Wednesday, April 29, 2009
Delaware Adopts Mortgage Loan Originator Regulations
Recently, the Delaware Office of the State Bank Commissioner issued regulations implementing a law requiring mortgage loan originators to be licensed. Among other things, the regulations provide that those mortgage loan originators employed by a licensed lender or mortgage loan broker prior to January 1, 2009 have until March 31, 2009 to submit a license application. Additionally, those individuals beginning employment as mortgage loan originators after January 1, 2009 may not conduct business as mortgage loan originators until they have submitted a license application. Once a license application has been submitted, an individual is free to operate as a mortgage loan originator on a provisional basis until the regulator has rendered a decision on the application. The regulations also set forth duties of originating entities that employ mortgage loan originators, as well as record keeping and notification requirements. Mortgage loan originators will be licensed through the Nationwide Mortgage Licensing System. The regulations became effective December 11, 2008.
Wednesday, April 15, 2009
What is the Best Way to Expand your Mortgage Company?
If you own your own mortgage company, you should always be looking at ways to expand your business. This does not necessarily mean that you want to hire more staff or make your company larger. Continually looking for ways to expand your business is required just to keep your income stable and to maintain the volume of business that is needed to stay in business.
So what are some of the best ways to expand your business?
Expand your coverage area (State Licensing)
Expand your available products (FHA Approval and Lender Approvals)
Expand your relationships (Realtors, CPAs, and Attorneys)
Expand your marketing (Online, Networking, and Lead Sources)
Expand Your Coverage Area (State Licensing)
One of the best ways to expand your business is to expand your coverage area. Most mortgage companies just rely on business in their home state. But when the market is slow in their state, they have no where else to turn. Also, when the type of marketing they are attempting to use does not produce a good response, they are forced to take the loss and look for other marketing routes. Any lead generation company will tell you that if you have multiple states to do business in, you will be better suited to meet these challenges.
State Licensing can be very complex, however, if you do your homework and choose a few good states, it will definitely be worth your while. Your mortgage company will be able to try different marketing in different areas of the country and be able to keep the volume high when the market in some states is slow.
Expand Your Available Products (FHA Approval and Lender Approvals)
Another great way to expand your business is to open up different loan products to your borrowers. Many borrowers shop around for a mortgage broker that can provide them with the best product to meet their needs. If you don\'t have access to most loan products in the market, you will lose the deal almost every time.
FHA is one of the most important loan products right now. It allows you to provide loans to low income, low credit score, high debt, and low asset borrowers, which is a majority of borrowers these days. In order to originate FHA loans, you need to be approved with HUD (Department of Housing and Urban Development).
Getting approved with other lenders is also a great way to expand your business. Not only should you be approved with 10 or more lenders, but you should know their guidelines like the back of your hand. Also, with so many lenders closing every day, you don\'t want to have all of your loans placed with one lender. That could be the end of your business very quickly.
Expand Your Relationships (Realtors, CPAs, and Attorneys)
Take the time to meet different people in other parts of the industry such as realtors, CPAs, escrow agents, title officers, and tax preparers. Often you can refer each other business. A common mistake is to think that people in these different areas of the business already refer business to other mortgage companies and don\'t need you. However, you would be surprised at how often I speak to a realtor that is having trouble with the mortgage company they refer their buyers to. They often can tell that I know the business and will ask me if I can do a loan for one of their buyers. Jump on these opportunities and actively seek other relationships. Knowing other people in the business is one of the best ways to create long lasting and profitable relationships.
Expand Your Marketing (Online, Networking, and Lead Sources)
A huge mistake that a lot of mortgage companies make is to only get leads from one source. If you market in only one way, that way is bound to dry up eventually. Make sure to have multiple lead sources in your business plan. Try marketing online or through another companies online system. Try networking through a website such as FaceBook or ActiveRain. Try getting leads from lead companies that actually do the marketing for you and send you the leads. As you try new ways of marketing, you will find what works best, but still continue to try new ways and keep a few lead sources in place.
Bottom Line
If you are not working at expanding your business, your business will shrink. And in todays market place, it will shrink fast.
