I’m located in Ridgewood, New Jersey and a lot of my clients are licensed in Florida, mostly as correspondent lenders. It’s a natural fit as many New Yorkers and New Jerseyans moved to Florida either for retirement or to live a lifestyle in the sun. Florida licenses have historically expired on August 31st. This year starts a big change in Florida licensing, including the transition to the Nationwide Mortgage Licensing System (NMLS). Some of my clients indicated that they may not transition their license to the NMLS and wondered what to do if their license (or branch license) expired August 31, 2010 and they had loans in the pipeline.
If you have a Florida license that expires on August 31, 2010, you should be aware that it has automatically been extended through December 31, 2010. During this period, all licensees will transition their licenses to the NMLS and the Department of Financial Regulation will not know until December 31, 2010 whether you have complied with all of the requirements to transition your license and renew your license (whether you have done your testing, criminal background check, etc). This automatic extension gives you time to decide whether you still have a reason to be licensed in Florida.
If you do not believe that it makes sense for you to maintain your Florida license, then close all of your loans that are in the pipeline now and stop originating new ones. If you decide before December that you would like to keep your Florida license, start familiarizing yourself with Florida’s licensing requirements and the NMLS. The transition period for Florida starts October 1, 2010 and do your transition as early as possible to ensure that your license will extend into 2011.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you need help with the NMLS or with your licensing applications (company or loan originator). 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, August 30, 2010
Monday, August 23, 2010
If You Make These Advertising Mistakes, It Could Cost You Plenty
Advertising plays a prominent role in many mortgage companies’ efforts to find new borrowers. As your customers get bombarded by more and more advertising messages, the urge to create an advertising piece that will stand out from the crowd becomes more urgent. This sense of desperation leads many mortgage lenders and brokers to create promotion pieces that cross the lines of permissible advertising. Make sure you don’t make these mistakes that can lead to costly penalties.
1. Don’t lead consumers to believe the government or their existing lender is sending them mail. Many mortgage brokers use direct mail to solicit new business. Companies have distributed solicitations that use names of mortgage lenders in such a way that consumers believe it was sent to them by their lender, leading consumers to also believe, based on these solicitations, that their private financial information has been shared with another entity. These actions are a violation of the regulations of HUD and of the various states that regulate mortgage brokers and lenders. In addition, they can lead to consumer complaints to the regulatory agencies. The number of complaints the agency receives about you impacts how often you will be examined.
2. Do not omit the APR when advertising an interest rate. No matter what state you are conducting mortgage activity, all lenders and brokers are subject to the application of federal Truth-in-Lending laws, specifically Regulation Z. The statute requires, among other things, that if a lender or broker advertises a particular interest rate, they must also quote the Annual Percentage Rate, or APR. The APR is correctly defined as the "cost of money borrowed, expressed as an annual rate." The APR takes into account the note rate, which is the rate a borrower’s monthly payment is based on and any and all lender fees and finance charges. Yes, most borrowers don’t understand APR but you are still required to use it in your advertising and be able to explain it to a potential customer.
3. Do not use terms that indicate unlimited access to credit. Advertisements that contain terms such as "bad credit no problem" (or similar phrases) or language that implies that an applicant will have total access to credit without clearly and conspicuously disclosing the material limitations on the availability of credit are prohibited under many state laws. In most states, lenders and brokers need to list any limitations to getting the advertised mortgage, including income requirements, limitations for consumers with bad credit (such as a higher rate), and that restrictions as to the maximum principal amount of the loan offered may apply.
4. All states require NMLS unique identification numbers in advertising. This one is easy to comply with. You have to add your company and mortgage loan originator NMLS unique identification number to all of your advertising materials, including websites and business cards. In addition, some states require company addresses and specific language that must be used on all advertising materials. You must check with each state in which you are licensed to find out the specific requirements and you must fully comply with all such requirements.
