I’ve already received my first annual report form and I know from my calendar system that other states have early annual reporting requirements. Most states require an annual report to be filed, some states require semi-annual reports. The vast majority of the annual reports require information about loans that you closed in the previous year. There are also reporting requirements in some states requesting information about the loan officers that you hired and fired in the last quarter or last year.
If this is your first year filing an annual report in a particular state, it may take you awhile to gather the information that the report asks for. So don’t wait until the last minute to review the report to see what information you need to find. If you have filed a report in prior years, you should have your computers and files stored in such a way that you can access the needed data in minutes (if you don’t, maybe you want to update your technology).
Some of the annual reports require financial information in their format, not your accountants’ format, which means that you are spending a lot of time manipulating the numbers to conform to the categories that your state has on its form. If this is not your area of expertise, hire an outside specialist to handle it for you. Your time is better spent closing loans than puzzling how to complete a form.
Showing posts with label California mortgage broker. Show all posts
Showing posts with label California mortgage broker. Show all posts
Thursday, January 8, 2009
Tuesday, September 16, 2008
Update on Virginia laws
As of July 1, 2008, Virginia has required that all employers must obtain a criminal history record from the Virginia Central Criminal Records Exchange for all new employees who have access to personal identifying or financial information from customers. The report must show that the prospective employee has not been convicted of any felony or misdemeanor involving fraud, deceit, or misrepresentation in any state or under federal law. If there is such a conviction, no matter how old, you must get permission from the Bureau of Financial Institutions to hire this person. You must keep the criminal records report in the event of an examination of your books and records by the Bureau of Financial Institutions.
Employers also need to provide initial training and continuing education for all employees who are involved in the origination, marketing, underwriting, closing or quality control of Virginia loans. The initial education must be provided to all who were your employees who fit the definition that I just stated and anyone else who fits that definition who is hired after July 1, 2008. You have until May 1, 2009 to have the initial training completed for employees who were with your company on July 1, 2009. You have 90 days to have the initial training completed for anyone new who is hired after July 1, 2009. The initial training consists of at least 12 hours of federal law including the Truth-in-Lending Act, RESPA, Equal Credit Opportunity Act, and the Fair Credit Reporting Act, 4 hours of Virginia law, including the Virginia Mortgage Lender and Broker Act and 2 hours of mortgage fraud prevention, including the penalties for participating in mortgage fraud. Marketing and sales training courses don’t count.
Additionally, there is continuing education required for these employees on an annual basis after the initial training and consists of at least 4 hours of federal law, 2 hours of Virginia law, and 1 hours of mortgage fraud prevention. All employers must keep documentation showing which employees had initial and then continuing education, which courses they took (you must provide descriptions of each course), how many hours each course was, who the provider was, and when each course was completed.
You should have received a copy of this new law if you are currently licensed in Virginia. If you are like many of my clients, when you receive notice of a new law, you quickly skim the notice and decide you can’t figure out what it says. And then you wonder what you need to do next. You should have retained a lawyer to explain the new laws to you if you cannot understand what the Bureau of Financial Institutions has sent to you. Your inability to understand the new laws, rules, or regulations will not serve to protect you if you violate them.
Employers also need to provide initial training and continuing education for all employees who are involved in the origination, marketing, underwriting, closing or quality control of Virginia loans. The initial education must be provided to all who were your employees who fit the definition that I just stated and anyone else who fits that definition who is hired after July 1, 2008. You have until May 1, 2009 to have the initial training completed for employees who were with your company on July 1, 2009. You have 90 days to have the initial training completed for anyone new who is hired after July 1, 2009. The initial training consists of at least 12 hours of federal law including the Truth-in-Lending Act, RESPA, Equal Credit Opportunity Act, and the Fair Credit Reporting Act, 4 hours of Virginia law, including the Virginia Mortgage Lender and Broker Act and 2 hours of mortgage fraud prevention, including the penalties for participating in mortgage fraud. Marketing and sales training courses don’t count.
Additionally, there is continuing education required for these employees on an annual basis after the initial training and consists of at least 4 hours of federal law, 2 hours of Virginia law, and 1 hours of mortgage fraud prevention. All employers must keep documentation showing which employees had initial and then continuing education, which courses they took (you must provide descriptions of each course), how many hours each course was, who the provider was, and when each course was completed.
You should have received a copy of this new law if you are currently licensed in Virginia. If you are like many of my clients, when you receive notice of a new law, you quickly skim the notice and decide you can’t figure out what it says. And then you wonder what you need to do next. You should have retained a lawyer to explain the new laws to you if you cannot understand what the Bureau of Financial Institutions has sent to you. Your inability to understand the new laws, rules, or regulations will not serve to protect you if you violate them.
Tuesday, July 8, 2008
Licensing of Branch Offices
All states require licensing of branch offices. But, again, each state has its own procedures for licensing branch offices. You should look on the website of each state in which you need to obtain a license to see what the requirements are for that state. For example, Nevada does not permit a branch office until after the main office has been examined by the Mortgage Lending Division and received a satisfactory rating in the preceding 12 months.
Many states have adopted the Uniform Application. In those jurisdictions, you will be filling out the Form MU3 as a starter. But each state can customize the additional information and documentation that it requires for a license approval. Some states require branch manager fingerprints, other states require that the branch manager have a certain number of years of mortgage industry experience, other states permit the branch to use a different assumed business name from the principal office, others require that all offices use the same business name.
Some of the states that have adopted the Uniform Application have moved to the Nationwide Mortgage License System (NMLS), the computerized national licensing database. If the state from which you want a license is on the NMLS, you must use the NMLS to get your branch licenses.
If the state has not adopted the Uniform Application, you must obtain its branch office license application from its website and review its requirements before submitting the application.
Usually, a branch office license application has fewer requirements than the initial license application. The license fee is lower, the minimum net worth does not change, or credit reports are not required. But some states, such as Maryland and Connecticut, do not have a separate branch office license application or different requirements. Each branch office is licensed with the same requirements and documentation as the initial office. In some cases, this makes it difficult to license additional offices if the company cannot find branch managers with the requisite number of years of industry experience or cannot obtain additional surety bonds.
You are not permitted to begin operations in the branch office until it has been licensed. The regulatory agencies treat this as unlicensed activity, the same as if you had never licensed the main office and you will be subjected to disciplinary action if caught. In many states, it is expressly prohibited to license a net branch. What is a net branch? It is a branch where a different company will be paying the employees of that location, where someone other than the main licensee is paying the expenses of the branch office, where the branch manager is totally responsible for hiring and firing employees in that office, or where someone other than the licensee has signed the lease, contracted with the utilities or the vendors that supply services or goods to the office.