So what are some of the best ways to expand your business?
Expand your coverage area (State Licensing)
Expand your available products (FHA Approval and Lender Approvals)
Expand your relationships (Realtors, CPAs, and Attorneys)
Expand your marketing (Online, Networking, and Lead Sources)
Expand Your Coverage Area (State Licensing)
One of the best ways to expand your business is to expand your coverage area. Most mortgage companies just rely on business in their home state. But when the market is slow in their state, they have no where else to turn. Also, when the type of marketing they are attempting to use does not produce a good response, they are forced to take the loss and look for other marketing routes. Any lead generation company will tell you that if you have multiple states to do business in, you will be better suited to meet these challenges.
State Licensing can be very complex, however, if you do your homework and choose a few good states, it will definitely be worth your while. Your mortgage company will be able to try different marketing in different areas of the country and be able to keep the volume high when the market in some states is slow.
Expand Your Available Products (FHA Approval and Lender Approvals)
Another great way to expand your business is to open up different loan products to your borrowers. Many borrowers shop around for a mortgage broker that can provide them with the best product to meet their needs. If you don\'t have access to most loan products in the market, you will lose the deal almost every time.
FHA is one of the most important loan products right now. It allows you to provide loans to low income, low credit score, high debt, and low asset borrowers, which is a majority of borrowers these days. In order to originate FHA loans, you need to be approved with HUD (Department of Housing and Urban Development).
Getting approved with other lenders is also a great way to expand your business. Not only should you be approved with 10 or more lenders, but you should know their guidelines like the back of your hand. Also, with so many lenders closing every day, you don\'t want to have all of your loans placed with one lender. That could be the end of your business very quickly.
Expand Your Relationships (Realtors, CPAs, and Attorneys)
Take the time to meet different people in other parts of the industry such as realtors, CPAs, escrow agents, title officers, and tax preparers. Often you can refer each other business. A common mistake is to think that people in these different areas of the business already refer business to other mortgage companies and don\'t need you. However, you would be surprised at how often I speak to a realtor that is having trouble with the mortgage company they refer their buyers to. They often can tell that I know the business and will ask me if I can do a loan for one of their buyers. Jump on these opportunities and actively seek other relationships. Knowing other people in the business is one of the best ways to create long lasting and profitable relationships.
Expand Your Marketing (Online, Networking, and Lead Sources)
A huge mistake that a lot of mortgage companies make is to only get leads from one source. If you market in only one way, that way is bound to dry up eventually. Make sure to have multiple lead sources in your business plan. Try marketing online or through another companies online system. Try networking through a website such as FaceBook or ActiveRain. Try getting leads from lead companies that actually do the marketing for you and send you the leads. As you try new ways of marketing, you will find what works best, but still continue to try new ways and keep a few lead sources in place.
Bottom Line
If you are not working at expanding your business, your business will shrink. And in todays market place, it will shrink fast.
Thursday, December 4, 2008
How long does it take to get a mortgage license?
Mortgage Licensing can be a very arduous process. Any time we deal with the government, the likelyhood of getting great customer service is very slim. The reason being that the state or federal government employees are not compensated with bonuses or commissions for processing more applications each month. Most government employees that I have worked with are just doing the minimum needed to stay employed so that they can receive their check each month and their retirement at the end of their career. There are some exceptions though. A few states have great management and helpful licensing analysts. New Mexico, Idaho, Utah, Delaware, Tennessee, and Wyoming are few examples.
With that being said, processing times for new license applications can greatly differ. If you apply for a New Mexico license on a Monday, it is possible to have it approved by Friday. However, if you apply for a New York license on January 1st, it is possible that you won't have the license by the following year. They are just very unorganized and the red tape can stop you in your tracks at times. Generally though, most states take about 2 month to process a license application, because the state regulations require them to provide you with a response within 60 days. As long as you submit everything correctly the first time, you can expect to have your license in that time frame. If items are missing, the time can easily double to 4 or more months.
