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.
Showing posts with label FHA Update. Show all posts
Showing posts with label FHA Update. Show all posts
Friday, August 1, 2008
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.
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.
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.
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.
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
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)
• 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)
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
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.
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, December 4, 2007
December 2007 Mortgage Licensing Update
The bills in the Senate are just sitting there, the state legislative sessions are starting up and business is slowing down. Here's the latest news for mortgage licensing
Colorado - E&O Insurance now required for Mortgage Broker Individuals
Massachusetts - Surety Bond is not available
FHA Reform - New Bills still on hold in the Senate
Colorado
Colorado began licensing mortgage brokers on 1/1/07. Mortgage brokers are defined as any individual that solicits or originates a loan. Colorado is one of the only states that only licenses individuals and not companies, i.e. corporations and LLCs. Colorado also removed the HUD exemption on 6/1/07, which then required about 1,000 more companies to get their individual loan originators licensed as Colorado Mortgage Brokers. Now, as of 1/1/08, all licensed mortgage broker individuals will also need a $25,000 E&O policy. I just spoke to my insurance company today and they said it is now available.
Massachusetts
Massachusetts issued some new requirements that became effective in September. I review all of these requirements in the following news update: Massachusetts adds New Requirements. One of the major requirements was a surety bond for mortgage brokers and lenders. Since that date, no mortage licenses have been issued in the state because the state failed to issue a form for the surety bond. Massachusetts has stated that it will be available very soon. Any mortgage companies that need assistance with obtaining this bond, please let me know.
FHA Reform
This is one of the hottest topics right now for mortgage companies. Unfortunately, the US Senate doesn't seem to think so. The Senate Banking Committee has sat on a number of bills for months and nothing seems to be moving. I have received confirmation from someone involved in the congressional hearings that the bond provision in lieu of the audited financials for HUD approval (FHA Licensing) has been removed and will not be passed in the Senate. This is very unfortunate for many companies that don't have the time and money to do audited financials every year. The other hot item is the FHA loan limit increase. This is expected to pass in one form or another. We are still waiting to see what happens on this.
Conclusion
Be ready for some state legislation as their legislative sessions are about to start very soon. I'm predicting a lot of legislation in regards to foreclosures, loan modifications, counseling, additional licensing requirements, and more. Keep your eyes open for some major changes.
Colorado - E&O Insurance now required for Mortgage Broker Individuals
Massachusetts - Surety Bond is not available
FHA Reform - New Bills still on hold in the Senate
Colorado
Colorado began licensing mortgage brokers on 1/1/07. Mortgage brokers are defined as any individual that solicits or originates a loan. Colorado is one of the only states that only licenses individuals and not companies, i.e. corporations and LLCs. Colorado also removed the HUD exemption on 6/1/07, which then required about 1,000 more companies to get their individual loan originators licensed as Colorado Mortgage Brokers. Now, as of 1/1/08, all licensed mortgage broker individuals will also need a $25,000 E&O policy. I just spoke to my insurance company today and they said it is now available.
Massachusetts
Massachusetts issued some new requirements that became effective in September. I review all of these requirements in the following news update: Massachusetts adds New Requirements. One of the major requirements was a surety bond for mortgage brokers and lenders. Since that date, no mortage licenses have been issued in the state because the state failed to issue a form for the surety bond. Massachusetts has stated that it will be available very soon. Any mortgage companies that need assistance with obtaining this bond, please let me know.
FHA Reform
This is one of the hottest topics right now for mortgage companies. Unfortunately, the US Senate doesn't seem to think so. The Senate Banking Committee has sat on a number of bills for months and nothing seems to be moving. I have received confirmation from someone involved in the congressional hearings that the bond provision in lieu of the audited financials for HUD approval (FHA Licensing) has been removed and will not be passed in the Senate. This is very unfortunate for many companies that don't have the time and money to do audited financials every year. The other hot item is the FHA loan limit increase. This is expected to pass in one form or another. We are still waiting to see what happens on this.
Conclusion
Be ready for some state legislation as their legislative sessions are about to start very soon. I'm predicting a lot of legislation in regards to foreclosures, loan modifications, counseling, additional licensing requirements, and more. Keep your eyes open for some major changes.
