Monday, October 25, 2010

What Happens After You Renew Your Company License Through the NMLS?

Starting next week, all company mortgage licensees (mortgage bankers, mortgage lenders, and mortgage brokers) must renew the licenses that expire on December 31, 2010. For those of you who are licensed in states that transitioned onto the Nationwide Mortgage Licensing System (NMLS) in 2008 or 2009, this transaction is old hat. For those of you who are renewing for the first time, you may be wondering about what the procedure is like. I have been helping clients with their NMLS renewals since 2008 so I’ve been down this road before.

The renewal process for most states starts with your using the NMLS to indicate which licenses you are renewing. You attest to your company record and pay the renewal and NMLS fees. You should be aware that there are still several states that are not renewing company licenses through the NMLS (although they may be renewing loan originator licenses through the NMLS). These states are CA-DRE, Hawaii, Maine, Florida, Utah-DFI, Nevada, Minnesota, and Delaware. If you are licensed in one of those states that are not renewing through the NMLS, you should have received your renewal license application and instructions already. If you have not, you should call your state licensing agency and request the renewal materials. You want to start the renewal process as early as you can.

Once your company has renewed its licenses through the NMLS, you need to review the jurisdictional checklist for each state in which your company is licensed. Print out the Renewals Checklist for each state and complete the Checklist. Send in each Checklist together with all additional documentation that is required to each state regulatory agency.

The state may take a few weeks to process your renewal application and additional documentation. If you have not sent in the additional documentation and checklist, the reviewer will post the items still needed on the Task List associated with your company’s MU1 record. You need to keep checking to see if the Task List is changed. You can also view the company’s license status by clicking on the Composite tab and looking at the View license/Registration List.

If you wait until the end of December to renew your licenses, it is likely that your renewal approval will not come through until some time in January. This creates problems for mortgage brokers whose investors will not let them close without a 2011 license. Don’t wait until the last minute to renew.

Contact Robin Gronsky at if you need help with your licensing (company or MLO) renewals.

Monday, October 18, 2010

Will Your Credit Report Prevent You From Getting Your Loan Originator License?

Starting November 1, 2010, the Nationwide Mortgage Licensing System (NMLS) will open up the credit report authorization process. This means that every loan originator must go to their NMLS record and allow the agency that approves your loan originator license to pull your credit report. Remember that approval for your license up until now has been conditional, pending review of a satisfactory credit report.

A regulator in each state in which you are licensed will independently review your credit information. There is no automated standard or minimum score that will be enforced inside NMLS. The SAFE Act leaves it to the discretion of each state regulator to develop its own processes and standards for reviewing credit information and determining the financial responsibility of its licensees. This means that if you are licensed in multiple states, it is possible that one state may approve your license and another state may deny your license, based on the same credit report.

Have you looked at your credit report lately? Is all the information accurate? Do you have any outstanding judgments or collection items? The state regulators are trying to determine how financially responsible you are. I know that some loan originators had money troubles when the real estate bubble burst and income went sharply down. And I’ve had some inquiries as to what the regulators are looking for. Most states have not posted minimum FICO scores and probably will not. The SAFE Act does not require minimum FICO scores so there is some flexibility (unlike the issue of criminal convictions which are hard and fast limitations). If you have any items on your credit report that may require an explanation, start planning on how you will explain any credit issues to the regulators. They are looking for fiscal responsibility so make sure that you look as though you are responsible when handling money.

Contact Robin Gronsky at if you need help with your licensing (company or MLO).

Monday, October 11, 2010

Do You Publicize Why Mortgage Brokers are Better Than Banks?

Mortgage brokers took the brunt of the criticism for the subprime mess and the collapse of the housing market that followed. In the eyes of the average consumer, mortgage brokers seemed to be the ones pushing homebuyers into products that were unsuitable for them. Because the housing market collapsed, many mortgage brokers could no longer make a living and thousands left the industry. As one of the survivors, you need to educate the public on how you can better help them with their mortgage needs and how you can get them a better deal than they would get by going to a bank.