Having a complete application is one of the most important steps to reducing the time for the state to process the application. For example, when you submit a loan to a processor, if the file is missing half of the documentation, the processor can easily get frustrated and confused on what is needed. The processor will likely put your file on the bottom of the stack and work on it later. It can go back and forth for a long time. The same situation occurs with licensing. If the file is missing major items, then the state analyst has to request those items, and your application is put on the bottom of the pile. Again, a process that should take a couple months turns into 4 or 5 months very easily.
Another very important aspect of how long it will take to get a mortgage license is the time to prepare the application. I have seen applications completed in a few days, and I have also seen applications take numerous months to be completed. When I prepare mortgage license applications, I will send a list of needed items to the mortgage company. If the company does not provide me the items, I cannot complete the application. Usually the needed items are simple such as resumes, credit reports, and financials on the owners or formation documents, financials, and reference letters on the company, however, if they are not provided, the application will just sit and the timeframe for the state to process the application will never start.
Usually most companies are able to provide the needed documentation within 2 to 4 weeks. And the states take 8 to 12 weeks to process the application. So the average time to obtain a mortgage license from start to finish is between 10 to 16 weeks. But remember, you need to make sure the application is complete and to provide the needed documentation right away or it could easily turn in to a 9 to 12 month process.
With that being said, processing times for new license applications can greatly differ. If you apply for a New Mexico license on a Monday, it is possible to have it approved by Friday. However, if you apply for a New York license on January 1st, it is possible that you won't have the license by the following year. They are just very unorganized and the red tape can stop you in your tracks at times. Generally though, most states take about 2 month to process a license application, because the state regulations require them to provide you with a response within 60 days. As long as you submit everything correctly the first time, you can expect to have your license in that time frame. If items are missing, the time can easily double to 4 or more months.
Having a complete application is one of the most important steps to reducing the time for the state to process the application. For example, when you submit a loan to a processor, if the file is missing half of the documentation, the processor can easily get frustrated and confused on what is needed. The processor will likely put your file on the bottom of the stack and work on it later. It can go back and forth for a long time. The same situation occurs with licensing. If the file is missing major items, then the state analyst has to request those items, and your application is put on the bottom of the pile. Again, a process that should take a couple months turns into 4 or 5 months very easily.
Another very important aspect of how long it will take to get a mortgage license is the time to prepare the application. I have seen applications completed in a few days, and I have also seen applications take numerous months to be completed. When I prepare mortgage license applications, I will send a list of needed items to the mortgage company. If the company does not provide me the items, I cannot complete the application. Usually the needed items are simple such as resumes, credit reports, and financials on the owners or formation documents, financials, and reference letters on the company, however, if they are not provided, the application will just sit and the timeframe for the state to process the application will never start.
Usually most companies are able to provide the needed documentation within 2 to 4 weeks. And the states take 8 to 12 weeks to process the application. So the average time to obtain a mortgage license from start to finish is between 10 to 16 weeks. But remember, you need to make sure the application is complete and to provide the needed documentation right away or it could easily turn in to a 9 to 12 month process.
Friday, October 24, 2008
November 2008 Mortgage Licensing News
With the S.A.F.E. Mortgage Licensing Act passing on June 30, 2008, there are a lot of changes expected to happen soon in mortgage licensing. At this time, only about one third of the states are in compliance with the federal law, and since most states are not going to want to hand over their licensing to the federal government, you can expect for many new laws to be passed in the near future. Here are some recent changes to be prepared for.
Michigan Loan Originator Licensing
As of January 1, 2009, Loan Originator must be licensed to originate mortgage loans. Prior to that date, Michigan only required Loan Originators to be w-2 employees of a licensed mortgage company. The new law requires the Loan Originator to have either 4.5 years of experience originating loans in the last 5 years or take a 24 hour live education course. Once either experience or education is met, then the Loan Originator is required to take a Michigan Loan Originator Test. The test just became available on October 21, 2008. Loan Originators must then complete fingerprint cards or live scan fingerprinting and go on to the Nationwide Mortgage Licensing System (NMLS) and submit a Loan Originator (MU4) application and then mail all of the previous documentation directly to the state. Everything is currently due to the state by 12/4/08 to guarantee that a Loan Originator License is issued by 1/1/09, however, details on the fingerprinting process has not been released yet, so I expect them to give Loan Originators an extension. Keep in mind, that it is just my opinion, so don't delay in following the state requirements and meeting the deadlines.