5. Be aware of the catch-all “fraudulent, deceptive or misleading” prohibitions. Both the Federal Trade Commission and different state regulatory agencies have statutes that prohibit an “unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading” or variations of this phraseology. Lately, the regulators are cracking down on advertisements regarding low interest rate loans that fail to mention that there may be negative amortization. If you think, but are not sure that your advertising contains inaccurate or misleading language, change the advertisement.
If you violate an advertising statute or regulation, at best, you will be asked to “cease and desist” the prohibited advertising and be subjected to increased scrutiny of all of your business activities. At worst, you could lose your licenses and pay heavy fines. This could also impact your premiums with your surety bond underwriter.
1. Don’t lead consumers to believe the government or their existing lender is sending them mail. Many mortgage brokers use direct mail to solicit new business. Companies have distributed solicitations that use names of mortgage lenders in such a way that consumers believe it was sent to them by their lender, leading consumers to also believe, based on these solicitations, that their private financial information has been shared with another entity. These actions are a violation of the regulations of HUD and of the various states that regulate mortgage brokers and lenders. In addition, they can lead to consumer complaints to the regulatory agencies. The number of complaints the agency receives about you impacts how often you will be examined.
2. Do not omit the APR when advertising an interest rate. No matter what state you are conducting mortgage activity, all lenders and brokers are subject to the application of federal Truth-in-Lending laws, specifically Regulation Z. The statute requires, among other things, that if a lender or broker advertises a particular interest rate, they must also quote the Annual Percentage Rate, or APR. The APR is correctly defined as the "cost of money borrowed, expressed as an annual rate." The APR takes into account the note rate, which is the rate a borrower’s monthly payment is based on and any and all lender fees and finance charges. Yes, most borrowers don’t understand APR but you are still required to use it in your advertising and be able to explain it to a potential customer.
3. Do not use terms that indicate unlimited access to credit. Advertisements that contain terms such as "bad credit no problem" (or similar phrases) or language that implies that an applicant will have total access to credit without clearly and conspicuously disclosing the material limitations on the availability of credit are prohibited under many state laws. In most states, lenders and brokers need to list any limitations to getting the advertised mortgage, including income requirements, limitations for consumers with bad credit (such as a higher rate), and that restrictions as to the maximum principal amount of the loan offered may apply.
4. All states require NMLS unique identification numbers in advertising. This one is easy to comply with. You have to add your company and mortgage loan originator NMLS unique identification number to all of your advertising materials, including websites and business cards. In addition, some states require company addresses and specific language that must be used on all advertising materials. You must check with each state in which you are licensed to find out the specific requirements and you must fully comply with all such requirements.
5. Be aware of the catch-all “fraudulent, deceptive or misleading” prohibitions. Both the Federal Trade Commission and different state regulatory agencies have statutes that prohibit an “unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading” or variations of this phraseology. Lately, the regulators are cracking down on advertisements regarding low interest rate loans that fail to mention that there may be negative amortization. If you think, but are not sure that your advertising contains inaccurate or misleading language, change the advertisement.
If you violate an advertising statute or regulation, at best, you will be asked to “cease and desist” the prohibited advertising and be subjected to increased scrutiny of all of your business activities. At worst, you could lose your licenses and pay heavy fines. This could also impact your premiums with your surety bond underwriter.
Monday, August 16, 2010
Continuing Education For Mortgage Loan Originators
Most mortgage loan originators (MLOs) are now aware that they have a requirement to take 20 hours of pre-licensing education in order to get their license. Many of you are unaware that the SAFE Act requires that you also take 8 hours of continuing education each year. The continuing education must be comprised of 3 hours of federal laws and regulations, 2 hours of ethics, 2 hours of training related to lending standards for the nontraditional mortgage product market, and 1 hour of undefined instruction on mortgage origination. Each state has the obligation to refine these requirements.
