential mortgage loan applications on real property located in Massachusetts, or assists consumers in completing such applications.
Sole proprietors licensed as mortgage brokers or mortgage lenders by the Division, as well as owners, officers and directors or entities licensed as mortgage lenders or mortgage brokers, are required to be licensed as mortgage loan originators in Massachusetts if they meet the definition above.



Applications must be submitted to Massachusetts through NMLS before May 28, 2008. The requirement for applicants to have completed a residential mortgage lending course does not apply to any individual who was working for a licensed Mortgage Lender or Mortgage Broker prior to November 30, 2007. Individuals who have changed employers since November 30th are also not required to complete a course prior to becoming licensed. Please note that any individual who meets these dates of employment standards and who does not file a license application with the Division of Banks prior to May 28th must complete a residential mortgage lending course prior to becoming licensed.


Applications must be submitted to Massachusetts through NMLS before July 1, 2008. Prior to becoming licensed, all applicants must complete a residential mortgage lending course that has been approved by the Division of Banks. However, applicants may submit their application filings to Massachusetts through NMLS prior to completing a course. Individuals who are presently working as loan originators may continue to operate after June 30th only if they have submitted a mortgage loan originator license application to Massachusetts through NMLS. Beginning July 1st, any individual who does not have a license application pending with the Division of Banks may not continue to originate loans in Massachusetts. Any individual who submits an application before July 1st will have until August 31, 2008 to complete a residential mortgage lending course. If such an applicant fails to complete a course prior to September 1, 2008, his/her mortgage loan originator license application will be terminated.

For information regarding the educational requirements for Mortgage Loan Originator license applicants, please see Regulatory Bulletin 5.1-105. The Division of Banks currently accepting applications for the approval of Mortgage Loan Originator educational courses.

Oklahoma Amends the Education Requirements for Mortgage Brokers and Mortgage Loan Originators

Effective November 1, 2008, new applicants for a mortgage broker license in Oklahoma will be required to have completed 20 hours of approved education during the three years immediately preceding the date of application, and new applicants for a mortgage loan originator license will be required to have completed 16 hours of approved education during the three years immediately preceding the date of application.

Tennessee Amends Mortgage Licensing Requirements

Effective January 2009, applicants for a license as a mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator will be required to complete an educational training course. Criminal background checks will also be required for mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator applicants, and for registered mortgage loan originators seeking to continue registration.

Minnesota Adds Commercial Loans to Definition of Residential Loans

Effective August 1, 2008, the definition of "residential mortgage loan" under the Residential Mortgage Originator and Servicer Licensing Act (the "Act") will expand to include commercial loans secured by 1-4 family residential real estate. The bill also expands the definition of "residential real estate" to include non-owner-occupied property, and extends certain record-retention requirements from 26 to 60 months.

Colorado Adopts Emergency Rule Making Initial and Continuing Education Mandatory for Mortgage Brokers

Effective January 1, 2009 all mortgage broker applicants must complete the 40 hours of licensing education and pass the two-part exam prior to applying for a mortgage broker license.

All mortgage brokers who currently maintain a Colorado mortgage broker’s license must complete 40 hours of licensing education and pass the two-part licensing exam by January 1, 2009.

Illinois Anti-Predatory Lending Database Registration for Mortgage Brokers and Loan Officers

On May 15, Illinois began registration of mortgage brokers and loan officers on the Anti-Predatory Lending Database. The Anti-Predatory Lending Database Program, pursuant to Public Act 95-0691, will become operational on July 1, 2008. In order to record any mortgage against Cook County property, a Certificate of Compliance or Certificate of Exemption must be attached to the mortgage. Property located outside of Cook County is not subject to the act. A mortgage broker or loan originator that takes a loan application will be required to enter certain information into the database. The database will first determine whether the property is exempt. If it is not exempt, the database will then determine if it will be necessary for the borrower(s) to obtain counseling. If counseling is not required, the loan may proceed to closing. If counseling is required, the borrower(s) will be notified and given a list of all participating counseling agencies. The act aims to reduce predatory lending practices by assisting the borrower in understanding the terms and conditions of the loan for which he or she has applied. The act does not prohibit any type of loan. For more information regarding mortgage broker and loan originator registration, please see

Connecticut Eliminates Secondary Lenders and Brokers Act

Effective July 1, 2008, new legislation essentially does away with the Secondary Mortgage Lenders, Brokers and Originators Act by consolidating all regulation of mortgage lenders and brokers under one act. The bond amount for lender and broker licensees will also increase and the mortgage license application procedures and requirements will be modified.

