Don’t Wait for the Last Minute to Take Your Pre-Licensing Education

Each state is passing legislation to implement the federal SAFE Act. The legislation requires 20 hours of pre-licensing education and then passing two tests, one is a national component and the second test is a state component. Each state is setting its own deadline for when you need to complete the 20 hours and pass the exams. Don’t wait until the last minute to take the education and sit for the exams.

I have been in the business of helping mortgage lenders and brokers obtain and renew licenses for more than 10 years. Some of my clients are more on top of their licensing needs and I get the signed paper applications or information that I need to renew through the NMLS a few days after I request the information or send the applications for signature. Since I submit paperwork that I get back from clients within 48 hours of my receiving it, for some clients, this can mean that they get their renewals processed by the state banking department before the reviewers get hit by a deluge of renewals. I also have clients who do not respond as promptly and I cannot submit the renewals until maybe a day or two before the deadline. For these clients, the renewal process is very slow and may create a problem with closing loans because their license has expired. Some states are kind enough to send me a letter that states that the licensee can still close loans while the renewal is in processing. But other states are too busy to send me such a letter and my mortgage broker clients are sitting tight with their borrowers because their lenders will not let them close without a renewal license.

Don’t wait until the last minute. The NMLS system is new and you don’t want to learn what you need to know just before your license expires. Take a few minutes to find out what your deadlines are and get the pre-licensing education and exams done weeks ahead of schedule. You’ll be the one closing loans while the procrastinators are still waiting for their license approval.

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Examinations (also known as Audits)

You get a letter out of the blue from the state Banking Department. They are coming in about 2-3 weeks to review your books, records and files. What do you do?

Most of my clients first panic. An examination seems to trigger the same reaction as a tax audit. Most people who receive a notice of a tax audit call their accountant. Most of the mortgage brokers/lenders out there never call for help. They figure they will muddle through it. And sometimes they do. But, sometimes the examination costs them serious dollars.

The letter announcing the examination is accompanied by a list of the books and records that they want to examine and a questionnaire to be answered. A point person should be designated for the examination. This person should be someone who is familiar with all aspects of the licensee and familiar with the laws and regulations of the state that is conducting the examination. At this point, outside help should be retained to assist and give expert advice with respect to how to get through an examination. The books and records to be examined should be retrieved from storage immediately and reviewed by the point person. Typically, the examination will look at closed borrower files, files in your pipeline, and files from borrowers that have had their applications denied. All of the files to be examined should have all of the required documents with the appropriate signatures in them. The point person should also collect the company books and records that will be examined and review them in advance to ensure that there are no surprises. If the state requires a minimum net worth, make sure that all financial statements show the required net worth. If the examination requires proof of surety or fidelity bonds, make sure you have your copies in your files and in full force and effect. Have the questionnaire completed well in advance of the examination and if you have retained expert help, have them review the questionnaire before you give it to the examiner.

The examination could take place in your office or in the banking department’s office, with you sending them the files. It will take a few days for the examiner to review all of the books and records that were requested. The point person must make himself/herself available to answer follow-up questions or provide more documentation, if requested.

Make sure the point person and the principal of the company attend the exit interview when the examination is complete. Take notes of what was said and keep the notes. You will be receiving a written report of the results of the examination. Sometimes the findings in the written report differ from the oral exit interview. That is when your notes from the exit interview could be very important. If the examiner found problems with your books and records, you must make the changes that are required. And you must indicate to the banking department that the problems that were found will never happen again.