Why Don't You Have a Lawyer on Retainer

This is just a quick post directed to mortgage broker/lender company owners. Do you have a lawyer on retainer for your company so that you can shoot questions about licensing, compliance, or general corporate/LLC issues as you think of them? If you do, how often do you call or email your lawyer? If you do not, why not? Please send me your responses or comments at Robin@mortgagelicensesolutions.com. Thank you.

Vermont Sole Proprietor License

Vermont has created a separate broker license for sole proprietors. This means that you don’t have any employees working for you. If you do have employees, then you must obtain a Mortgage Broker Company License. The requirements are that you must be licensed in your home state, you must be in good standing with your home state regulators, you must register a resident agent with the Vermont Secretary of State, and you must purchase a $25,000 surety bond.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!

It's Annual Reports Season Again

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.

New HUD-1 and GFE forms

This is not a licensing issue but I thought I’d give out some information on the compliance front. HUD has announced that it is requiring new Good Faith Estimate (GFE) and HUD-1 and HUD-1A forms. The new HUD-1 forms have references back to the GFE so savvy consumers can compare the two documents. Although the new forms won’t be required until January, 2010, you should take a look at them:

http://www.hud.gov/content/releases/goodfaithestimate.pdf
http://www.hud.gov/content/releases/hud-1.pdf

Examinations – the Most Common Issues Leading to Enforcement

The vast majority of mortgage brokers and lenders come through their banking department examination with a few problems to resolve. However, there are always some companies that have a major issue that is brought to light during the examination and leads to an enforcement action. You don't want to be one of them.

Which are the most common issues that lead to an enforcement action?

1. Unlicensed activity;
2. Material misstatements in loan documents;
3. Failure to produce documents;
4. GFEs that do not disclose all of the fees;
5. GFEs that are not consistent with HUD-1s;
6. APRs not attempted or seriously different from the required calculation.

Make a New Year’s resolution to look through your files to make sure you don’t find these errors. It could cost you plenty.

License Expiration Dates

If your company has more than one license, someone needs to keep track of your license expiration dates so that you do not let any license lapse. A very few states have licenses that never expire so you only have to keep track of other compliance issues such as annual reports.
If you are in a large mortgage company, you probably have a compliance department and it is their job to keep track of all expiration dates. But if you don't have a compliance department, you need a compliance person. In a very small company, that person might be the owner. Or it might be an administrative assistant. You might even outsource the function to a law firm or company that provides compliance services. I have several clients that just send me all of the compliance paperwork that they receive from the various banking departments and secretaries of state.

I have a calendar marked with all my clients' license expiration dates and also marked about 2-1/2 months before each license expiration date. At 2-1/2 months before each expiration date, I send emails to my clients reminding them that they should be receiving renewal materials from the banking department and that they should forward them to me as soon as they receive them. I start the renewal process as soon as the state permits so that I can get any additional information that is required from the client. For example, in states that require continuing education, the license renewal application asks for details about what courses were taken and who the education provider was.

If you are keeping track of your own license expiration dates, you need to set up your own system so that you get the renewal process completed before the expiration date. In some states, going past the deadline means you pay a late fee. In other states, you might need to start all over with the application process and that can take several weeks, time that you cannot take in any new applications in that state.And who can afford that?