In states where the branch office applications are not as extensive as the original application, the review time is also streamlined. In some states, it can take as little as 2-3 weeks for an approval.
Many states have adopted the Uniform Application. In those jurisdictions, you will be filling out the Form MU3 as a starter. But each state can customize the additional information and documentation that it requires for a license approval. Some states require branch manager fingerprints, other states require that the branch manager have a certain number of years of mortgage industry experience, other states permit the branch to use a different assumed business name from the principal office, others require that all offices use the same business name.
Some of the states that have adopted the Uniform Application have moved to the Nationwide Mortgage License System (NMLS), the computerized national licensing database. If the state from which you want a license is on the NMLS, you must use the NMLS to get your branch licenses.
If the state has not adopted the Uniform Application, you must obtain its branch office license application from its website and review its requirements before submitting the application.
Usually, a branch office license application has fewer requirements than the initial license application. The license fee is lower, the minimum net worth does not change, or credit reports are not required. But some states, such as Maryland and Connecticut, do not have a separate branch office license application or different requirements. Each branch office is licensed with the same requirements and documentation as the initial office. In some cases, this makes it difficult to license additional offices if the company cannot find branch managers with the requisite number of years of industry experience or cannot obtain additional surety bonds.
You are not permitted to begin operations in the branch office until it has been licensed. The regulatory agencies treat this as unlicensed activity, the same as if you had never licensed the main office and you will be subjected to disciplinary action if caught. In many states, it is expressly prohibited to license a net branch. What is a net branch? It is a branch where a different company will be paying the employees of that location, where someone other than the main licensee is paying the expenses of the branch office, where the branch manager is totally responsible for hiring and firing employees in that office, or where someone other than the licensee has signed the lease, contracted with the utilities or the vendors that supply services or goods to the office.
In states where the branch office applications are not as extensive as the original application, the review time is also streamlined. In some states, it can take as little as 2-3 weeks for an approval.
Monday, June 30, 2008
New Net Worth Requirements in Maryland
Effective June 1, 2008, Maryland licensed lenders (and that includes brokers) must meet new net worth requirements in order to get approved and renew their license. Remember, net worth equals assets minus liabilities. If you are a broker or table –funding a loan (but your name is not on the mortgage), the minimum net worth that is required is $25,000. For lenders, the minimum net worth is a sliding scale, based on the amount of lending you did in the previous 12 months. If your loans totaled $1,000,000, your minimum net worth must be at least $25,000. If you lent between $1,000,000 and $5,000,000, your minimum net worth must be at least $50,000. And, if you lent more than $5,000,000, you need a minimum net worth of $100,000. As of January 1, 2009, if you are a lender with mortgages of more than $10,000,000, your minimum net worth requirement increases to $250,000.00.
You can satisfy the requirement with cash, a line of credit (brokers cannot use a line of credit), or other assets. A line of credit cannot be used for more than 75% of the net worth. You can show proof of your net worth by submitting a certified financial statement, certified by a principal of the licensee and compiled, reviewed, or audited by a certified public accountant. If cash is used as the sole qualifying asset, you can submit a letter from your bank. If a line of credit is used, you must submit a copy of the line of credit agreement.
You can satisfy the requirement with cash, a line of credit (brokers cannot use a line of credit), or other assets. A line of credit cannot be used for more than 75% of the net worth. You can show proof of your net worth by submitting a certified financial statement, certified by a principal of the licensee and compiled, reviewed, or audited by a certified public accountant. If cash is used as the sole qualifying asset, you can submit a letter from your bank. If a line of credit is used, you must submit a copy of the line of credit agreement.
Tuesday, June 17, 2008
Loan Officer Licensing
The mortgage meltdown has led to a re-examination of whether a loan officer has a duty to protect customers from “risky” mortgages. Many in the regulatory agencies believe that licensing all loan officers would help avoid a re-occurrence of the recent subprime mess. To that end, there is a pronounced trend toward requiring loan officers working for non-depository lenders and brokers to be licensed.
Licensing typically requires some education, maybe passing a test and undergoing a criminal background search to ensure that the applicant has not been arrested or convicted of any crime. There may also be continuing education requirements. It’s not terribly rigorous. And there is no way to regulate integrity. There are plenty of rogue loan officers out there who jump from company to company, state to state.
Right now, the states that require licensing or registration of loan officers are: Arkansas, California (if licensed through the Department of Real Estate), Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wisconsin. If you are an Alaskan loan officer, your licensing requirement starts July 1, 2008.
You are in violation of your state’s licensing law if you have licensed or registered one loan officer and funnel all applications through that one person. You are in violation if an unlicensed or unregistered loan officer is originating mortgages with consumers. You are in violation if you are co-brokering with another broker that is not licensed. Violations can be expensive if you are caught. Think thousands of dollars in penalties and fines.
Obviously, my recommendation is to register or license every loan officer in all of your offices for every state in which they will solicit business. If you have a branch that is located in New York and they do business in New York only, you’re fine. Once that branch starts talking to consumers in New Jersey or Connecticut, you need to get them registered in those other states.
Licensing typically requires some education, maybe passing a test and undergoing a criminal background search to ensure that the applicant has not been arrested or convicted of any crime. There may also be continuing education requirements. It’s not terribly rigorous. And there is no way to regulate integrity. There are plenty of rogue loan officers out there who jump from company to company, state to state.
Right now, the states that require licensing or registration of loan officers are: Arkansas, California (if licensed through the Department of Real Estate), Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wisconsin. If you are an Alaskan loan officer, your licensing requirement starts July 1, 2008.
You are in violation of your state’s licensing law if you have licensed or registered one loan officer and funnel all applications through that one person. You are in violation if an unlicensed or unregistered loan officer is originating mortgages with consumers. You are in violation if you are co-brokering with another broker that is not licensed. Violations can be expensive if you are caught. Think thousands of dollars in penalties and fines.
Obviously, my recommendation is to register or license every loan officer in all of your offices for every state in which they will solicit business. If you have a branch that is located in New York and they do business in New York only, you’re fine. Once that branch starts talking to consumers in New Jersey or Connecticut, you need to get them registered in those other states.
Tuesday, May 27, 2008
New York Licensing Timeframe
I just received the news that a client’s application for a New York mortgage broker license was just approved (if he submits his surety bond). I originally submitted his application over a year ago. Although there were delays by him in responding to requests for additional information that increased the timeline for an approval, I have other clients whose applications are also pending for over 10 months.
