Banking Department Frequently Asked Questions

Many state banking departments include Frequently Asked Questions (FAQs) on their websites that give answers to questions you had and to some you didn’t have but should have had. It can give you insight on how to approach an issue when dealing with a state regulator or learn that you don’t need a license to make or broker that one loan (only permitted in a few states).

For example, the North Carolina Commissioner of Banks website includes Frequently Asked Questions about examinations. Although some of the information is specific to North Carolina laws and regulations, I find that the majority of information can be applied to most states. One question that I found interesting was about whether referral fees were permissible.

Although I am aware that many mortgage brokers and lenders pay “referral” fees, they should all be aware that it is a RESPA violation. In many states, it is also done to do an end-run around state licensing laws. After all, if you don’t call it a “commission” or “bonus” when the loan closes, how can anyone say you are paying an unlicensed loan officer in violation of the state’s licensing statute? Every state comes down hard on paying fees to unlicensed mortgage originators, no matter what you call the originator (e.g., a net branch) or what you call the fee. Expect to pay a heavy fine or have your company placed on probation if you are caught.

The Washington D.C. Department of Insurance, Securities and Banking’s FAQs lets you know that the exemption for making 3 or fewer loans per year is now gone. You need a license to make or broker even 1 loan. On the other hand, Massachusetts’ Division of Banks FAQs lets you know that 5 or fewer loans per every 12 consecutive months exempts you from their licensing requirements.

Most FAQs deal with licensing qualifications and are helpful to know when diciding whether you should even submit a license application (minimum net worths, minimum number of years of origination experience, etc.). I suggest you look over the FAQs on the banking department websites of every state in which you are licensed and any state in which you are interested in becoming licensed to learn as much about what you need to know as possible.