Do you remember when you incorporated or created your limited liability company (LLC)? You did a filing with your state’s Secretary of State (some states use other agencies for this filing). If you expanded your territory to include other states, you needed to file for a Certificate of Authority to Transact Business as a foreign corporation or LLC (or a similar name for this document).
Most states have a requirement that you file an annual report with the Secretary of State’s Office or maybe the Franchise Tax Board. The filing times vary by state. The annual reports are designed to let the state know that you are still in existence, that you haven’t changed your registered agent, that you haven’t moved your offices, and that your officers, directors and/or members are still the same. Usually, there is a small fee to be paid. If there are changes, you are supposed to notify the state of those changes. Franchise board filings tend to be just a requirement to send a franchise fee to that state.
The consequences of not filing the annual report can be that you may eventually lose the right to legally transact business in that state and that the fees that are owed will continue to be owed and may incur interest and penalties. This is true even if you have stopped transacting business. it can also jeopardize your ability to renew your licenses.
You must file your annual reports on a timely basis. If you are not sure when you need to file, contact the Secretary of State (or whichever agency is in charge of corporate and LLC filings) or hire an outside company to do the filings for you (either a law firm or company that provides this service). If you have stopped doing business in that state, make sure the proper withdrawal documents are filed with that agency and pay the required fee. If you fail to do this, it could get quite expensive for your company.
Showing posts with label correspondent mortgage lender. Show all posts
Showing posts with label correspondent mortgage lender. Show all posts
Monday, March 28, 2011
Friday, January 7, 2011
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.
Monday, October 11, 2010
Do You Publicize Why Mortgage Brokers are Better Than Banks?
Mortgage brokers took the brunt of the criticism for the subprime mess and the collapse of the housing market that followed. In the eyes of the average consumer, mortgage brokers seemed to be the ones pushing homebuyers into products that were unsuitable for them. Because the housing market collapsed, many mortgage brokers could no longer make a living and thousands left the industry. As one of the survivors, you need to educate the public on how you can better help them with their mortgage needs and how you can get them a better deal than they would get by going to a bank.
Although mortgage brokers held about 70% of the mortgage origination business at one time, that percentage has dropped significantly. Your customer base has shrunk for a variety of reasons. Fewer people are buying homes. Even when buyers fill out a 1003, it may be questionable whether they qualify for a loan. Or the property may not appraise high enough to get a loan commitment. With the lowest interest rates in years, refinancing is not as big a part of your business as it should be because so many homeowners are underwater or there is not enough equity in the property or their credit history is not clean enough. So you have to fight for every customer you can find. You need to give them a reason to come to you rather than the big banks that everyone has heard of. Can you make a list of those reasons that a customer should come to you rather than where they keep their checking account?
It is a smart exercise to make that list even if you never give out that list to your customers. It helps you focus on why your business is better than your competitors. Thinking through your competitive advantages will help you get new customers. Can you help borrowers with less than clean credit history? Do you have investors for borrowers who are self-employed? Are your fees better than a bank’s? Can you offer a better rate than the banks? Did you spend time answering their questions when a bank loan originator didn’t have the time or inclination? Did the bank loan officer know about different types of loan products? If a customer is shopping for a new loan, why specifically should they choose you? If you are stuck on the answers, survey your current customers and your past customers. Find out what they liked about working with you.
Once you have figured out why you are the better choice for a consumer, you need to educate the public. Most consumers don’t know enough about your world to even ask the right questions. You need to ask the questions that they should be asking and then answer them in a way that shows your advantages over the banks (and your mortgage broker competitors).
Whenever you are creating materials that may be categorized as advertising, don’t forget to include all required disclosures that your state law requires for advertising materials (and that kind of disclosure may be a competitive advantage itself).
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you need help with licensing (company or MLO) or compliance issues. 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.
Although mortgage brokers held about 70% of the mortgage origination business at one time, that percentage has dropped significantly. Your customer base has shrunk for a variety of reasons. Fewer people are buying homes. Even when buyers fill out a 1003, it may be questionable whether they qualify for a loan. Or the property may not appraise high enough to get a loan commitment. With the lowest interest rates in years, refinancing is not as big a part of your business as it should be because so many homeowners are underwater or there is not enough equity in the property or their credit history is not clean enough. So you have to fight for every customer you can find. You need to give them a reason to come to you rather than the big banks that everyone has heard of. Can you make a list of those reasons that a customer should come to you rather than where they keep their checking account?
It is a smart exercise to make that list even if you never give out that list to your customers. It helps you focus on why your business is better than your competitors. Thinking through your competitive advantages will help you get new customers. Can you help borrowers with less than clean credit history? Do you have investors for borrowers who are self-employed? Are your fees better than a bank’s? Can you offer a better rate than the banks? Did you spend time answering their questions when a bank loan originator didn’t have the time or inclination? Did the bank loan officer know about different types of loan products? If a customer is shopping for a new loan, why specifically should they choose you? If you are stuck on the answers, survey your current customers and your past customers. Find out what they liked about working with you.
Once you have figured out why you are the better choice for a consumer, you need to educate the public. Most consumers don’t know enough about your world to even ask the right questions. You need to ask the questions that they should be asking and then answer them in a way that shows your advantages over the banks (and your mortgage broker competitors).
Whenever you are creating materials that may be categorized as advertising, don’t forget to include all required disclosures that your state law requires for advertising materials (and that kind of disclosure may be a competitive advantage itself).