I am trying to make 2 points: it doesn’t help you to dawdle about submitting the information that a licensing reviewer has requested and New York takes many months to approve an application.
If your goal is to get a new license because you need the new business, you must make the time to respond to a reviewer’s questions about anything you have submitted or to get new documentation that has been asked for. If you show the reviewer that you do not care about the application (and to a reviewer, there is no other explanation for why you are not jumping when they contact you), they will put your file aside and get to it when they aren’t busy (which is almost never).
Yes, I know that it is very frustrating to hear that a license application will take many months to get approved. Some unscrupulous companies, in order to get your business, may tell you they can get it for you in a matter of weeks or that they know someone who will fast-track your application. When asked questions about approval timelines, I try to be as honest as I can within the framework of my experience. Even though I know many of the reviewers in the state banking departments, I can’t get a “rush” on every application that I send in. I use my relationship with the reviewers to help move applications through the process but I don’t beg a favor with every application. After awhile, the reviewers will stop responding. If you are checking around to find someone to handle your license applications, ask each of them about approval timeframes. If someone tells you something radically different from the others, find out why. It may be an unusual situation, or more likely, someone is telling you what they think you want to hear. Be realistic about the time it takes to get a license and start now.
I am trying to make 2 points: it doesn’t help you to dawdle about submitting the information that a licensing reviewer has requested and New York takes many months to approve an application.
If your goal is to get a new license because you need the new business, you must make the time to respond to a reviewer’s questions about anything you have submitted or to get new documentation that has been asked for. If you show the reviewer that you do not care about the application (and to a reviewer, there is no other explanation for why you are not jumping when they contact you), they will put your file aside and get to it when they aren’t busy (which is almost never).
Yes, I know that it is very frustrating to hear that a license application will take many months to get approved. Some unscrupulous companies, in order to get your business, may tell you they can get it for you in a matter of weeks or that they know someone who will fast-track your application. When asked questions about approval timelines, I try to be as honest as I can within the framework of my experience. Even though I know many of the reviewers in the state banking departments, I can’t get a “rush” on every application that I send in. I use my relationship with the reviewers to help move applications through the process but I don’t beg a favor with every application. After awhile, the reviewers will stop responding. If you are checking around to find someone to handle your license applications, ask each of them about approval timeframes. If someone tells you something radically different from the others, find out why. It may be an unusual situation, or more likely, someone is telling you what they think you want to hear. Be realistic about the time it takes to get a license and start now.
Thursday, May 1, 2008
Washington State Consumer Loan Company License
Washington State has a new law requiring lenders to be licensed under the Consumer Loan Company Law. The law becomes effective on June 12, 2008. The license permits, lending, funding, brokering, or loan origination services to Washington consumers or others with Washington real property. The applicant needs to provide a financial statement, a surety bond of $100,000.00 per office location (up to a total of $500,000.00) and principals of the company must submit to criminal and credit background checks.
As of May 1, 2008, all lenders must apply for the license through the Nationwide Mortgage License System. Washington State will not be accepting paper applications anymore.
As of May 1, 2008, all lenders must apply for the license through the Nationwide Mortgage License System. Washington State will not be accepting paper applications anymore.
Tuesday, March 11, 2008
Audited financial statements
An audited financial statement is one that is prepared by a certified public accountant and certified by that accountant that it has been prepared in accordance with generally accepted accounting principles.
It is typically needed when a state or the FHA requires a minimum net worth in order to get and keep a license. Accountants who are willing to prepare audited financials are getting scarce and they are not cheap. I've heard of start-up companies being charged $5,000 and existing companies being charged twice that amount.
Why so expensive? Accountants can be sued when the company for whom they prepared audited financials lose a lot of money or go out of business, leaving unhappy investors and creditors. To compensate accountants for the risk of a lawsuit, many charge very high fees. Some accountants feel they don't want the risk and will not prepare audited financial statements at all.
I have been asked what to do if a mortgage company cannot find an accountant who will prepare an audited financial statement. My recommendation is to ask your family and friends, every accountant that you know, and every accountant all of those accountants know. Your accountant does not have to be local. One client of mine has his accountant in New Jersey, even though he is located in Maryland. Another client is located in Colorado, his accountant is in Florida. So, if your brother, best friend, or wife's cousin has a great accountant in another state, find out if that accountant does audited financials or knows of an accountant that does. In addition to finding an accountant that you can work with, you might find that he/she charges less than your local accountant does. Go with someone who is recommended and who you feel comfortable with. You will be working with that someone for many years.
It is typically needed when a state or the FHA requires a minimum net worth in order to get and keep a license. Accountants who are willing to prepare audited financials are getting scarce and they are not cheap. I've heard of start-up companies being charged $5,000 and existing companies being charged twice that amount.
Why so expensive? Accountants can be sued when the company for whom they prepared audited financials lose a lot of money or go out of business, leaving unhappy investors and creditors. To compensate accountants for the risk of a lawsuit, many charge very high fees. Some accountants feel they don't want the risk and will not prepare audited financial statements at all.
I have been asked what to do if a mortgage company cannot find an accountant who will prepare an audited financial statement. My recommendation is to ask your family and friends, every accountant that you know, and every accountant all of those accountants know. Your accountant does not have to be local. One client of mine has his accountant in New Jersey, even though he is located in Maryland. Another client is located in Colorado, his accountant is in Florida. So, if your brother, best friend, or wife's cousin has a great accountant in another state, find out if that accountant does audited financials or knows of an accountant that does. In addition to finding an accountant that you can work with, you might find that he/she charges less than your local accountant does. Go with someone who is recommended and who you feel comfortable with. You will be working with that someone for many years.
Monday, March 3, 2008
Do You Need to be Licensed?
I have been getting a number of telephone calls lately with the question essentially being do I need to get a license? Some of these calls are from companies that do mortgage servicing, some do commercial mortgages and some do a variation of what can be called “lead generation.”
The short answer to every question of whether someone needs a license in a particular state is “what does the statute say?” Every state has a law that creates the requirement that some persons doing certain activities must be licensed. Part of every licensing statute is the definitions section. The definitions section will describe what activities constitute “mortgage lending,” or “mortgage brokering” or “mortgage servicing.” If the activities that your company does fall within the description provided in the statute, you need a license. Sometimes, it’s not so clear whether your activity falls within the definition. If you are not sure whether your activity requires a license, my recommendation is to get the license anyway. It’s more costly to be wrong about your guessing about the need for a license. Yes, you may go about your business for several years without the license with no troubles, but the first complaint that alerts the banking department to your existence may find that you did need a license and your ignorance of that fact is no defense. Unlicensed activity invokes a heavy fine and you will be stopped from continuing your lucrative business.
