The answer to this question is different state by state and whether you are a mortgage broker or a mortgage lender.
If you are a mortgage broker, many states have a required minimum net worth of $25,000. New Jersey even requires a minimum net worth of $50,000. What is net worth? It is your company’s assets minus liabilities. For a new company, assets usually consist of cash (in your company's checking account), computer equipment and furniture. It does not include your car, unless title is in the company's name. Existing companies might also have accounts receivable and prepaid expenses. Liabilities are the amount of money a company owes. New companies usually do not have any liabilities.
Even if the state that you are interested in does not have a minimum net worth requirement, the licensing department might want to see a company's financial statement. They are looking to make sure that you can pay any claim that may arise after you are licensed. In order to get approval for a license, you must demonstrate to the banking department that you are serious about your financial responsibilities. Many states require an audited financial statement. This requires a very thorough review of your records by a CPA. Many accountants do not even prepare audited financial statements anymore. The accountants that do this type of work charge thousands of dollars to prepare the audited financials. If your state does not require a CPA-audited financial statement, it requires the president (or other officer) to swear that the financial statement is true and accurate.
The more assets you can show, the better. For existing companies, I counsel my clients not to distribute all of the profits to the shareholders of a corporation or members of a limited liability company. That lowers the net worth of a company. If the company shows that profits are retained to maintain operations or grow the business, the licensing department looks favorably at the company's application. Obviously if you are a start-up, you may have a limited amount of assets, but if you are adding new states, the licensing departments want to see how you have done in the past few years, when times have been more challenging.
The requirements for a mortgage lender license are even higher, typically $100,000 to $250,000. And most states do have a net worth requirement for lenders. If a mortgage lender needs a warehouse line of credit in order to fund its loans, the warehouse line creditor now requires a much higher net worth (I’m hearing numbers in excess of $1,000,000).
Regardless of whether a state requires a minimum net worth, at least at the very beginning of your company's existence, you should put in and keep as much money in the business as you can to show the licensing departments that you are serious about being a successful company that intends to be an upstanding member of the community.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Monday, February 22, 2010
Tuesday, February 16, 2010
Home Offices for Loan Originators - Are They Allowed?
Many of us would like to work from home for many reasons - to save on rent, you like the short commute, or maybe you need to take care of your children. But are you allowed to work from home?
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. If your local ordinance prohibits home offices, then your banking department will not permit you to have a home office. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. If your local ordinance prohibits home offices, then your banking department will not permit you to have a home office. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Tuesday, February 9, 2010
Fingerprinting on the NMLS
The Nationwide Mortgage Licensing System (NMLS) has opened up the ability to get your fingerprints done through their system. All states’ SAFE Acts, which govern the requirements of loan originator licensing, require federal criminal background checks to be conducted by the FBI. The NMLS now permits you to input the information that the FBI needs to run the background check. There is a fee for the background check which must be paid through the NMLS. You also schedule an appointment to have your fingerprints taken by an approved vendor. Your fingerprints will become part of your NMLS record but that part of your record is not allowed to be seen by the public. In many states, you must also have a background check run by your state police.
Many times, a client has told me that they can answer “no” to all of the criminal background disclosure questions even though they have been arrested in the past. The FBI and state criminal background searches show all arrests, even if your criminal record has been expunged, even if you received probation only, or other reasons that your criminal attorney told you that you could state that you had no criminal background. If you answer “no” to all of the disclosure questions, and you have been arrested in the past, you run the risk of having to explain why you have an arrest in your background check that you did not disclose. Now your honesty is in question, as well as the circumstances of the arrest. When in doubt, answer the disclosure question “yes” and send a letter of explanation to your state regulators.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Many times, a client has told me that they can answer “no” to all of the criminal background disclosure questions even though they have been arrested in the past. The FBI and state criminal background searches show all arrests, even if your criminal record has been expunged, even if you received probation only, or other reasons that your criminal attorney told you that you could state that you had no criminal background. If you answer “no” to all of the disclosure questions, and you have been arrested in the past, you run the risk of having to explain why you have an arrest in your background check that you did not disclose. Now your honesty is in question, as well as the circumstances of the arrest. When in doubt, answer the disclosure question “yes” and send a letter of explanation to your state regulators.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Monday, February 1, 2010
Home Offices - Are Tthey Allowed?
Many of us would like to work from home for many reasons - to save on rent, you like the short commute, or maybe you need to take care of your children. But are you allowed to work from home?
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is either the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is either the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
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