If you are licensed in a state that required you to take the 20 hours of pre-licensing education in 2009, then in order to renew your license in November, 2010, you will need to complete your continuing education hours by December 31, 2010. If you are licensed in more than one state, you should check with each state’s regulatory agency to make sure that you complete that state’s continuing education requirements. If you took your 20 hours of pre-licensing education in 2010, you do not need to take continuing education until 2011.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you want to explore expanding into new states or need help with your licensing applications (company or loan originator). 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.
If you are licensed in a state that required you to take the 20 hours of pre-licensing education in 2009, then in order to renew your license in November, 2010, you will need to complete your continuing education hours by December 31, 2010. If you are licensed in more than one state, you should check with each state’s regulatory agency to make sure that you complete that state’s continuing education requirements. If you took your 20 hours of pre-licensing education in 2010, you do not need to take continuing education until 2011.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you want to explore expanding into new states or need help with your licensing applications (company or loan originator). 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, August 9, 2010
Extensions to the July 31st Deadline – Are You in One of These States?
July 31st was supposed to have been the deadline for completing the licensing requirements in certain states. Some states have decided to extend these deadlines to allow their reviewers additional time to review all of the transition applications. If you are a licensee in New Jersey, Maryland, or South Carolina, you have been granted the right to originate loans until September 30, 2010 (Maryland), October 1, 2010 (New Jersey), or October 31, 2010 (South Carolina Board of Financial Institutions) even if your application is still pending. You should make sure that you have completed all of your licensing requirements as soon as possible to ensure that you are unable to close your loans when this extended deadline passes. The reviewers are finding that many applications are incomplete and rather than denying these companies and loan originators the right to originate, they have given you more time. You should be checking your task lists on the NMLS to see what requirements you still need to comply with. When your application has been approved, the designation on your MU-4 record is usually “approved – conditional.” This is because the required credit check has not been reviewed yet (and won’t be until starting October 1, 2010).
If you missed the July 31, 2010 deadline, you are not covered by an extension. You need to submit a new application (not a transition application) and you cannot originate loans until your application has been approved.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you want to explore expanding into new states or need help with your licensing applications (company or loan originator). 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.
If you missed the July 31, 2010 deadline, you are not covered by an extension. You need to submit a new application (not a transition application) and you cannot originate loans until your application has been approved.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you want to explore expanding into new states or need help with your licensing applications (company or loan originator). 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, August 2, 2010
How Do You Differentiate Yourself When Customers Are Shopping on Price?
I am hearing from the mortgage brokers that I talk to that customers seem to be interested only in how low your interest rates are. If you don’t offer the lowest interest rates, what are you saying to those price shoppers to get them to consider you instead?
Have you created a script and a marketing piece that tells your potential customer how you are different but better than the broker/lender that offers the lowest interest rate? Is it phrased in terms of benefits to the borrower? Do these “tire kickers” ask you about quality? Have you told them about your qualifications (thanks to the new licensing laws you have plenty to tell them on this subject) and the fact that you are more knowledgeable and trustworthy than the loan officers hired by the banks helps your customer?
Sometimes you can compete on price. But when you can’t, you need to able to answer the question (even when they are not asking that question yet but seem to be on the fence) “Why should I go with you and not the other guy?”
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you want to explore expanding into new states or need help with your licensing applications (company or loan originator). 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.
Have you created a script and a marketing piece that tells your potential customer how you are different but better than the broker/lender that offers the lowest interest rate? Is it phrased in terms of benefits to the borrower? Do these “tire kickers” ask you about quality? Have you told them about your qualifications (thanks to the new licensing laws you have plenty to tell them on this subject) and the fact that you are more knowledgeable and trustworthy than the loan officers hired by the banks helps your customer?
Sometimes you can compete on price. But when you can’t, you need to able to answer the question (even when they are not asking that question yet but seem to be on the fence) “Why should I go with you and not the other guy?”
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you want to explore expanding into new states or need help with your licensing applications (company or loan originator). 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.
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