The other short answer is that most states do not regulate commercial brokering and it varies by state whether mortgage servicers need to be licensed. Again, go back to the licensing statute to be sure.
The short answer to every question of whether someone needs a license in a particular state is “what does the statute say?” Every state has a law that creates the requirement that some persons doing certain activities must be licensed. Part of every licensing statute is the definitions section. The definitions section will describe what activities constitute “mortgage lending,” or “mortgage brokering” or “mortgage servicing.” If the activities that your company does fall within the description provided in the statute, you need a license. Sometimes, it’s not so clear whether your activity falls within the definition. If you are not sure whether your activity requires a license, my recommendation is to get the license anyway. It’s more costly to be wrong about your guessing about the need for a license. Yes, you may go about your business for several years without the license with no troubles, but the first complaint that alerts the banking department to your existence may find that you did need a license and your ignorance of that fact is no defense. Unlicensed activity invokes a heavy fine and you will be stopped from continuing your lucrative business.
The other short answer is that most states do not regulate commercial brokering and it varies by state whether mortgage servicers need to be licensed. Again, go back to the licensing statute to be sure.
Monday, February 25, 2008
Working with the Nationwide Mortgage Liensing System
I represent a number of clients on an ongoing basis, keeping them in compliance with the states in which they are licensed. Because the Nationwide Mortgage Licensing System (NMLS) has been up since January 2, 2008, I’ve been on the system quite a bit.
My experience is that it is somewhat time-consuming to work with the NMLS. I actually have that same opinion about all computer-based systems (i.e. annual reports and renewals that must be done online). If the entry isn’t done in the exact format that they require, the computer kicks it back. If I don’t have the answer to a question for a client, I need to go back to the client and get the answer; otherwise the system will not let me get further through the questions. This is true even with questions that seem to be irrelevant as to whether a mortgage originator or owner is honest and experienced in the industry. Questions about 10 years of residential history, providing month and year for each residence, do not make sense to me. Ten years of employment history, even if it is not mortgage related, seems excessive. When you have a paper-based system, the reviewer seems to have the leeway to allow a small piece of information to be omitted. And the format of the response does not stop you from moving from question to question.
I have not yet had the pleasure of adding a new state to be licensed for a client already in the system. I hope that it will just require a few minutes of input for the new state (each state still has its own requirements for what it requires for licensure) and the application will be submitted. I still need to know each state’s requirements, but the added work of re-typing each state’s application form will eventually disappear. That will make the NMLS a pleasure.
My experience is that it is somewhat time-consuming to work with the NMLS. I actually have that same opinion about all computer-based systems (i.e. annual reports and renewals that must be done online). If the entry isn’t done in the exact format that they require, the computer kicks it back. If I don’t have the answer to a question for a client, I need to go back to the client and get the answer; otherwise the system will not let me get further through the questions. This is true even with questions that seem to be irrelevant as to whether a mortgage originator or owner is honest and experienced in the industry. Questions about 10 years of residential history, providing month and year for each residence, do not make sense to me. Ten years of employment history, even if it is not mortgage related, seems excessive. When you have a paper-based system, the reviewer seems to have the leeway to allow a small piece of information to be omitted. And the format of the response does not stop you from moving from question to question.
I have not yet had the pleasure of adding a new state to be licensed for a client already in the system. I hope that it will just require a few minutes of input for the new state (each state still has its own requirements for what it requires for licensure) and the application will be submitted. I still need to know each state’s requirements, but the added work of re-typing each state’s application form will eventually disappear. That will make the NMLS a pleasure.
Monday, February 11, 2008
Training Your Loan Officers
A couple of months ago, I blogged about the best practices for hiring new loan officers. Now, it’s time to review the procedures to use to ensure that your loan officers stay compliant with all laws.
If your company is large enough, it should have a manual of company policies and procedures (prepared or reviewed by a lawyer who is very familiar with employment law). When a new loan officer starts his/her job with your company, the new loan officer should be given a copy of the company manual, should read the manual and should be required to sign an acknowledgement that the manual was read. If you don’t have a company manual, you need to meet with each new loan officer and explain what the company’s policies are regarding vacation and sick days, dress codes, email and use of the company computers, confidentiality of company information and client privacy information, all statutes and regulations that apply to your company and its business, etc.
Each job should have a job description so that everyone knows what he/her responsibilities are. Review each job description and make sure that all employees are complying with their job duties.
If your loan officers do not have experience in originating or processing loans of any state in which you are licensed, you must give some training to new loan officers in compliance with state laws and regulations. You can hire a trainer to give this training. If you are outsourcing this function, make sure that your trainer is entirely familiar with the subject matter in which he/she is giving training. You should monitor training sessions so that you know what is being taught to your employees. If anything is said that seems to contradict what you know about your state’s requirements, check with the state banking department to clear up all discrepancies. If there is a contradiction between the trainer and the banking department answers, go with the banking department answers.
Each employee should have training on how to deal with customers and potential borrowers. Loan officers should know what they can and cannot say to customers. You may want to hire a professional to teach sales development techniques and marketing skills. All loan officers should be familiar with investor requirements and the different loan programs that you offer to customers. They should be able to explain each program in detail so that it is easily understandable to borrowers.
Training should be ongoing and refresher courses should be given at least annually. Loan officers who need continuing education to maintain their licenses must keep a schedule of when they completed their required hours and employers should require that they receive a copy of that schedule.
Finally, model the type of behavior and standards that you want others to follow. Loan officers that do not follow state and federal law as well as your company’s procedures will get you into trouble. The loan officer may be long gone by the time the problem comes to light. But you will be left with the consequences.
If your company is large enough, it should have a manual of company policies and procedures (prepared or reviewed by a lawyer who is very familiar with employment law). When a new loan officer starts his/her job with your company, the new loan officer should be given a copy of the company manual, should read the manual and should be required to sign an acknowledgement that the manual was read. If you don’t have a company manual, you need to meet with each new loan officer and explain what the company’s policies are regarding vacation and sick days, dress codes, email and use of the company computers, confidentiality of company information and client privacy information, all statutes and regulations that apply to your company and its business, etc.
Each job should have a job description so that everyone knows what he/her responsibilities are. Review each job description and make sure that all employees are complying with their job duties.
