Do You Need a License?

I periodically get calls and emails, asking me if a certain person needs a license for the activities he is doing. Maybe it’s mortgage loan lead generation, sometimes it’s hard money lending or commercial mortgage brokering. My answer is always to read the statutes in your state (or any state in which you wwant to do business)regarding residential mortgage licensing to see if the activity that you are proposing to do fit within the description of a mortgage broker or mortgage lender. Also read the exemptions from licensing. If your activities fit within the definition of “mortgage broker” or “mortgage lender” and you don’t fit within any of the exemptions, you need a license. If your activity is not residential mortgages, also check the statutes for commercial mortgages to see if any such statute exists, whether your activity falls within the definition of mortgage broker or lender and whether you fall within the exemptions. It’s that simple. If you don't understand the language in the statutes, you need to hire someone like me who can explain the statutes to you.

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Are You Licensed in the Right States?

During the height of the real estate boom, mortgage companies were getting licensed in the states that had the most active selling climate. Assuming you could meet the brick and mortar and other licensing requirements, Nevada and Arizona were on everyone’s “hot” list. So were California and Florida.

Times are different now and the “hot” states are experiencing very high rates of foreclosures. This means a slow sales climate and selling prices that are plummeting. It is much more difficult now to make money in these states.

If you are licensed in a state that is not your home state, you should do some market research for that state. How much business are you doing in this state and how much profit are you making? Are there any very active markets in that state (not every city is experiencing the same level of sales meltdown)? Have sales prices fallen or risen? Do you have contacts in those active markets or can you create referral relationships?

Do the same market research in states that you are not licensed in now but could be if the conditions were favorable for you to make money. First, find the cities and states where sales levels are greater than the national average. Do you have any contacts in these cities? Can you find referral sources through your contacts? Don’t forget to use your business and social contacts to reach out to others who are living and working in other states and can lead you to those referral sources (the six degrees of separation phenomenon). If you join LinkedIn or Facebook or other internet social media, can you locate possible referral sources or borrowers?

You want to be one of the survivors in this very difficult market. This means changing strategies to take advantage of changes in the lending environment. Use the ability to be licensed in more than one state strategically to make more money.

Florida Has Gone Paperless

If you have a current Florida mortgage lender, correspondent lender, mortgage broker business, or mortgage broker license, you should have received a letter from the Florida Office of Financial Regulation letting you know that you must start using their new online system called REAL. The letter gave you an authorization code to create an account for you to input your license information. If you did not receive your authorization code letter, you must call the Office of Financial Regulation.

From now on, all license applications, scheduling of the broker or principal representative exam, license renewals, filing of quarterly reports and all other functions associated with your license must be done through their online system.

The new system removes all paper filings, including a paper license. If an investor requires proof that you have a valid Florida license, you will have to print out your information from the database.

Licensing your loan officers

The trend in licensing is towards more regulation rather than less regulation. As the real estate market stabilizes or declines, foreclosures are starting to increase. This alarms consumer advocates and legislators who clamor that bad mortgage originators are steering borrowers to mortgage loans that they cannot afford. The cure, to them, is registering or licensing loan officers.

Colorado is the latest state to require licensing. It doesn't even license mortgage lender or broker businesses - it only licenses the loan officers.

Registration of loan officers, in the states that require them, such as New Jersey, Connecticut, Arkansas and Wisconsin, merely require the filing of the application and the payment of a fee.

The licensing states, such as Utah, Illinois, North Carolina, and Texas, require passing an exam, background checks, a certain number of years of mortgage industry experience, or continuing education.

By requiring your loan officers to be licensed in the states that require it, you are ensuring that they are knowledgeable about the laws and regulation that govern the industry.

Mortgage license solutions and your credit report

Many of the states request that you send in a current credit report or agree that the banking department can pull your credit report. What are they looking for? The same things you are looking for when you have a potential customer - how good you are at managing money.

Does your credit report have a low FICO score? Lots of late pays? Open judgments? Some states, like West Virginia, will automatically deny the application if you have a FICO score in the 500s. Other states will also deny the application if you have open judgments and refuse to pay (no matter what the reason for the non-pay). The banking departments take the position that if you can't manage your own finances, how will you be able to advise consumers on what is the best financial decision among the many loan programs that are out there.

What do you do if you suspect you have a problem credit report? First, get a copy of your credit report and FICO score. Review the report and note any items that would raise a red flag. If there are problems with your credit report, pay the judgments, take a few months to make all of your payments on time, get your FICO score up. If you cannot solve this dilemma, do not become an owner of record. Let your partner be the one to submit only his/her credit report.