Tuesday, November 13, 2007
November 2007 Mortgage Licensing Update
There are a lot of interesting things happening to the mortgage industry due to the market flux. One of the main items of interest is the legislation currently in congress. Here is an overview of what may be coming soon.
FHA Reform
There have been a couple FHA Reform bills in congress. One of them got a lot of publicity because it passed the House with an overwhelming majority and proposed to more than double the loan limits in high median house price areas. This bill has been held up in the Senate Banking Committee and will possibly die. There was a surety bond provision in the bill that would have allowed smaller mortgage brokers to obtain a surety bond instead of getting audited financials. This provision has unfortunately died. Many companies were hoping this would pass since it is so costly to get an audited financial statement. The only option now is audited financial with a $63,000 net worth. There are still numerous other provisions that will likely be passed by Senate. The raising of the loan limits is very likely but will not be as high as the House proposed.
Mortgage Loan Officer Licensing
There is also a bill that has been passed by the Senate Banking Committee that proposes to make it mandatory for states to adopt a loan officer licensing scheme. This is very likely going to pass. It would then give each state that doesn't have its own licensing for loan officers about 2 years to put legislation and regulations together to make this happen. If the state doesn't meet the requirements of the bill, then HUD will be required to step in and set up loan officer licensing for that state. The larger short-term impact of the passage of a House bill is that the states will pick up on it as a template for new state law enactments in the coming state legislative season, which starts around the first of the year. Buckle your belts for the states to really get crazy soon.
Yield Spread Premium
The final interesting item being discussed in every mortgage company right now is the provision for "eliminating YSP." I put it in quotes, because the legislation doesn't really eliminate YSP, it just requires that the YSP be disclosed up front as an actual figure instead of just 0% to 3% like it is now on most Good Faith Estimates (GFE). This will change this a little bit, but it won't really affect the mortgage broker industry as much as some opponents to the bill say.
Conclusion
Be Ready for some exciting changes to happen in the mortgage industry soon. The government is looking to make a change to the current system and although many might argue that it won't help, it will definitely happen and change the industry forever.
FHA Reform
There have been a couple FHA Reform bills in congress. One of them got a lot of publicity because it passed the House with an overwhelming majority and proposed to more than double the loan limits in high median house price areas. This bill has been held up in the Senate Banking Committee and will possibly die. There was a surety bond provision in the bill that would have allowed smaller mortgage brokers to obtain a surety bond instead of getting audited financials. This provision has unfortunately died. Many companies were hoping this would pass since it is so costly to get an audited financial statement. The only option now is audited financial with a $63,000 net worth. There are still numerous other provisions that will likely be passed by Senate. The raising of the loan limits is very likely but will not be as high as the House proposed.
Mortgage Loan Officer Licensing
There is also a bill that has been passed by the Senate Banking Committee that proposes to make it mandatory for states to adopt a loan officer licensing scheme. This is very likely going to pass. It would then give each state that doesn't have its own licensing for loan officers about 2 years to put legislation and regulations together to make this happen. If the state doesn't meet the requirements of the bill, then HUD will be required to step in and set up loan officer licensing for that state. The larger short-term impact of the passage of a House bill is that the states will pick up on it as a template for new state law enactments in the coming state legislative season, which starts around the first of the year. Buckle your belts for the states to really get crazy soon.
Yield Spread Premium
The final interesting item being discussed in every mortgage company right now is the provision for "eliminating YSP." I put it in quotes, because the legislation doesn't really eliminate YSP, it just requires that the YSP be disclosed up front as an actual figure instead of just 0% to 3% like it is now on most Good Faith Estimates (GFE). This will change this a little bit, but it won't really affect the mortgage broker industry as much as some opponents to the bill say.
Conclusion
Be Ready for some exciting changes to happen in the mortgage industry soon. The government is looking to make a change to the current system and although many might argue that it won't help, it will definitely happen and change the industry forever.