If your loan officers do not have experience in originating or processing loans of any state in which you are licensed, you must give some training to new loan officers in compliance with state laws and regulations. You can hire a trainer to give this training. If you are outsourcing this function, make sure that your trainer is entirely familiar with the subject matter in which he/she is giving training. You should monitor training sessions so that you know what is being taught to your employees. If anything is said that seems to contradict what you know about your state’s requirements, check with the state banking department to clear up all discrepancies. If there is a contradiction between the trainer and the banking department answers, go with the banking department answers.
Each employee should have training on how to deal with customers and potential borrowers. Loan officers should know what they can and cannot say to customers. You may want to hire a professional to teach sales development techniques and marketing skills. All loan officers should be familiar with investor requirements and the different loan programs that you offer to customers. They should be able to explain each program in detail so that it is easily understandable to borrowers.
Training should be ongoing and refresher courses should be given at least annually. Loan officers who need continuing education to maintain their licenses must keep a schedule of when they completed their required hours and employers should require that they receive a copy of that schedule.
Finally, model the type of behavior and standards that you want others to follow. Loan officers that do not follow state and federal law as well as your company’s procedures will get you into trouble. The loan officer may be long gone by the time the problem comes to light. But you will be left with the consequences.
Friday, February 1, 2008
Banking Department Frequently Asked Questions
Many state banking departments include Frequently Asked Questions (FAQs) on their websites that give answers to questions you had and to some you didn’t have but should have had. It can give you insight on how to approach an issue when dealing with a state regulator or learn that you don’t need a license to make or broker that one loan (only permitted in a few states).
For example, the North Carolina Commissioner of Banks website includes Frequently Asked Questions about examinations. Although some of the information is specific to North Carolina laws and regulations, I find that the majority of information can be applied to most states. One question that I found interesting was about whether referral fees were permissible.
Although I am aware that many mortgage brokers and lenders pay “referral” fees, they should all be aware that it is a RESPA violation. In many states, it is also done to do an end-run around state licensing laws. After all, if you don’t call it a “commission” or “bonus” when the loan closes, how can anyone say you are paying an unlicensed loan officer in violation of the state’s licensing statute? Every state comes down hard on paying fees to unlicensed mortgage originators, no matter what you call the originator (e.g., a net branch) or what you call the fee. Expect to pay a heavy fine or have your company placed on probation if you are caught.
The Washington D.C. Department of Insurance, Securities and Banking’s FAQs lets you know that the exemption for making 3 or fewer loans per year is now gone. You need a license to make or broker even 1 loan. On the other hand, Massachusetts’ Division of Banks FAQs lets you know that 5 or fewer loans per every 12 consecutive months exempts you from their licensing requirements.
Most FAQs deal with licensing qualifications and are helpful to know when diciding whether you should even submit a license application (minimum net worths, minimum number of years of origination experience, etc.). I suggest you look over the FAQs on the banking department websites of every state in which you are licensed and any state in which you are interested in becoming licensed to learn as much about what you need to know as possible.
For example, the North Carolina Commissioner of Banks website includes Frequently Asked Questions about examinations. Although some of the information is specific to North Carolina laws and regulations, I find that the majority of information can be applied to most states. One question that I found interesting was about whether referral fees were permissible.
Although I am aware that many mortgage brokers and lenders pay “referral” fees, they should all be aware that it is a RESPA violation. In many states, it is also done to do an end-run around state licensing laws. After all, if you don’t call it a “commission” or “bonus” when the loan closes, how can anyone say you are paying an unlicensed loan officer in violation of the state’s licensing statute? Every state comes down hard on paying fees to unlicensed mortgage originators, no matter what you call the originator (e.g., a net branch) or what you call the fee. Expect to pay a heavy fine or have your company placed on probation if you are caught.
The Washington D.C. Department of Insurance, Securities and Banking’s FAQs lets you know that the exemption for making 3 or fewer loans per year is now gone. You need a license to make or broker even 1 loan. On the other hand, Massachusetts’ Division of Banks FAQs lets you know that 5 or fewer loans per every 12 consecutive months exempts you from their licensing requirements.
Most FAQs deal with licensing qualifications and are helpful to know when diciding whether you should even submit a license application (minimum net worths, minimum number of years of origination experience, etc.). I suggest you look over the FAQs on the banking department websites of every state in which you are licensed and any state in which you are interested in becoming licensed to learn as much about what you need to know as possible.
Thursday, January 24, 2008
Colorado clarifies who needs to be licensed as a mortgage broker
Colorado has found it necessary to clarify whom it is requiring to license as a mortgage broker. Although the definition of a mortgage broker seems clear, the Department of Real Estate just issued new regulations specifying who the licensing statute and regulation covers. And one category that does not seem to fit the definition now requires licensing.
All loan officers who “broker a mortgage, offer to broker a mortgage, act as a mortgage broker, or offer to act as a mortgage broker” must be licensed. I think most of the industry already knew that. What seems to be new and different is that supervisors who directly supervise loan officers must also be licensed. The Department of Real Estate also explained that administrative and clerical personnel do not need a mortgage broker license. If your processors only collect and distribute information about applicants, they do not require licensing. If they talk to borrowers about loan terms and rate or offer any kind of advice about loan terms and rates, then they cross the line and fall within the definition of mortgage broker.
When in doubt, either get the license for your employees or make sure their actions and speech do not extend to advice of any kind.
All loan officers who “broker a mortgage, offer to broker a mortgage, act as a mortgage broker, or offer to act as a mortgage broker” must be licensed. I think most of the industry already knew that. What seems to be new and different is that supervisors who directly supervise loan officers must also be licensed. The Department of Real Estate also explained that administrative and clerical personnel do not need a mortgage broker license. If your processors only collect and distribute information about applicants, they do not require licensing. If they talk to borrowers about loan terms and rate or offer any kind of advice about loan terms and rates, then they cross the line and fall within the definition of mortgage broker.
When in doubt, either get the license for your employees or make sure their actions and speech do not extend to advice of any kind.
Friday, January 11, 2008
New York Now Requires Mortgage Loan Originator Registration
New York now requires all loan officers, which they call mortgage loan originators (MLOs), to be registered. This state is one of the first to become part of the Nationwide Mortgage Licensing System (NMLS). In addition to the detailed online application through the NMLS, loan officers are required to submit supplementary documents directly to the New York Banking Department, including fingerprints, credit history, and documentation related to financial and criminal disclosures. Loan officers who work for banks, thrifts and credit unions do not have to register. Loan processors would need to register if they discuss loan products or terms with customers.
