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.