Wednesday, November 7, 2007
FHA License Update
Public comments on the FHA Reform Bill in the Senate is closed today, October 22, 2007. Already passed by the House with an overwhelming majority, it is expected to pass in the Senate by mid-November. The Expanding American Homeownership Act of 2007 will bring about many changes to FHA loan origination. The most important changes are:
1. FHA Licensing - Elimination of Audited Financial Requirement for Brokers
2. FHA Loan Limit - Increase of the Low FHA Loan Limits
FHA Licensing
Currently when a small broker shop tries to get licensed to originate FHA loans, they hid a major hurdle. HUD requests that all companies have their financials audited annually showing a minimum net worth of $63,000. Smaller broker shops that do have the minimum net worth, often find it difficult to obtain audited financials since they cost around $5,000 to $10,000. They can also take several months to complete if your corporation or LLC has never been audited before. Up until now many companies have been forced to form a new corporation or LLC in order to reduce the cost of audited financials.
The new legislation being proposed will do away with the audited financial requirement. In lieu of audited financials, you can submit a surety bond. A surety bond is simple and cheap to obtain in comparison to audited financials and is actually safer for the consumer whom it is meant to protect. The president of the largest Mortgage Insurance Company in the nation told me yesterday that he has helped push this change through in congressional hearings and that he expects it to pass very soon.
FHA Loan Limit
The new legislation also proposes to increase the FHA Loan Limit. Currently the loan limit is at 87% ($362,790) of the Fannie Mae Loan Limit ($417,000) in areas with high median house prices. It is about 50% of that in low median house prices. The only exception is Hawaii, Guam and Alaska. The proposed increase passed by the house will raise the loan limits to as high as $750,000 in certain high median house price areas. This would open up FHA to assist many people in coastal areas where average house prices are about $600,000 and higher. With only Jumbo loans as an option right now, many people are finding it very difficult to obtain a loan due to the hightened underwriting guidelines.
The President is expected to sign the bill, but not at such a high amount. He has stated in public speeches that he does not plan on raising the limit above the Fannie Mae Limit of $417,000. Many people, loan originators, brokers, and borrowers are waiting patiently to see what happens in the house in November.
For help with FHA Licensing, Contact Integrity Mortgage Licensing at (714) 721-3963 or ssheasby@integritymortgagelicensing.com
1. FHA Licensing - Elimination of Audited Financial Requirement for Brokers
2. FHA Loan Limit - Increase of the Low FHA Loan Limits
FHA Licensing
Currently when a small broker shop tries to get licensed to originate FHA loans, they hid a major hurdle. HUD requests that all companies have their financials audited annually showing a minimum net worth of $63,000. Smaller broker shops that do have the minimum net worth, often find it difficult to obtain audited financials since they cost around $5,000 to $10,000. They can also take several months to complete if your corporation or LLC has never been audited before. Up until now many companies have been forced to form a new corporation or LLC in order to reduce the cost of audited financials.
The new legislation being proposed will do away with the audited financial requirement. In lieu of audited financials, you can submit a surety bond. A surety bond is simple and cheap to obtain in comparison to audited financials and is actually safer for the consumer whom it is meant to protect. The president of the largest Mortgage Insurance Company in the nation told me yesterday that he has helped push this change through in congressional hearings and that he expects it to pass very soon.
FHA Loan Limit
The new legislation also proposes to increase the FHA Loan Limit. Currently the loan limit is at 87% ($362,790) of the Fannie Mae Loan Limit ($417,000) in areas with high median house prices. It is about 50% of that in low median house prices. The only exception is Hawaii, Guam and Alaska. The proposed increase passed by the house will raise the loan limits to as high as $750,000 in certain high median house price areas. This would open up FHA to assist many people in coastal areas where average house prices are about $600,000 and higher. With only Jumbo loans as an option right now, many people are finding it very difficult to obtain a loan due to the hightened underwriting guidelines.
The President is expected to sign the bill, but not at such a high amount. He has stated in public speeches that he does not plan on raising the limit above the Fannie Mae Limit of $417,000. Many people, loan originators, brokers, and borrowers are waiting patiently to see what happens in the house in November.
For help with FHA Licensing, Contact Integrity Mortgage Licensing at (714) 721-3963 or ssheasby@integritymortgagelicensing.com
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