Sole proprietors and company officers, directors, members and shareholders who also engage in soliciting customers for New York loans must register as MLOs.
Each loan officer will need to set up his/her own account on the NMLS, creating a personal user name and password. He/she will need to complete the MU4 form and pay a registration fee.
Each loan officer will be required to get his/her fingerprints taken, getting the fingerprint cards either through the Banking Department or through the employer. Even company officers, directors, members and shareholders who were previously fingerprinted for the company license must be fingerprinted again if they are required to register as an MLO.
Additionally, a recent (within 30 days of registration on the NMLS) credit report for each registered MLO must be submitted with the fingerprint cards. If the MLO answered “yes” to any of the questions regarding criminal charges and convictions, bankruptcy filings, civil litigation, regulatory problems with any state or federal agency, and whether he/she was ever fired from a previous job, back-up documentation must be submitted along with the fingerprint cards and credit report. All MLO applications must be approved by the Banking Department or that loan officer cannot solicit any business in New York.
The registrations are good only for one calendar year and expire on December 31st. MLOs can work for only one company. If the MLO switches companies, the Banking Department must be notified of the change.
If your company was licensed in New York before January 1, 2008, your existing MLOs must submit applications through the NMLS for registration before July 1, 2008. If your company is licensed after January 1, 2008, the MLOs should immediately submit their applications as they have only until April 1, 2008 to receive notification from the Banking Department that their application has been received to be allowed to solicit New York business.
Sole proprietors and company officers, directors, members and shareholders who also engage in soliciting customers for New York loans must register as MLOs.
Each loan officer will need to set up his/her own account on the NMLS, creating a personal user name and password. He/she will need to complete the MU4 form and pay a registration fee.
Each loan officer will be required to get his/her fingerprints taken, getting the fingerprint cards either through the Banking Department or through the employer. Even company officers, directors, members and shareholders who were previously fingerprinted for the company license must be fingerprinted again if they are required to register as an MLO.
Additionally, a recent (within 30 days of registration on the NMLS) credit report for each registered MLO must be submitted with the fingerprint cards. If the MLO answered “yes” to any of the questions regarding criminal charges and convictions, bankruptcy filings, civil litigation, regulatory problems with any state or federal agency, and whether he/she was ever fired from a previous job, back-up documentation must be submitted along with the fingerprint cards and credit report. All MLO applications must be approved by the Banking Department or that loan officer cannot solicit any business in New York.
The registrations are good only for one calendar year and expire on December 31st. MLOs can work for only one company. If the MLO switches companies, the Banking Department must be notified of the change.
If your company was licensed in New York before January 1, 2008, your existing MLOs must submit applications through the NMLS for registration before July 1, 2008. If your company is licensed after January 1, 2008, the MLOs should immediately submit their applications as they have only until April 1, 2008 to receive notification from the Banking Department that their application has been received to be allowed to solicit New York business.
Friday, December 7, 2007
Colorado Requires Errors and Omissions Insurance
Colorado has adopted a rule, effective November 13,2007, to require that all mortgage brokers maintain errors and omissions insurance in an amount not less than $100,000 per licensed individual for each covered claim and an aggregate of not less than $300,000 per licensed individual. The deductible on the insurance cannot be more than $5,000.
I have stated before that each mortgage company should carry errors and omissions insurance. Even if you are the sole employee of your company, you may not even realize that the statements that you make to a customer or the actions you take might in the future lead to a lawsuit. This is true even if you have done nothing wrong. The coverage will pay for your legal costs as well as any possible settlement or judgment (if the settlement is negotiated by and agreed to by your insurance carrier).
Mistakes happen. And you can’t be everywhere, watching what your employees do and say to every customer. Errors and omissions insurance covers your mistakes and the mistakes of your employees and independent contractors.
Even if you are not licensed in Colorado, it’s a good business practice to have errors and omissions insurance in place now. Talk to your insurance broker to get this done. You can’t afford to be without it. Currently, Ameriquest is a defendant in a lawsuit that alleges that it falsified borrower documents to get approval of the loans. Various mortgage brokers are being brought in by Ameriquest as defendants, claiming that the mortgage brokers provided the falsified documents. Attorneys typically ask for a $5,000 retainer to take the case. Do you have thousands of dollars to defend yourself in a lawsuit, even if you are ultimately successful? If not, get the insurance.
I have stated before that each mortgage company should carry errors and omissions insurance. Even if you are the sole employee of your company, you may not even realize that the statements that you make to a customer or the actions you take might in the future lead to a lawsuit. This is true even if you have done nothing wrong. The coverage will pay for your legal costs as well as any possible settlement or judgment (if the settlement is negotiated by and agreed to by your insurance carrier).
Mistakes happen. And you can’t be everywhere, watching what your employees do and say to every customer. Errors and omissions insurance covers your mistakes and the mistakes of your employees and independent contractors.
Even if you are not licensed in Colorado, it’s a good business practice to have errors and omissions insurance in place now. Talk to your insurance broker to get this done. You can’t afford to be without it. Currently, Ameriquest is a defendant in a lawsuit that alleges that it falsified borrower documents to get approval of the loans. Various mortgage brokers are being brought in by Ameriquest as defendants, claiming that the mortgage brokers provided the falsified documents. Attorneys typically ask for a $5,000 retainer to take the case. Do you have thousands of dollars to defend yourself in a lawsuit, even if you are ultimately successful? If not, get the insurance.
Monday, November 26, 2007
Hiring Real Estate Agents
The refinance boom is long over. Mortgage brokers are looking for every piece of business they can find. Many are contacting customers with whom they have already done business. Others are looking at different relationships with real estate agents as a source of referrals. After all, in many purchase transactions, the buyers’ real estate agents help their clients find a mortgage by recommending a lender or a mortgage broker that they have worked successfully with. Can a mortgage broker hire a real estate agent to act as a loan officer?
It depends. In many states, this relationship is not prohibited by the banking department or the real estate commission (or whatever the agency that regulates real estate agents is called in your state). No matter what relationship you have with a real estate agent, you must make sure the arrangement is compliant with the U.S. Department of Housing and Urban Development's RESPA (Real Estate Settlement Procedures Act) in regard to fee splitting. What’s key to staying in compliance is that the real estate agents do more than just make a referral to the mortgage company. Among other things, they must be made an employee of the mortgage broker (even if only a part-time employee). Indeed, even if the real estate agent performs actual loan officer functions so that there is no question of whether all fees are properly earned, the customer must sign a disclosure statement so that your company is protected against RESPA violations and the customer understands that the real estate agent is wearing two hats. Texas even has a form on its website for mortgage brokers who are also acting as real estate agents or as an attorney in the transaction.