Iowa Amends Code Chapters Administered By Division of Banking

Effective January 1, 2009, new legislation establishes initial education and examination requirements for persons subject to registration under the Mortgage Bankers and Brokers Act. Effective July 1, 2008 the required surety bond amounts will increase and the annual license and registration expiration dates will change from June 30 to December 31 for mortgage banker and broker licensees.

Thursday, May 1, 2008

May 2008 Mortgage Licensing Update

FHA Licensing

US Congress is continuing to lag on any FHA Modernization Bill. Hopes of FHA Licensing becoming easier are slowly fading.

Maryland Bond Increase

MD surety bond increases are effective 6/1/08. Notices will be sent out soon. Bonds will need to be increased. It depends on loan volume.

Idaho Eliminates Loan Officer Bonding Requirement

Idaho loan officers no longer need to carry the $10K bond effective July 1, 2008. Notices should be sent out around May.

Michigan Enacts Law Requiring Loan Officer Registration

On April 2nd, 2008 H.B. 5288 was approved, which will require the registration of "loan officers." Under these new laws, loan officers employed by licensees or registrants will be required to complete 24 hours of pre-licensure education (unless employed as a loan officer during 4 ½ of the previous five years) and pass an initial examination. Loan officers will also be required to complete six hours of continuing education each year. Loan officer registration will begin on January 1, 2009.

Note – Under the new rules, Michigan 1st bonds now needs to expire on 12/31 just like the MI 2nd in preparation for joining the NMLS. Many bond riders will need to be completed.

Indiana Enacts First Lien Mortgage Lending Act

On March 24, the "First Lien Mortgage Lending Act" (the "Act") was approved as part of H.B. 1359. The Act requires the licensure of first-lien mortgage lenders and places requirements on a lender's origination and servicing activities. Also, as part of new legislation, the Indiana Loan Brokers Act was amended to exclude first-lien mortgage lenders. The First Lien Mortgage Lending Act will become effective January 1, 2009.

Wisconsin Enacts Bill Removing Commercial Loans from Licensing Act

On April 7, Wisconsin Governor James Doyle signed S.B. 517. This Act amends the definition of "loan" under the Mortgage Bankers, Loan Originators and Mortgage Brokers Act (the "Act"). Currently under the Act, a "loan" is broadly defined to include loans made for commercial purposes. S.B. 517 narrows the definition of "loan" to mean "a loan for personal, family, or household purposes that is secured by a lien or mortgage, or equivalent security interest, on real property [consisting of 1 to 4 dwelling units, including individual condominium units] located in this state." S.B. 517 will go into effect on April 22, 2008.

Mississippi Requires Mortgage Licensees to Use Multistate Licensing System

On April 7, 2008 S.B. 2605 became law, amending the Mississippi Mortgage Consumer Protection Law (MMCPL), Miss. Code Ann. §§ 81-18-1 et seq., to clarify the statute and require the use of a multistate licensing system. The new law requires any entity or individual licensed under the MMCPL to use the multistate licensing system for application, renewal, surrender and any other activity required by the Commissioner of the Department of Banking and Consumer Finance. Finally, S.B. 2605 allows mortgage loan originators to work at any licensed location in Mississippi of the licensed company for which he/she works and creates a de minimis exemption from the MMCPL for persons who enter into no more than 12 residential mortgage loan transactions per calendar year. S.B. 2605 also requires individuals who own or acquire more than 10% of a licensed entity, down from 25%, to file an application for a license. S.B. 2605 became effective on April 7, 2008.

Massachusetts Loan Originator Applicants Must Complete 24 Hour Education Course

The Massachusetts Division of Banks (the Division) recently finalized and released Regulatory Bulletin 5.1-105 outlining the educational requirements that loan originator applicants must satisfy before securing licensure. Most notably, within 2 years of approval of individual licensure, Massachusetts loan originator applicants must complete an approved educational course consisting of at least 24 hours of classroom-based instruction. In addition, licensed loan originators must annually complete at least 8 hours of continuing residential mortgage lending education. Individuals are not required to fulfill the 24 hour course requirement if they (i) met the definition of mortgage loan originator prior to November 30, 2007, and (ii) apply for licensure prior to May 27, 2008. The Division instituted the new education requirements to ensure that applicants are knowledgeable about mortgage lending concepts, applicable law and regulations specific to the mortgage origination profession. We note that the Bulletin also outlines the requirements for a company seeking the Division's approval of its mortgage loan origination educational courses.

