April 2008 Mortgage Licensing Update

The April Mortgage Licensing Update includes the following updates:

• FHA Licensing Bond - Will it ever pass? • Alaska Mortgage Licensing - July 1, 2008 • New York Mortgage Licensing - Transition to NMLS • Surety Bond Issues - Massachusetts, District of Columbia, and New York • HUD Exempt States - This is really interesting

FHA Licensing Bond

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



Alaska Mortgage Licensing

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



New York Mortgage Licensing

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



Surety Bond Issues

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



HUD Exempt States

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



Alabama

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

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

Ohio if you only originate HUD loans.

Missouri

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

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

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

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

March 2008 Mortgage and FHA Licensing Update

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



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



FHA Licensing Update

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





Massachusetts
Issues FAQs on Licensing Law


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




MORTGAGE LOAN ORIGINATOR LICENSE APPLICATIONS ACCEPTED
THROUGH NMLS BEGINNING FEBRUARY 19TH

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




New Colorado Licensing Requirements

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



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

Alaska Proposes Mortgage
Lender, Loan Originator Rules

On February 12, the Alaska Department of Commerce published a notice
proposing rules implementing the Mortgage Lending Regulation Act,
requiring licensure of mortgage lenders, brokers, and loan originators.
 Fortunately the Alaska legislature gave ample time for the
state to prepare the new licensing requirements.
The act was passed last summer, but does not go into effect until July
1, 2008.
The proposed rules cover (i) lender and broker licensing obligations
and procedures, (ii) loan originator licensure and education
requirements, (iii) record retention format and requirements for
regulated entities, (iv) outlines specific deceptive advertising
practices, and (v) enforcement powers and procedures of the Department
of Commerce. It also details applicable fees for licensure,
registration, and renewals. Full text of the rules can be found at http://www.commerce.state.ak.us/occ/pub/MTG0208.pdf.

February 2008 Mortgage and FHA Licensing Update

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


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

• Colorado Clarifies Trigger for Licensing • Nebraska Branch Licensing • New York Loan Originator Licensing • Nationwide Mortgage Licensing System (NMLS) Update • FHA Update

Colorado Clarifies Trigger for Licensing

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


Nebraska Branch Licensing

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


New York Loan Originator Rules

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


Nationwide Mortgage Licensing System (NMLS) Update

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


FHA Update

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

January 2008 Mortgage Licensing Update

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



The updates for January are as follows:

• FHA Licensing Update • Massachusetts Bond Form Released • Colorado E&O Requirement Postponed • Alaska Licensing by 7/1/08 • Nationwide Mortgage Licensing System Released

FHA Licensing Update

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



Massachusetts Bond Form Released

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



Colorado E&O Requirement Postponed

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



Alaska Licensing by 7/1/08

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



Nationwide Mortgage Licensing System (NMLS) Released

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

• Idaho • Iowa • Rhode Island • New York • Kentucky • Massachusetts • Nebraska

What Services does a Mortgage Licensing Company Offer?

I have had clients tell me that licensing a mortgage company nationwide was one of the most challenging projects that they have ever taken on. So why is it so challenging, and what can you do to make the process easier?

What does a Mortgage Licensing Company do to make this process easier?

To explain what a mortgage licensing company does, I need to first explain what is involved in getting a mortgage license. Almost every state has the following requirements: Filing for certificate of authority as a foreign entity, registered agent, surety bond, fingerprints, education, experience, and exams, detailed ownership and officer information, financials, and a final application.

Time
The following items take a lot of time to complete and fill out correctly if you have never done it before. Filing a certificate of authority is different in each state and required prior to obtaining a license. Each filing requires a number of additional items such as a certificate of good standing and/or certified articles of incorporation as well as information on the registered agent. By using a mortgage licensing company, they usually include this process in the service that they offer. Completing the license applicaton also requires a number of different documents to attach and can be very time consuming to research and fill out accurately. Most states do not make the process simple and definitely do not explain what is needed in a step by step manner that would be simple to fill out.

Knowledge
The following items can take detailed understanding and intimate knowledge of each states requirements. The surety bond requirement can be difficult and often the largest barrier to obtaining licenses nationwide. Since each state requires a surety bond, once about 5 to 10 states are reached, a mortgage company will find it difficult to obtain the necessary bonding in order to go into additional states. If there is any financial or criminal background on the owners or officers of the company, you will need to delicately provide this information to the states and make sure to provide them the answers that they need to be able to determine if their regulations prohibit that type of background. It must be handled very carefully.

In whole, the process can be done on your own or with the assistance of professionals. If planning on a mortgage licensing project in to 1 or 50 states, make sure to consider the cost, not just the immediate monetary cost, but also the cost of the time involved to maneuver all of the different state requirements quickly and efficiently.