New Hawaii Mortgage Company and LO Licensing Requirements

Hawaii has changed the SAFE Act Compliance Legislation and extended the Deadline for Mortgage Loan Originator Licensing. On May 7, the Hawaiian Governor, Linda Lingle, signed into law legislation (S.B. 2603) to amend Hawaii's Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) compliance law, which was passed last year.


This amendment delays the deadline for licensure of mortgage loan originators via the Nationwide Mortgage Licensing System (NMLS) until January 1, 2011. Also, mortgage loan originators who are licensed with Hawaii by December 31, 2010 have until November 30, 2011 to be licensed via NMLS. Additionally, The law requires certain independent contractors (including mortgage loan originators, processors and underwriters) to be licensed as "mortgage loan originators." Finally, the law replaces an existing surety bond requirement with the Mortgage Loan Recovery Fund, which assesses a fee to licensees based on the number of registered offices and mortgage loan originators. For a copy of the bill, please see http://www.capitol.hawaii.gov/session2010/bills/SB2603_CD1_.pdf.

Mortgage Company Licensing now required in Colorado

Colorado is now requiring Mortgage Companies to be licensed by the state. On May 26, 2010, the Governor of Colorado, Bill Ritter, Jr., signed a bill (H.B. 10-1141) that (i) creates the Board of Mortgage Loan Originators, a new state mortgage regulatory division, and (ii) establishes registration deadlines for mortgage loan originators and mortgage companies by way of the the Nationwide Mortgage Licensing System (NMLS). Mortgage companies, as well as individual mortgage loan originators, must be licensed via NMLS by January 1, 2011.


The law establishes a new licensing category of "mortgage company," defined as entities that take residential mortgage loan applications or offer or negotiate the terms of a residential mortgage loan. The new law exempts from mortgage company licensing requirements banks, savings associations, subsidiaries owned and controlled by a bank or savings association, employees of bank or savings association or its subsidiaries, credit unions, and employees of credit unions. Mortgage companies will be overseen by the newly-created Board of Mortgage Loan Originators, which will, among other things, have the authority to impose fines and deny license applications or renewals. For a copy of the bill, please see http://www.leg.state.co.us/CLICS/CLICS2010A/csl.nsf/fsbillcont3/91997519A6EFDCBB872576A80054E840?Open&file=1141_enr.pdf

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.



http://dfi.wa.gov/cs/sb_6471_faq.htm



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.



http://www.dora.state.co.us/real-estate/licensing/education/MB/brokereducation.htm



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.

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.



Alabama

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.

Missouri

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)

Largest Barrier to Mortgage Company Licensing

I get calls all of the time from companies that are interested in getting away from a net branch company and getting their own mortgage licenses. After hundreds of these conversations, I've been able to reduce the call to a simple question. What is your mortgage company's net worth?

Now you may be thinking that net worth is not a requirement in a lot of states especially for mortgage brokers or is very minimal such as $10,000 to $20,000. You are correct. Most states don't have a very high net worth requirement for mortgage brokers, although a few do. That is actually not why I ask the question, "What is your net worth?" The reason I ask the question is because most states have a surety bond requirement. To better explain this, let me tell you what a surety bond is.

A surety bond involves three parties, the Principal (in this case mortgage companies), the Obligee (the state department), and the Surety (insurance surety carrier). It is an agreement by the surety to be responsible to the obligee for the obligation or conduct of a third party which is the Principal. It is also a way for the states to regulate the licensing of mortgage companies conducting business in their states as a broker or a banker or both. The laws and statutes vary from state to state. When the statutes or laws are broken by the Principal a claim or loss can occur on the bond. The most important thing to remember on a surety bond is that it is not an insurance policy. Whereas, in a regular insurance policy, the Insurer takes all risk and pays out claims, in a surety bond the law seeks that Surety ask for recovery or reimbursement for what surety pays out to handle the claim with the state.

