Monday, June 30, 2008

New Net Worth Requirements in Maryland

Effective June 1, 2008, Maryland licensed lenders (and that includes brokers) must meet new net worth requirements in order to get approved and renew their license. Remember, net worth equals assets minus liabilities. If you are a broker or table –funding a loan (but your name is not on the mortgage), the minimum net worth that is required is $25,000. For lenders, the minimum net worth is a sliding scale, based on the amount of lending you did in the previous 12 months. If your loans totaled $1,000,000, your minimum net worth must be at least $25,000. If you lent between $1,000,000 and $5,000,000, your minimum net worth must be at least $50,000. And, if you lent more than $5,000,000, you need a minimum net worth of $100,000. As of January 1, 2009, if you are a lender with mortgages of more than $10,000,000, your minimum net worth requirement increases to $250,000.00.

You can satisfy the requirement with cash, a line of credit (brokers cannot use a line of credit), or other assets. A line of credit cannot be used for more than 75% of the net worth. You can show proof of your net worth by submitting a certified financial statement, certified by a principal of the licensee and compiled, reviewed, or audited by a certified public accountant. If cash is used as the sole qualifying asset, you can submit a letter from your bank. If a line of credit is used, you must submit a copy of the line of credit agreement.

Tuesday, June 24, 2008

Alaska Joins the Licensing Club

The Alaska Mortgage Lending Regulation Act (AMLRA), AS 06.60, requires mortgage lenders, mortgage brokers, and originators operating in Alaska to become licensed, starting July 1, 2008. This new law does not permit anyone to be grandfathered so everyone who is doing mortgage lending or brokering in Alaska needs to get a license.

If you are already doing business as a lender or broker in Alaska (as evidenced by your current business license), you have until March 1, 2009 to get your license. But, if you want to start doing business in Alaska after June 30, 2008, you must be licensed.

The new law does not require a brick-and-mortar presence in Alaska so you can do all of your solicitation of business through the internet, mail, or telephone. Companies get a company license and loan officers each get their own licenses. Loan officers must undergo a background check, pass a test, and will be required to get 24 hours of continuing education every 2 years. A company owner who also originates loans must be licensed as an originator as well as getting the company license. The license fee for originators is $150.

The company must submit the license application, a $25,000 surety bond, and a $250 investigation fee and $500 license fee. All control persons of the mortgage company will have to undergo fingerprinting.

Applications are already available at the Alaska Banking Department website.

Tuesday, June 17, 2008

Loan Officer Licensing

The mortgage meltdown has led to a re-examination of whether a loan officer has a duty to protect customers from “risky” mortgages. Many in the regulatory agencies believe that licensing all loan officers would help avoid a re-occurrence of the recent subprime mess. To that end, there is a pronounced trend toward requiring loan officers working for non-depository lenders and brokers to be licensed.

Licensing typically requires some education, maybe passing a test and undergoing a criminal background search to ensure that the applicant has not been arrested or convicted of any crime. There may also be continuing education requirements. It’s not terribly rigorous. And there is no way to regulate integrity. There are plenty of rogue loan officers out there who jump from company to company, state to state.

Right now, the states that require licensing or registration of loan officers are: Arkansas, California (if licensed through the Department of Real Estate), Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wisconsin. If you are an Alaskan loan officer, your licensing requirement starts July 1, 2008.

You are in violation of your state’s licensing law if you have licensed or registered one loan officer and funnel all applications through that one person. You are in violation if an unlicensed or unregistered loan officer is originating mortgages with consumers. You are in violation if you are co-brokering with another broker that is not licensed. Violations can be expensive if you are caught. Think thousands of dollars in penalties and fines.

Obviously, my recommendation is to register or license every loan officer in all of your offices for every state in which they will solicit business. If you have a branch that is located in New York and they do business in New York only, you’re fine. Once that branch starts talking to consumers in New Jersey or Connecticut, you need to get them registered in those other states.

Monday, June 9, 2008

New Oregon Annual Report Rule

Oregon has just sent out notice of its new requirement regarding annual reports. The rule is OAR 441-865-0022 and can be read in its entirety on the internet at
The rule details what information will be required to be on the annual report. In addition to the standard totals for number and dollar amount for 1st mortgages, there are questions about loans insured or guaranteed by a federal agency, totals for negative amortization mortgages, and loans with a loan-to-value ratio of less than 80% but to a borrower with a FICO score of 620 and above. In all, there are 17 sections with some sections having more than 1 question.

The annual report is due on or before August 30, 2008 for loans made in 2007. There are no forms available yet. However, I would suggest that all mortgage bankers and brokers who are licensed in Oregon read the rule and start gathering the necessary information.

Tuesday, June 3, 2008

NMLS Participating States

This is just an update of which states are now using the Nationwide Mortgage Licensing System (NMLS), the national database of mortgage lenders, brokers and loan originators.

Currently using the system are Idaho, Iowa, Kentucky, Massachusetts, Mississippi, Nebraska, New Hampshire, New York, North Carolina, Rhode Island, Vermont, and Washington. Some of these states are fully using the NMLS for all licensee information and others are just transitioning to the NMLS, with a date in the future, up to September 1, 2008, to be fully transitioned. If you are licensed in one of the states listed here, you should have been notified by your regulatory agency that you need to input all company and loan originator information into the NMLS database during the transition period. If you have not received such a notice, I suggest that you check with your banking department to get the latest information to keep you in compliance.

Forty-two states have signed up for the NMLS so expect that you will be on the system within the next couple of years.