Monday, November 29, 2010

Why Your License Renewal Fees May Be So Cheap

I just renewed the licenses for one of my mortgage broker clients and its 6 loan originators. I used the company’s credit card for payment of the renewal fees and sent the payment confirmations (I print out every payment confirmation for every client) to my client with an explanation of what each confirmation was for. I also sent my client a quick memo explaining that this year’s renewal fees were much cheaper than next year’s renewal fees would be.

Why are this year’s renewal fees cheaper? My client has multiple licenses and some of its state licenses were transitioned to the Nationwide Mortgage Licensing System (NMLS) in 2008, some in 2009, and some in 2010. The states which transitioned onto the NMLS in 2008 and 2009 charged full renewal fees for the company, its branches, and its loan originators. The state that transitioned to the NMLS in 2010 did not charge a renewal fee because it essentially charged the renewal fee when the transition to the NMLS took place. For that state, my client paid only an NMLS administrative fee which is $30. For a company with one branch and 6 loan originators, it meant that my mortgage broker client was not paying hundreds of dollars in renewal fees at this time.

Next year, at this time, all of the company’s state banking departments will charge full renewal fees. This means that that this client (and all licensees) must have a stash of cash to pay for its renewals at one time. There is no more spreading out your renewal fees. And all states now renew annually (my client had a state license that renewed every two years) plus all the loan originators need to take continuing education next year.

If you are a mortgage lender or broker or a loan originator, and you transitioned to the NMLS in 2010, you spread out some of your fees over the course of this year. It may seem fairly inexpensive to now renew your licenses under the new statute. But, next year, you will be paying the full amount due in November or December. And you will need to take continuing education. Make sure you have enough in reserves to pay these necessary expenses.

Monday, November 22, 2010

Are You Planning on Buying a Mortgage Company in Another State? What Do You Need to Know About Getting Its License?

There are some mortgage companies that are prospering and growing. They are expanding into new states by buying mortgage companies rather than obtaining their own licenses and establishing new branches.

These expanding mortgage companies must be aware that, by buying an existing license, they do not have an instant entry into a new state. Each state has its own requirements for a “change in ownership” or “change of control.” Each state even has its own definition of “change of control.” If you are contemplating buying an existing mortgage lender or broker, you should be aware that the company that you are buying cannot assign its existing license to you. You must check with each state in which the company that you are buying is licensed to learn what their requirements are and you must comply with each state’s different procedures. Some states require notification before the change and other states require notification immediately after the change.

The state agency has the power to deny the application for a change of ownership or change of control. Accordingly, the new owners or new company cannot go forward with their transaction until they have the approval of the state regulatory agency. In just about every state that I work with, the state imposes a moratorium on new originations until the regulatory agency has approved the new owners. Therefore, if you are planning to buy an existing mortgage company, you must factor in weeks or months (depending on the state) for the state to approve the change in ownership or change of control in your expansion plans. Any loans that are already in the pipeline of the company that is being acquired are allowed to be closed, so as to not inconvenience consumers.

The approval process usually includes submitting information about the new owners, including their background in the mortgage industry, financial stability, criminal background checks, and credit status. If the new owners could not qualify for a license on their own in any particular state, they will not be in a better position by buying an existing licensee.

The mortgage company who buys an existing company does not do so to get an instant license. It usually buys the company to get its existing assets (loan originators, customers, and lease). If you are planning on buying an existing company, you must prepare for the licensing process or all of your plans could be for nothing.

Monday, November 15, 2010

Are Loan Originators Allowed to Originate Loans When They Are Conditionally Licensed?

Your state is still transitioning to the Nationwide Mortgage Licensing System. Some of your loan originators have transitioned their licenses but they have not been approved yet by the state licensing agency. Are they allowed to originate loans? Can you pay them for the loans they originate?

Check your state’s licensing statute and find out whether the licensing agency has issued any bulletins or memos to its licensees outlining its interpretation of the licensing statute. In many cases, the state agency has taken the position that, so long as your loan originators have license applications pending with the state or have extended licenses or registrations, then they may receive compensation for originations. A different position may be taken by your licensing agency for new originators who are awaiting approval of their licensing applications during the transition period. You may find that your state takes the position that a new loan originator may not originate loans until the license application has been approved. Each state has a different licensing statute subject only to the requirements of the SAFE Act. Each licensing agency will interpret its own laws and regulations so you must check each state's laws and regulations for every state in which you and your loan originators are licensed or wish to be licensed. You may find that one state will allow originators to originate (and get paid) while the application is pending but another state may require the loan originator to wait to originate until the application is fully approved.

Monday, November 8, 2010

Do You Know Whether You Need A Certified Financial Statement?

A certified financial statement is one that has been reviewed by a certified public accountant (CPA) to ensure that the numbers reported in the statement are accurate and are not subject to material errors or omissions. Because the accountant is attaching a certification to the financial statement that he has reviewed the figures and found them to be accurate, he may incur liability if the figures in the financial statement turn out to be wrong. Because of the possible liability, many CPAs do not certify financial statements anymore. Those that do charge a large fee. For this reason, mortgage brokers and mortgage lenders are looking for reasons not to need a certified financial statement. There are two grounds for needing one: the state in which you are licensed requires them (for proving your net worth) or you want to originate FHA loans.

Although the SAFE Act changed many requirements for licensing, there are still a number of states (i.e., New Jersey for mortgage lenders, Illinois Residential Mortgage Licensees, California Residential Mortgage Lender Licensees) that require certified financial statements. You must provide such a statement as of the end of the most recent fiscal year. Some states do require a minimum net worth, other states do not. No matter in how many states you are licensed, you only need one certified financial statement. The statement must be in .pdf format and must be uploaded through the NMLS.

The ability to broker or originate FHA loans also comes with the requirement that you get a certified financial statement. If you are an FHA Loan Correspondent (also known as a “mini-eagle”), you should be aware that 2010 is the last year that FHA is approving your Loan Correspondent status. Starting in 2011, the investors to whom you will broker your loans will be responsible for the approval and oversight of you. Therefore, it is possible that each lender will have its own set of requirements. It is likely that many lenders will insist on certified financials so that they are more assured that you are not under-capitalized.

It is still required by the FHA that mortgage lenders who are originating FHA loans have a required minimum net worth that must be corroborated by the submission of a certified financial statement.

Since government loans are a large percentage of the loans that are being originated these days, it is likely that the need for (and expense of) a certified financial statement is not going away any time soon.

Monday, November 1, 2010

How Do You Renew Your Individual Loan Originator License Through the NMLS?

Starting today, all mortgage loan originator licensees (usually called loan officers) 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. If you have licenses that you are not renewing, you must actively indicate through the NMLS that you are not renewing those licenses. You can change your mind even if you click on “Do Not Renew.” You should also review your record to make sure that all of the information is up-to-date. Did you change your residence, did your company move its offices? All of your record should be accurate. You then attest to your individual record and pay the renewal and NMLS fees. If you took your pre-licensing education in 2008 or 2009, you must have taken 8 hours of continuing education in 2010 in order to get approval for your renewal license application.

Once you have renewed your licenses through the NMLS, you need to review the jurisdictional checklist for each state in which you are licensed. Print out the Renewals Checklist for each state and complete the Checklist. Although many of the states do not require additional documentation, you need to check the uniform checklist at
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 MU4 record. You need to keep checking to see if the Task List is changed. You can also view your license status by clicking on the Composite tab and looking at the View license/Registration List or by calling your state regulatory agency and speak to the reviewer.

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 you when your investors will not let you 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 renewals.