With that being said, basically if you receive any claims on your surety bond, your company and then in most cases the ultimate owners of the company will be required to pay back the surety company. Since the surety may have to go after your mortgage company and owners for the losses, the surety company needs to verify that you actually have the ability to pay them back if their was ever a claim. So they verify the company's and the owners assets and ultimately net worth.

Most surety companies that you talk with will tell you that the maximum they can offer in surety bonds is the net worth of the company. With that being said, now you can see why net worth is so important when you go into multiple states. For example: Let's just say that you decide to get licensed in 5 states. Each state has between a $10,000 to $50,000 surety bond. The total of all surety bonds in the 5 states equals $175,000. If you try to get $175,000 worth of surety bonds, the surety company will ask to see your company's financials to see if your company could pay back any claims. If your company only has a net worth of $25,000, you may have a difficult time getting the bonds. There is one exception, and that is if the owners financials are very good. If the owner has a couple hundred thousand in net worth, the surety companies may look at that as enough to lower their risk of non-payment.

Now despite this being the largest barrier to mortgage licensing in multiple states, surety bonds are hardly ever claimed. Usually companies pay any fines or fees way before they get a claim on their surety bond. The reason is for this is if there is a claim on a company's surety bond, they usually will start to lose their bonds, because no surety company will insure them and they will subsequently lose all of their state licenses. It just doesn't happen very often.

Even though multiple states may not be an option at this time, I do recommend getting licensed in a few states that you do most of your business. This will greatly reduce your overhead and allow you the flexibility to work on your own.

What Are The Benefits Of Using A Mortgage License Service?

If you're reading this article, you may be asking what the benefits are of using a mortgage license service. Acquiring a license is as simple as just sending an application to the state and waiting for the license to come in, right? Well, yes and no. Due to sensitive information handled by mortgage companies, the large amounts of money handled by mortgage companies, and the increasing amount of fraud in the industry, mortgage licensing has become a very arduous task. Mortgage licensing often involved numerous steps and can take months for the state to process the application just to find out that they need a few more items. This can often go on for months. So what can a mortgage license service do for you.?



1. Experience - Provide expertise to expedite the application process.

2. Connections - Find the best service providers for surety bonds, registered agents, and document retrieval.

3. Filing - Complete the paperwork so you can focus on building your mortgage company.



Experience

A mortgage licensing service has the experience to be able to put the licensing application together for you quickly. Without assistance it can take weeks even months just to research everything that's required. You will also have an advocate with the states. A mortgage licensing company has dealt with the same people at the states numerous times and can get you the answers you need if there are any issues that come up during the process.



Connections

Knowing the right companies to work with during this process is invaluable. You will need an insurance company that provides surety bonds. You will need a registered agent company that is nationwide that can receive service of process for you. You will also need a company that can expedite document retrieval from the different Secretary of States to expedite the process. I remember working with a surety bond company many years ago that told me the company I was working for couldn't get any more bonds. They told me that the companies financials weren't good enough. I went to about 10 different companies before I found one that would be able to provide additional bonds. Without assistance finding the right connections, you could find it difficult to complete the process.



Filing

The paperwork in some states is very simple, but most states have pages and pages to complete. Some of the questions are not very clear and require additional research and making calls. A mortgage licensing service already has gone through this and can provide the answers to these tough questions. They also complete the mortgage license applications for you so you don't have to spend hours filling out paperwork.



Mortgage Licensing Conclusion

If you have trained staff to handle all of the paperwork, make the connections, and provide the expertise, then definitely handle it in-house, but if you don't I recommend considering outsourcing the mortgage licensing process. It will actually save your company money and time.

Texas Company Mortgage License Applications Ready

Are you a licensed mortgage broker in the state of Texas? Does the compensation that you make on a loan go to your corporation or LLC? If so, you now need to get your mortgage corporation or LLC licensed. The applications just posted last week at: http://www.sml.state.tx.us/mortgage.html. If you're in need of assistance to file this application, please contact us at Integrity Mortgage Licensing. We will assist you with every step required to make sure you meet the 12/31/2007 deadline. After this date, if your mortgage company is not licensed, the lenders will have to pay the individual mortgage broker.