Delaware Loan Originator Licensing
Delaware House Bill 508 becomes effective on January 1, 2009, but mortgage loan originators will not be required to obtain a license until the State Bank Commissioner adopts regulations implementing the new licensing laws. At this time, there is nothing on the states website implementing the Delaware Loan Originator Licensing requirement, so it will probably not be requred until later in 2009. HB 508 defines a mortgage loan originator as an employee or independent contractor of a licensed Delaware Mortgage Broker or Lender. The legislation requires a mortgage loan originator to apply to the Office of the State Bank Commissioner for a mortgage loan originator license, establishes initial and continuing education requirements for licensees, and authorizes the Commissioner to adopt regulations to facilitate participation in the Nationwide Mortgage Licensing System. The bill requires that loan originator licensees have at least 18 hours of education courses within the five years prior to licensure, or within one year following licensure. Applicants may work as mortgage loan originators upon initial employment on a temporary basis until the person is either licensed or the application is denied. Applicants must submit a $250 investigation fee and a $250 annual license fee.
Rhode Island Loan Originator Licensing
Licensing requirements for Rhode Island Loan Originators are now posted on the Nationwide Mortgage Licensing System (NMLS) website. A Loan Originator license must be obtained by January 1, 2009 in order to continue originating in the state of Rhode Island. The application requires fingerprint cards, 20 hours of pre-licensure education, a personal financial statement showing a positive net worth, a copy of a valid photo ID (for example, driver's license), and the submission of a Loan Origiantor Application (MU4) on the NMLS. Applications are due by 11/1/08 in order for applications to be approved by 1/1/09. Also, starting in the 2nd quarter of 2009, Rhode Island expects to have a testing requirement.
Nationwide Mortgage Licensing System
New states transitioning onto the NMLS on November 1, 2008 are: Arkansas, Indiana, Pennsylvania, and Wyoming. Michigina began transitioning on October 1, 2008. All of these states require transitions to be completed by December 31, 2008. Also, most states already on the NMLS will be using the NMLS for renewals. There are currently 19 states on the NMLS and all states are expected to be on by 2010.
Michigan Loan Originator Licensing
As of January 1, 2009, Loan Originator must be licensed to originate mortgage loans. Prior to that date, Michigan only required Loan Originators to be w-2 employees of a licensed mortgage company. The new law requires the Loan Originator to have either 4.5 years of experience originating loans in the last 5 years or take a 24 hour live education course. Once either experience or education is met, then the Loan Originator is required to take a Michigan Loan Originator Test. The test just became available on October 21, 2008. Loan Originators must then complete fingerprint cards or live scan fingerprinting and go on to the Nationwide Mortgage Licensing System (NMLS) and submit a Loan Originator (MU4) application and then mail all of the previous documentation directly to the state. Everything is currently due to the state by 12/4/08 to guarantee that a Loan Originator License is issued by 1/1/09, however, details on the fingerprinting process has not been released yet, so I expect them to give Loan Originators an extension. Keep in mind, that it is just my opinion, so don't delay in following the state requirements and meeting the deadlines.
Delaware Loan Originator Licensing
Delaware House Bill 508 becomes effective on January 1, 2009, but mortgage loan originators will not be required to obtain a license until the State Bank Commissioner adopts regulations implementing the new licensing laws. At this time, there is nothing on the states website implementing the Delaware Loan Originator Licensing requirement, so it will probably not be requred until later in 2009. HB 508 defines a mortgage loan originator as an employee or independent contractor of a licensed Delaware Mortgage Broker or Lender. The legislation requires a mortgage loan originator to apply to the Office of the State Bank Commissioner for a mortgage loan originator license, establishes initial and continuing education requirements for licensees, and authorizes the Commissioner to adopt regulations to facilitate participation in the Nationwide Mortgage Licensing System. The bill requires that loan originator licensees have at least 18 hours of education courses within the five years prior to licensure, or within one year following licensure. Applicants may work as mortgage loan originators upon initial employment on a temporary basis until the person is either licensed or the application is denied. Applicants must submit a $250 investigation fee and a $250 annual license fee.