NMLS First Quarter Operations are Successful

The Nationwide Mortgage Licensing System (NMLS) has concluded its first quarter of operations successfully. Events of note in the first quarter:

· Seven states with an estimated 83,144 licenses are participating on NMLS.

· MA Division of Banks is implementing its new loan originator licensing law through NMLS.

· Two states, Nebraska and Rhode Island, had transition deadlines during the first quarter. It is estimated that 78% of Nebraska company licensees and 74% of Rhode Island company licensees transitioned onto NMLS.

· Additional functionality was added to NMLS on March 31st that included data download capabilities for regulators and the first phase of reporting. The next release of the system is schedule for June 30th.

· The NMLS call center was instrumental in assisting licensees get onto and navigate through the system, handling an average of 400 calls a day.

NY Banking Department begins Company/Branch licensing on NMLS

Companies and sole proprietors that currently hold a NY Mortgage Broker Registration or a NY Mortgage Banker License, have from April 1, 2008 to September 1, 2008 to complete and submit through NMLS all necessary Form MU1s, Form MU2s and Form MU3s. Companies that have established their company record on NMLS can begin to submit licensing applications on behalf of their loan officers, as required under the New York law that went into effect on January 1st of this year.

Washington State DFI begins Consumer Loan Company Licensing on NMLS on May 1st

Companies holding a Washington State Consumer Loan Company License have from May 1, 2008 to September 1, 2008 to complete and submit through NMLS all necessary Form MU1s, Form MU2s, Form MU3s, and Form MU4s. WA-DFI will no longer accept Consumer Loan Company License applications via paper after April 18, 2008.

The following state agencies are expected to begin participating in NMLS in 2008.

May 1st

Washington Department of Financial Institutions (Consumer Loan Company Licenses)

July 1st

Connecticut Department of Banking

Louisiana Officer of Financial Institutions

Mississippi Department of Banking & Consumer Finance

New Hampshire State Banking Department

North Carolina Office of Commissioner of Banks

Vermont Department of Banking, Insurance, Securities, and Health Care Administrations

Washington Department of Financial Institutions (Mortgage Broker Licenses)

November 1st

Arkansas Securities Department

Indiana Department of Financial Institutions

Pennsylvania Department of Banking

Wyoming Division of Banking

Note: These lists are an indication of intent. Official announcements of participation will be made by each agency in a communication to each of their licensees.

Friday, April 4, 2008

April 2008 Mortgage Licensing Update

The April Mortgage Licensing Update includes the following updates:

• FHA Licensing Bond - Will it ever pass?

• Alaska Mortgage Licensing - July 1, 2008

• New York Mortgage Licensing - Transition to NMLS

• Surety Bond Issues - Massachusetts, District of Columbia, and New York

• HUD Exempt States - This is really interesting

FHA Licensing Bond

Congress has been working on reconciling the FHA Modernization Act for months now and although it appears every week that they are making progress, it is still very unclear whether a bond provision will be in the new law. If you are looking to do FHA loans and you don't meet the $63,000 net worth requirement, I recommend looking into other options. There are many companies out there that will allow you the independence you desire while operating under their HUD approval.

Alaska Mortgage Licensing

Although you won't find anything on Alaska's website, mortgage broker and lender licensing are required by July 1, 2008. The contact is Roger Prince at (907) 269-8144. My recommendation is to contact him as soon as possible if you desire to originate in Alaska after July 1, 2008.

New York Mortgage Licensing

The transition for New York Mortgage Brokers and Bankers to the NMLS has started. Beginning April 1, 2008 you can now submit your company information into the NMLS. The deadline for transition is September 1, 2008. With the complete incompetence of the New York Banking Departments Mortgage Licensing Division, there is great concern that they will be able to handle this in a professional manner. It could turn out very bad for many companies if this does not go smoothly, but it is possible that the NMLS will eventually streamline the process of getting licensed in New York, which at this time is the most difficult state for licensing in the nation. My hope is that they clean house over there and get rid of the people that are uncooperative and rude.

