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
WHO IS REQUIRED TO HAVE A MORTGAGE LOAN ORIGINATOR LICENSE?
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.
WHEN CAN AN INDIVIDUAL APPLY FOR A MORTAGE LOAN ORIGINATOR LICENSE?
LOAN ORIGINATORS WHO WERE WORKING FOR A LICENSED MORTGAGE LENDER OR MORTGAGE BROKER PRIOR TO NOVEMBER 30, 2007:
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.
LOAN ORIGINATORS WHO FIRST BEGAN WORKING FOR A LICENSED MORTGAGE LENDER OR MORTGAGE BROKER AFTER NOVEMBER 29, 2007:
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 http://www.obre.state.il.us/RESFIN/NEWS/SB1167RegistrationBrokers.pdf.
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.