An important RESPA guideline is that all parties involved with the transaction must actually earn the fees that will be charged to the buyer/borrower. Many real estate agents do some of the work involved in the mortgage transaction to ensure that their transactions close, including tracking the loan. By hiring a real estate agent as a loan officer, you can offer them the loan origination commission on top of the real estate agency fee they have contracted for with their customers and clients. But you will now be assured of getting the referral that might have gone to another mortgage broker with whom they also had some sort of relationship.
In some states, you will have to license the office where the real estate agent is originating loans as a branch location of your company. Additionally, if the real estate agent is not an employee of your company, he or she must have a mortgage broker license or be exempt from the licensing requirements. Finally, because there are potential confidentiality and conflict of interest issues, it is best to address how you will handle those situations before they come up.
It depends. In many states, this relationship is not prohibited by the banking department or the real estate commission (or whatever the agency that regulates real estate agents is called in your state). No matter what relationship you have with a real estate agent, you must make sure the arrangement is compliant with the U.S. Department of Housing and Urban Development's RESPA (Real Estate Settlement Procedures Act) in regard to fee splitting. What’s key to staying in compliance is that the real estate agents do more than just make a referral to the mortgage company. Among other things, they must be made an employee of the mortgage broker (even if only a part-time employee). Indeed, even if the real estate agent performs actual loan officer functions so that there is no question of whether all fees are properly earned, the customer must sign a disclosure statement so that your company is protected against RESPA violations and the customer understands that the real estate agent is wearing two hats. Texas even has a form on its website for mortgage brokers who are also acting as real estate agents or as an attorney in the transaction.
An important RESPA guideline is that all parties involved with the transaction must actually earn the fees that will be charged to the buyer/borrower. Many real estate agents do some of the work involved in the mortgage transaction to ensure that their transactions close, including tracking the loan. By hiring a real estate agent as a loan officer, you can offer them the loan origination commission on top of the real estate agency fee they have contracted for with their customers and clients. But you will now be assured of getting the referral that might have gone to another mortgage broker with whom they also had some sort of relationship.
In some states, you will have to license the office where the real estate agent is originating loans as a branch location of your company. Additionally, if the real estate agent is not an employee of your company, he or she must have a mortgage broker license or be exempt from the licensing requirements. Finally, because there are potential confidentiality and conflict of interest issues, it is best to address how you will handle those situations before they come up.
Wednesday, November 14, 2007
Staying Alive
Much of the advice that I am seeing in the different publications for mortgage professionals pertains to marketing. After all, without clients, you have no income and will soon be contemplating your next career. But, there is probably nothing more frustrating than getting a loan application in (finally!) and not having a loan program to match it with. During these slow times, you should be doing as much marketing as you can afford but you should also be thinking about the other end of the application process. You must have relationships with lenders with different types of loan programs that you can utilize for your borrowers. Now is a good time to find those programs.
Having new products to offer borrowers means that you will rarely have to turn away business. There are a lot of adjustable mortgages out there that need refinancing. You can get that business if you have loan programs that are more stable for borrowers than the exotic mortgages that were in vogue a few years ago. Borrowers like to know what their expenses will be for the foreseeable future so if you can find a lender with a program that meets this particular need, you’ve got a valuable tool for marketing to a certain segment of the buying/refinance population. Also, if you can find lenders who have programs for borrowers with no documentation or lower FICO scores, that’s another weapon in your marketing arsenal. And make sure you let all of your existing, former and potential clients and referral sources know that you have many ways to get a loan application to closing.
If you are a wholesale lender with innovative programs, make sure you get the word out to mortgage brokers that you can help them close their loans. That is a win-win situation for the lender, the mortgage broker and the borrower.
The days of thinking that a new loan application equals income are gone. You need to use different ways of thinking and marketing to keep yourself in business.
Having new products to offer borrowers means that you will rarely have to turn away business. There are a lot of adjustable mortgages out there that need refinancing. You can get that business if you have loan programs that are more stable for borrowers than the exotic mortgages that were in vogue a few years ago. Borrowers like to know what their expenses will be for the foreseeable future so if you can find a lender with a program that meets this particular need, you’ve got a valuable tool for marketing to a certain segment of the buying/refinance population. Also, if you can find lenders who have programs for borrowers with no documentation or lower FICO scores, that’s another weapon in your marketing arsenal. And make sure you let all of your existing, former and potential clients and referral sources know that you have many ways to get a loan application to closing.
If you are a wholesale lender with innovative programs, make sure you get the word out to mortgage brokers that you can help them close their loans. That is a win-win situation for the lender, the mortgage broker and the borrower.
The days of thinking that a new loan application equals income are gone. You need to use different ways of thinking and marketing to keep yourself in business.
Thursday, October 11, 2007
Starting Your New Business (Part II)
Before you even open your doors, you must have a marketing plan in place. This requires you to sit down and assess your competition and decide how you will be different from your competitors. Are you going to specialize in one segment of the population? Are you going to specialize in only a few products? How will you find your customers? What will be the budget for your marketing and how will it be spent? The more you write down about the research you have done and the specific plans you have for the first year, first three year and first five years of operations, the more likely your chances are that you will succeed. The climate for new mortgage companies is very difficult right now. All over the country existing mortgage businesses are shutting down. You must have a strategy for getting new business.
You must also plan for how loans will be processed and closed once you or your loan officers bring the new business in the door. Will this function be done in-house or will it be outsourced? Do you have the knowledge to do everything yourself in order to keep costs down? Do you know which software to buy? Do you have a source for credit reports, appraisers, relationships with title companies, and real estate lawyers? It is imperative that you do your research before you start your business. Otherwise, you will be throwing your money away as you learn on the fly.
When you have done your research, set up your systems and your license has been approved, you are ready to open for business. Good luck and I hope you reach your goals.
You must also plan for how loans will be processed and closed once you or your loan officers bring the new business in the door. Will this function be done in-house or will it be outsourced? Do you have the knowledge to do everything yourself in order to keep costs down? Do you know which software to buy? Do you have a source for credit reports, appraisers, relationships with title companies, and real estate lawyers? It is imperative that you do your research before you start your business. Otherwise, you will be throwing your money away as you learn on the fly.
When you have done your research, set up your systems and your license has been approved, you are ready to open for business. Good luck and I hope you reach your goals.