Surety Bond Issues

Massachusetts, District of Columbia, and New York are becoming very difficult states to place bonds in. Hartford issued a letter that they would not be renewing any Massachusetts bonds. District of Columbia has made some changes to the way they interpret the bond increasing the liability for the carrier, and New York has been making so many claims on the bonds that no surety carrier wants to write them anymore. My recommendation to you is to contact these states if you are licensed in them and complain. They need to make some changes to their surety bonds and the way they use them or the mortgage companies in these states are going to lose their licenses or be forced to pay a lot of money to get the bonds. Let your voices be heard.

HUD Exempt States

HUD approval allows you to do FHA loans, but it also has another added benefit: HUD exemptions. About 10 years ago, you could be exempt in most states if you were approved to broker FHA loans, but slowly the states have taken away these exemptions. Here is the list of states that still have some form of exemption in their laws. Keep in mind that some of these exemptions will not apply to you and some lenders do not accept exemptions.


Hawaii under Foreign lender exemption (some banks don't take it though - most do)

Oklahoma if you have a FHA nationwide direct lending branch or a FHA approved branch with a lending area that includes OK.

Ohio if you only originate HUD loans.


Indiana if you originate 25 FHA loans per year in IN as of 1/1/08 OR if you have a Full-Eagle.

Kentucky if you originate 12 FHA loans per year in KY.

Tennessee will allow you to register instead of license, which removes the $90,000 bond requirement, however, if you are already licensed, you will be required to keep the bond for 2 years after changing from licensee to registrant.

Texas as a full-eagle under the mortgage banker registration (Must have DE Underwriter on staff)

Wednesday, March 5, 2008

March 2008 Mortgage and FHA Licensing Update

With the Economic Stimulus bill passed, it looks like the FHA modernization bill has been held up once again. The President asked Congress to move forward with the latter bill during the signing of the Economic Stimulus bill, and many are hoping it will pass this month.

Massachusetts finally released the new bond format. The previous format released about 6 months ago has made it virtually impossible for anyone to get a bond without posting $75,000 in a business line of credit. Hartford, one of the largest surety carriers in the world, still has declined to issue the new bond stating in a press release that "the State now intends to be able to look to the bond to recover any "past due Division costs, assessments, penalties, and other obligations...all of which were outside the obligations of the prior bond form." Most surety companies still find it too risky to issue a bond in this State, which will make it difficult for those trying to start new business and those trying to renew in the state.

FHA Licensing Update

Everyone seems to have their own opinion on the FHA modernization bill.
 There are those who are very optimistic, somewhat optimistic,
and pessimistic. Some think the bill will definitely pass on March 15,
some think it will hopefully pass by August 15, and some don't think it
will ever pass this year.  I am of the persuasion that we have
no idea what Congress intends on doing so we need to move forward with
hope that it passes soon but expectation that it may never pass.
 With this in mind, if you are planning on getting FHA
licensing this year and you meet the net worth requirement ($63,000
company net worth), I recommend starting the process now.  If
you don't meet the net worth requirement, I recommend looking for an
employment relationship with a company that will allow you to originate
FHA loans.  There are numerous small companies that will give
you the flexibility of working as if you are running your own mortgage company while being an
employee of theirs.  Hopefully we'll know more in two weeks,
but don't delay.  Act now to start taking part in the FHA loan

Issues FAQs on Licensing Law

The Massachusetts Division of Banks just released answers to frequently
asked questions (FAQs) in regards to recent changes to that
state's mortgage lending laws and regulations. The FAQs discuss newly
established (i) loan originator
licensing provisions, (ii) 90-day Right to Cure for residential
mortgages, and (iii) a requirement to provide counseling to subprime
borrowers. To view the FAQs in full, take a look at


Individuals who were employed by their current employer
prior to November 30, 2007 may submit a license application to the
Division through the Nationwide Mortgage Licensing System (NMLS)
between February 19, 2008
and May 27, 2008.

New Colorado Licensing Requirements

1. Pre-Licensing Education - All mortgage brokers will need to complete the pre-licensing education requirements and the requisite test. This will need to be completed by all mortgage brokers prior to January 1, 2009. Mortgage brokers who fail to complete the pre-licensing and test requirement are subject to disciplinary action regarding their license. The Director, Erin Toll, appointed a 10 member Mortgage Broker Education Task Force to help develop and determine the number of pre-licensing hours required, course content, course approval, the pre-licensing test and continuing education.