Although mortgage brokers held about 70% of the mortgage origination business at one time, that percentage has dropped significantly. Your customer base has shrunk for a variety of reasons. Fewer people are buying homes. Even when buyers fill out a 1003, it may be questionable whether they qualify for a loan. Or the property may not appraise high enough to get a loan commitment. With the lowest interest rates in years, refinancing is not as big a part of your business as it should be because so many homeowners are underwater or there is not enough equity in the property or their credit history is not clean enough. So you have to fight for every customer you can find. You need to give them a reason to come to you rather than the big banks that everyone has heard of. Can you make a list of those reasons that a customer should come to you rather than where they keep their checking account?

It is a smart exercise to make that list even if you never give out that list to your customers. It helps you focus on why your business is better than your competitors. Thinking through your competitive advantages will help you get new customers. Can you help borrowers with less than clean credit history? Do you have investors for borrowers who are self-employed? Are your fees better than a bank’s? Can you offer a better rate than the banks? Did you spend time answering their questions when a bank loan originator didn’t have the time or inclination? Did the bank loan officer know about different types of loan products? If a customer is shopping for a new loan, why specifically should they choose you? If you are stuck on the answers, survey your current customers and your past customers. Find out what they liked about working with you.

Once you have figured out why you are the better choice for a consumer, you need to educate the public. Most consumers don’t know enough about your world to even ask the right questions. You need to ask the questions that they should be asking and then answer them in a way that shows your advantages over the banks (and your mortgage broker competitors).

Whenever you are creating materials that may be categorized as advertising, don’t forget to include all required disclosures that your state law requires for advertising materials (and that kind of disclosure may be a competitive advantage itself).

Contact Robin Gronsky at if you need help with licensing (company or MLO) or compliance issues. I’ll keep what you tell me confidential but I cannot give you any specific legal advice until you become a client of the firm. This is done by written agreement only.

Monday, October 4, 2010

Why Mortgage Companies Should Hire an Outside NMLS Administrator

Right about the beginning of October, you should have received an email or two from the Nationwide Mortgage Licensing System (NMLS) reminding you that you will need to renew your license fairly soon (the starting date for renewals is November 1 of each year). In addition to your company licenses, all of your loan officers (including you) must renew all of their licenses. This can add up to a lot of time – time that you and your loan officers could better spend finding new business. If you hire an outside administrator, that person could be the one spending all the time it takes to get through the renewal process. It could save you a great deal of money that your business would lose if your loan officers are spending hours trying to remember how to use the NMLS.

In most companies, the owner inputs the NMLS information himself and requires each loan officer to also input the information himself. Since this procedure is done once a year, most loan officers and owners have forgotten even their log-in names and passwords. They don’t remember what steps they need to take to renew their licenses. The NMLS is not particularly user-friendly and it may take hours for each loan officer to get through the procedures. In addition, most loan officers have no idea what requirements they need to meet in order to get approval for their renewals. As usual, each state has its own checklist in terms of continuing education, additional documents, and fees.

An outside administrator will know what requirements are in effect for each state and should be communicating to each of their clients, in advance, what will be required for each company, branch and loan originator in order to get the renewals approved. That information, coupled with an outside administrator’s expertise in working with the NMLS system itself, will save you time and money. You don’t want to find that you don’t have your licenses renewed when January rolls around. You could lose your entire business if you can’t close loans in January.

If you do decide to hire an outside administrator, you should do some research to find someone who works well with you and knows what they are doing as far as working with the NMLS and licensing laws are concerned. Check their websites to see what kind of information they provide to the public. You should also interview each outside administrator that you are considering. You should be asking that person (or company) several questions:

1. Are you the NMLS administrator for other mortgage companies and loan officers;
2. How long have you worked with the NMLS as an outside administrator;
3. Do you only do the input onto the NMLS system or do you follow up until the state regulator makes a decision on the license application;
4. Do you provide licensing information to your clients during the year or only at renewal time;
5. What fees do you charge and when do your clients pay them.

You should be talking to each outside administrator (or the person at the company who would be doing your work) to get a sense of how comfortable you feel with them. Does each person you talk to actually answer your questions? Do they seem knowledgeable? Was it difficult to reach them, either by telephone or email? Check their websites to see what kind of information they provide to the public.

If the administrator does not seem knowledgeable or interested in working with you and your loan officers (maybe your company is too small, maybe it’s too big), move on to the next name on your list. Choose the administrator who gives you the answers that make you comfortable and whose personality meshes with your own. Selecting the right NMLS administrator will save you both time and money while decreasing your stress level.