Rhode Island Loan Originator Licensing
Licensing requirements for Rhode Island Loan Originators are now posted on the Nationwide Mortgage Licensing System (NMLS) website. A Loan Originator license must be obtained by January 1, 2009 in order to continue originating in the state of Rhode Island. The application requires fingerprint cards, 20 hours of pre-licensure education, a personal financial statement showing a positive net worth, a copy of a valid photo ID (for example, driver's license), and the submission of a Loan Origiantor Application (MU4) on the NMLS. Applications are due by 11/1/08 in order for applications to be approved by 1/1/09. Also, starting in the 2nd quarter of 2009, Rhode Island expects to have a testing requirement.
Nationwide Mortgage Licensing System
New states transitioning onto the NMLS on November 1, 2008 are: Arkansas, Indiana, Pennsylvania, and Wyoming. Michigina began transitioning on October 1, 2008. All of these states require transitions to be completed by December 31, 2008. Also, most states already on the NMLS will be using the NMLS for renewals. There are currently 19 states on the NMLS and all states are expected to be on by 2010.
Friday, August 1, 2008
How do you obtain an FHA License?
It has been about a year since FHA became a major part of the mortgage market. Many mortgage companies that do not have FHA Approval are finding it difficult to survive. So what is required to get an FHA License?
There are 4 major requirements that must be met. Everything else is just paperwork. These 4 requirements are audited financials, commercial space, 3 years origination experience, and decent credit. Let's explain these items in detail.
Audited Financials
Audited Financials are usually the largest barrier for most companies. Brokers need to show $63,000 in net worth and lenders need to show $250,000. For both brokers and lenders, 20% of the total net worth must be liquid, so basically cash in the bank. Many people confuse this to mean that the owners of the company need to have this net worth. It's actually the company not the individual owners. So, often owners will invest cash, cars, investment properties into the company to show as net worth on the financial statement. The even more difficult part about this requirement is that the financial statement must be audited. If you have ever had your taxes done, you know that can be a lot of work, but for your taxes, the account does not verify every assett and liability or every income or expense. For an auidted financial statement, the CPA has to verify every number on it. Most CPAs will charge $7,000 to $10,000 for this type of financial statement. Some CPAs that specialize in these types of audits have made the process very efficient and charge as little as $2,500 to $3,500, but that is still a lot of money, especially with the way the market is.
Commercial Space
Most companies work out of a commercial space, but with the market the way it is and often for convenience some companies have chosen to start working out of their homes. HUD will not allow that. There are a few exceptions if the home is commercially zoned, or if it is near a commercialy zoned area and has easy access to the public, but in most cases, a residence will not work. Another issue with the commercial space is that it has to be separate from all other companies, except for possibly a shared receptionist. A good way to determine if your office is separate is to walk from your car to your office. If you have to pass by employees in cubicles for other companies then you are not separate.
Three Years Origination Experience
One of the senior officers must have 3 years of origination experience. This requirement is usually no problem, but is worth mentioning. If your company does not have anyone working for it that has been in the mortgage origination field for over 3 years, then you can not get approved. You will either need to hire someone or check with all of your employees to see if you can make one of them a senior officer if they have the 3 years of experience.
Decent Credit
All senior officers and all owners of 25% or more of the company will need to provide their credit reports. If any of these credit reports show major derogatory items in the last two to three years, then you will have a problem getting approved. HUD uses FHA Underwriting guidelines to determie if the owners and officers of the mortgage company are financially fit. If any of these individuals have had a recent foreclosure, bankruptcy, tax liens, or numerous lates, they will need to be removed as senior officers and have their ownership reduced to below 25% before you can apply.
If you meet all of these requirements, then you should have no problem getting approved. The paperwork is difficult and I recommend getting some assistance putting it together. You will also need to find a CPA that is not too expensive, but like I said, everything else is just paperwork if you meet these 4 major requirements.
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.
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