2. All mortgage brokers will need to complete a minimum of nine (9) hours of continuing education every three years.

Alaska Proposes Mortgage
Lender, Loan Originator Rules

On February 12, the Alaska Department of Commerce published a notice
proposing rules implementing the Mortgage Lending Regulation Act,
requiring licensure of mortgage lenders, brokers, and loan originators.
 Fortunately the Alaska legislature gave ample time for the
state to prepare the new licensing requirements.
The act was passed last summer, but does not go into effect until July
1, 2008.
The proposed rules cover (i) lender and broker licensing obligations
and procedures, (ii) loan originator licensure and education
requirements, (iii) record retention format and requirements for
regulated entities, (iv) outlines specific deceptive advertising
practices, and (v) enforcement powers and procedures of the Department
of Commerce. It also details applicable fees for licensure,
registration, and renewals. Full text of the rules can be found at

Friday, February 1, 2008

February 2008 Mortgage and FHA Licensing Update

With the mortgage industry in turmoil and state legislatures in session, we can expect a lot of changes to occcur in the next 2 quarters. The Nationwide Mortgage Licensing System debuted last month and is already going strong in 7 states. FHA is expected to change dramatically with the US Congress compromising on a new bill. Many states are likely going to be proposing bills to require the lender to verify the ability of the borrower to repay their loan. This means stated income will likely be a program of the past. States will be increasing their regulations dramatically in an industry that is already over regulated. This will mean more states requiring loan officer licensing and branch licensing.

Here is an update on Mortgage Licensing items to be aware of:

• Colorado Clarifies Trigger for Licensing

• Nebraska Branch Licensing

• New York Loan Originator Licensing

• Nationwide Mortgage Licensing System (NMLS) Update

• FHA Update

Colorado Clarifies Trigger for Licensing

On January 7, the Colorado Division of Real Estate issued a position statement seeking to resolve “uncertainty… in the market place regarding who is required to be licensed.” The guidance specifies that “persons who directly supervise individuals that negotiate, originate, or offer or attempt to negotiate or originate for a borrower, and for a commission or other thing of value, a residential mortgage loan to be consummated and funded by a mortgage lender” must become individually licensed as mortgage brokers. The Division goes on clarify that persons performing only administrative tasks are not required be individually licensed as mortgage brokers. The position statement defines administrative tasks to include: (i) receipt, collection, distribution, and analysis of information common for the processing or underwriting of a mortgage; and (ii) communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about rates or terms.

Nebraska Branch Licensing

Nebraska is the first state to transition to the Nationwide Mortgage Licensing System (NMLS) with a transition deadline of February 28, 2008. Included in that deadline is new branch licensing requirements for the state. Make sure to add all branch locations that you want to be able to do business in Nebraska by that deadline.

New York Loan Originator Rules

On December 19, the New York State Banking Department (NYSBD) issued rules implementing the state’s new mortgage loan originator licensing statute (NY CLS Bank Article § 599-a et seq.) which goes into effect on January 1, 2008. Under the rules, originators who have not worked previously in New York will be required to apply for approval prior to April 1, 2008, but originators employed by or affiliated with a New York banker or broker prior to 2008 are not required to file an application until July 1, 2008. The authorization process will utilize the Nationwide Mortgage Licensing System (NMLS) which becomes operational on January 2, 2008. Applicants will also be required to submit fingerprints, credit histories, and documentation of their financial and criminal history disclosures.

Nationwide Mortgage Licensing System (NMLS) Update

With the release of the new Nationwide Mortgage Licensing System on January 2nd, 2008, there has been much speculation about whether the system would stand up to it's goals to unify the licensing process, make license maintenance easier for licensees and regulators, and help regulators to track down the bad companies. Still being in the transition stage, we haven't seen whether the last goal has been met, but we have had a chance to see what the system does and how easy it is to use. So far, I have found the system to unify the process quite dramatically. Much of the time of applying in multiple states before was the process of filling out the same information over and over for each state. The system has been created fairly user friendly to allow multiple users to access company, branch, and loan originator information to update it and ammend for each state at the same time. Another thing that has worked well for the system is the call center. The people working there are very helpful, answer the phones promptly, and try their best to answer all questions as thoroughly as possible. Personally, I have had a run in with the state where they were still not very cooperative as most states are, but the system forced them to follow protocol and move forward whereas they would have let it go in the past. Altogether, I see the system bringing much needed changes to a major problem with the current way mortgage licensing is handled in many states.