Thursday, October 4, 2007
Starting Your New Business (Part I)
Although there are plenty of companies out there that are shutting down, I am still getting phone calls from people wanting to start their own company. What should the owner of a new company do to ensure a successful beginning?
First, create a corporation or limited liability company because of the liability protection it provides. You will run into lawsuit-happy clients or unknown amounts of fines levied by the banking department. You do not want to put your personal assets at risk. Consult a lawyer and accountant for advice on the best entity to create for your personal circumstances. After you have the entity created, you must get a federal taxpayer identification number for your company.
You must decide whether you need office space. Some states allow home-based mortgage companies. If you have no employees, this can be a great way to cut your overhead significantly. If your state requires an office, then concentrate on finding the cheapest office space that will work for your business plan. If you do not intend to have clients come to your office, you do not need to pay top dollar for rent and furnish your space expensively. Find out if your town or county require a business license or permit.
Make sure you have enough cash in the bank to run the business for several months even if you do not show a profit. Some states require a certain minimum net worth to ensure that you properly capitalize your business. Even if your state does not have a minimum, you should have a good-sized balance in your company’s checking account.
If you are a mortgage broker, find lenders to whom you will broker your loans. If you are a mortgage banker, know to whom you will sell your closed loans. Get your broker or banker license from your home state and any other states where you think you can find borrowers. Create a marketing plan.
Buy insurance. Every business needs several types of insurance. Even if you are a home-based business, you will need separate insurance from your homeowners’ insurance (which will typically exclude coverage for business activities in the home). You will need property and casualty insurance, business interruption insurance, workers’ compensation, if you have employees, and errors and omissions insurance. Error and omissions insurance covers your company in the event a client holds your company liable for something you did or did not do that you were supposed to do. It will cover you when you get sued for something a loan officer said or did that he wasn’t supposed to say or do, or when the outcome of a loan application displeased the borrower and he holds your company responsible for the bad outcome. Even if you win the lawsuit, the costs of defending your company will cost thousands of dollars. Errors and omissions insurance will pay for your defense and any judgment that your company is found liable for.
This is just the very start of what you should do before you open the doors to your new mortgae company. I will use my next few blog entries to outline the rest of the steps that need to be taken.
First, create a corporation or limited liability company because of the liability protection it provides. You will run into lawsuit-happy clients or unknown amounts of fines levied by the banking department. You do not want to put your personal assets at risk. Consult a lawyer and accountant for advice on the best entity to create for your personal circumstances. After you have the entity created, you must get a federal taxpayer identification number for your company.
You must decide whether you need office space. Some states allow home-based mortgage companies. If you have no employees, this can be a great way to cut your overhead significantly. If your state requires an office, then concentrate on finding the cheapest office space that will work for your business plan. If you do not intend to have clients come to your office, you do not need to pay top dollar for rent and furnish your space expensively. Find out if your town or county require a business license or permit.
Make sure you have enough cash in the bank to run the business for several months even if you do not show a profit. Some states require a certain minimum net worth to ensure that you properly capitalize your business. Even if your state does not have a minimum, you should have a good-sized balance in your company’s checking account.
If you are a mortgage broker, find lenders to whom you will broker your loans. If you are a mortgage banker, know to whom you will sell your closed loans. Get your broker or banker license from your home state and any other states where you think you can find borrowers. Create a marketing plan.
Buy insurance. Every business needs several types of insurance. Even if you are a home-based business, you will need separate insurance from your homeowners’ insurance (which will typically exclude coverage for business activities in the home). You will need property and casualty insurance, business interruption insurance, workers’ compensation, if you have employees, and errors and omissions insurance. Error and omissions insurance covers your company in the event a client holds your company liable for something you did or did not do that you were supposed to do. It will cover you when you get sued for something a loan officer said or did that he wasn’t supposed to say or do, or when the outcome of a loan application displeased the borrower and he holds your company responsible for the bad outcome. Even if you win the lawsuit, the costs of defending your company will cost thousands of dollars. Errors and omissions insurance will pay for your defense and any judgment that your company is found liable for.
This is just the very start of what you should do before you open the doors to your new mortgae company. I will use my next few blog entries to outline the rest of the steps that need to be taken.
Wednesday, September 12, 2007
Rogue loan officers
"Rogue" loan officer is the term for a loan originator who does not behave ethically. The rogue behavior can include copying customer lists and customer information just before leaving to move on to another company. It can include putting customers in loan programs that are not suitable for them. Or they do not follow your company's rules and procedures.
Rogue loan officers are very costly to your company and to the business of mortgage origination in general. Every time a rogue loan officer acts in a way that is detrimental to your company, it may cost you money. You may be sued by an unhappy customer, investigated by your state banking department or "requested" by an investor to buy back a loan. Even if you can placate the banking department or settle the lawsuit, it costs you money and puts your insurance company on notice (you do have errors and omissions insurance, don't you?). The larger the number of complaints about rogue loan officers, the more likely there will be further regulation of loan officers. And regulation always costs money, either licensing the loan officer or paying for continuing education or paying for an increased number of banking department examinations because your company is on their watch list. Moreover, regulation doesn't seem to stem the tide of rogue loan officers.
The only way to ensure that rogue loan officers don't hurt you is to supervise all of your loan officers very closely. Check loan files, watch what your loan officers are doing, especially after normal business hours, make sure your branch managers are supervising closely as well. Most rogue loan officers do not have a criminal background or even a regulatory problem with any state banking department. They skip out before they are found out. The last thing you need in these difficult times is one or two rogue loan officers putting you out of business.
Rogue loan officers are very costly to your company and to the business of mortgage origination in general. Every time a rogue loan officer acts in a way that is detrimental to your company, it may cost you money. You may be sued by an unhappy customer, investigated by your state banking department or "requested" by an investor to buy back a loan. Even if you can placate the banking department or settle the lawsuit, it costs you money and puts your insurance company on notice (you do have errors and omissions insurance, don't you?). The larger the number of complaints about rogue loan officers, the more likely there will be further regulation of loan officers. And regulation always costs money, either licensing the loan officer or paying for continuing education or paying for an increased number of banking department examinations because your company is on their watch list. Moreover, regulation doesn't seem to stem the tide of rogue loan officers.
The only way to ensure that rogue loan officers don't hurt you is to supervise all of your loan officers very closely. Check loan files, watch what your loan officers are doing, especially after normal business hours, make sure your branch managers are supervising closely as well. Most rogue loan officers do not have a criminal background or even a regulatory problem with any state banking department. They skip out before they are found out. The last thing you need in these difficult times is one or two rogue loan officers putting you out of business.
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