FHA Update

FHA is one of the most intersting items to speak of this month. The House has passed a bill that will raise the FHA loan limits to as high as 125% of the median house price, which would be around $775,000 in California. The House bill also has a provision for a surety bond in lieu of audited financials when applying for or renewing an FHA Loan Correspondent (Mini-Eagle) Approval. The Senate bill only proposed to raise the FHA limit to the Fannie Mae Conforming Loan Limit, which is at $417,000 right now. The Senate bill also did not include the surety bond provision. At this moment, the Senate and the House are in Committee working on a compromise on these two bills. To add to the excitement, the House, Senate, and Administration signed an Economic Stimulus Agreement last week that called for the FHA bill to move forward quickly as well as a number of other major changes to specifically help the ailing housing market. This means that the House and Senate bill will be likely compromised on in a couple of weeks if not sooner. The pressure is very great right now as we may be heading into a recession. Expect to see some major changes to FHA in the very near future.

Tuesday, January 22, 2008

January 2008 Mortgage Licensing Update

There have been a lot of changes in 2007, and we can expect even more in 2008. With the state legislators gathering together and the current market conditions influencing their legislative decision-making power, we can expect numerous new laws relating to the mortgage industry from each state. Especially if the US Congress decides to pass legislation requiring minimum levels of licensing in each state, which is likely to pass early this year.

The updates for January are as follows:

• FHA Licensing Update

• Massachusetts Bond Form Released

• Colorado E&O Requirement Postponed

• Alaska Licensing by 7/1/08

• Nationwide Mortgage Licensing System Released

FHA Licensing Update

With legislation recently passing by the US House and the US Senate, many changes are expected to happen in 2008. The Senate bill that just passed was much more conservative than the House bill and did not include items such as the surety bond in lieu of audited financials, a dramatic increase in the FHA Loan Limit, and risk-based pricing. It did, however, include some major changes to the HECM loan (Reverse Mortgage) that many people are excited about. Now the two bills have been sent to committee for the House and Senate to come to a compromise on differences in the bills. I would expect the Senate to hold their ground and the final bill to look very similar to the bill just recently passed by the Senate, but there is still a chance that some of the provisions in the House bill will be adopted. I would expect a final bill to be sent to the President by February.

Massachusetts Bond Form Released

Massachusetts made some new requirements for new licensees back in September, one of which was a new bond requirement. Unfortunately, the state failed to make the new bond form available. All mortgage companies that applied for a mortgage broker license since that date have been on hold. Massachusetts finally issued the new bond form, but to this date, it still has not been approved by the insurance companies to be issued. Numerous companies are waiting on this final item in order to get a license and hoping that the insurance companies will start issuing surety bonds on the new form soon.

Colorado E&O Requirement Postponed

Colorado recently issued a new requirement for all individual mortgage brokers (loan originators) licensed in the state to maintain an E&O policy. The insurance companies starting issuing these around the beginning of December, however, one of the questions on the application was "what percentage of loans originated in the previous 12 months were sub-prime loans?" Anyone that said more than 20% was either denied or told that they would have to pay thousands for the policy. Due to this issue, Colorado has issued an emergency ruling allowing until 1/31/08 for individuals to obtain the necessary insurance as well as increasing the maximum deductible to make the bond more cost-effective. Colorado is getting known for their emergency rulings since the state legislator is not giving enough time for the Colorado Division of Real Estate to implement new legislation.

Alaska Licensing by 7/1/08

This is just a reminder for those of you who are currently originating loans in Alaska. Many people have been able to originate their for years without a license, however, there new licensing requirements go into effect on July 1, 2008. Make sure to get your applications in soon if you plan on continuing to do business there after the first of the year.

Nationwide Mortgage Licensing System (NMLS) Released

Just a final reminder for those who are licensed in the first 7 states that will be using the system. You will want to access the system as soon as possible to update your company information. Here is a list of the first 7 states that will be using the system:

• Idaho

• Iowa

• Rhode Island

• New York

• Kentucky

• Massachusetts

• Nebraska