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you need help with licensing (company or MLO) or compliance issues. 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, April 5, 2010
Why You Need a Team of Trusted Advisors to Grow Your Business
Most entrepreneurs start their new businesses with the dream of building a successful business. Many of you who started your new business opened up your business when times were good and mortgage applications were rolling in the door. You weren’t prepared with a business plan, or market research, or entrepreneurial skills. Yet, because there was so much real estate activity going on, your business was thriving. Then everything changed and the phones got very quiet. Most of the mortgage bankers and brokers who couldn’t survive closed their doors. Loan officers left in droves. If you are one of the companies still left standing, you have much less competition than you did five years ago. But, the phones are still not ringing off the hook and you need to be smart to stay alive. If you create a team of advisors, you should be able to find professionals and businesspeople who can help you build a prosperous business.
Who should be on your team? You should have a business lawyer, an accountant who can advise you on taxes and on how to grow your profits, an insurance broker, and a person who has already created a successful business.
Why do you need these advisors and how do you find them? A business lawyer has the knowledge to advise you about how to avoid lawsuits (which are always more expensive than the costs of acting proactively). You want to consult with a business lawyer to help you negotiate with the landlord to get you the best lease terms. A business lawyer will draft your contracts for you to work with vendors, and with independent contractors (so you don’t get into trouble with the IRS or the labor department). You may have a logo to trademark. You may want a non-disclosure agreement so that your loan officers do not take your client lists or creative marketing ideas when they jump ship or you terminate their employment. Your business lawyer will help you with all of these problems or can refer you to another lawyer who has more expertise with these types of law.
Your accountant will help you set up a chart of accounts, prepare your business tax returns and advise you (together with your lawyer) on issues where taxes are involved. Your accountant should also be able to advise you on how to maximize business deductions so that you pay the least amount of taxes that are required.
An accountant or profitability consultant will advise you on how to grow your revenues, help you to focus on your core business and then add new products or services, advise you on setting your pricing strategy, and help you with cash flow problems.
Many businesses carry a wide variety of insurance – or should. These range from liability insurance to business interruption insurance to errors and omissions insurance to surety bonds to auto insurance to commercial property insurance. Do you have an independent insurance broker who will shop your business to several insurance companies? Who will find you the best coverages for the right prices? Who will advise you about risk management so you can keep your premiums as low as possible? That’s why you need an insurance broker on your trusted advisor team.
You should also try to find a business mentor, someone who has created a business that is successful. This person should be available, who will listen to you, who has the knowledge and skills that you want to acquire, and should be willing to give you constructive criticism and feedback. If you can find a mentor who has a successful mortgage company, that’s even better. But all businesses can borrow ideas from each other because certain issues exist in all types of businesses.
Your team of trusted advisors lets you look at your business through fresh eyes. It gives you a group of professionals who have been what you’re going through and have shepherded clients through your challenges. They have expertise that you do not have and should have contacts in other businesses that will help your business (such as technology, marketing, or pricing strategies). They will ask you questions that you haven’t even thought of yet. But, you must be willing to take the advice of your trusted advisors because they will help you build the business of your dreams.
How do you find these trusted advisors? Start with one advisor who you trust and ask them for referrals to the other types of advisors that you want to have. Interview them about their experience and ask yourself whether you would be willing to work with these individuals over an extended period of time. You must be comfortable with your team because they will know you and your business intimately. Only by being open and honest with your advisors can they really help you.
A good team will get you to your goals faster than if you do it on your own. Go find the help and support to get to your business goals faster.
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!
Who should be on your team? You should have a business lawyer, an accountant who can advise you on taxes and on how to grow your profits, an insurance broker, and a person who has already created a successful business.
Why do you need these advisors and how do you find them? A business lawyer has the knowledge to advise you about how to avoid lawsuits (which are always more expensive than the costs of acting proactively). You want to consult with a business lawyer to help you negotiate with the landlord to get you the best lease terms. A business lawyer will draft your contracts for you to work with vendors, and with independent contractors (so you don’t get into trouble with the IRS or the labor department). You may have a logo to trademark. You may want a non-disclosure agreement so that your loan officers do not take your client lists or creative marketing ideas when they jump ship or you terminate their employment. Your business lawyer will help you with all of these problems or can refer you to another lawyer who has more expertise with these types of law.
Your accountant will help you set up a chart of accounts, prepare your business tax returns and advise you (together with your lawyer) on issues where taxes are involved. Your accountant should also be able to advise you on how to maximize business deductions so that you pay the least amount of taxes that are required.
An accountant or profitability consultant will advise you on how to grow your revenues, help you to focus on your core business and then add new products or services, advise you on setting your pricing strategy, and help you with cash flow problems.
Many businesses carry a wide variety of insurance – or should. These range from liability insurance to business interruption insurance to errors and omissions insurance to surety bonds to auto insurance to commercial property insurance. Do you have an independent insurance broker who will shop your business to several insurance companies? Who will find you the best coverages for the right prices? Who will advise you about risk management so you can keep your premiums as low as possible? That’s why you need an insurance broker on your trusted advisor team.
You should also try to find a business mentor, someone who has created a business that is successful. This person should be available, who will listen to you, who has the knowledge and skills that you want to acquire, and should be willing to give you constructive criticism and feedback. If you can find a mentor who has a successful mortgage company, that’s even better. But all businesses can borrow ideas from each other because certain issues exist in all types of businesses.
Your team of trusted advisors lets you look at your business through fresh eyes. It gives you a group of professionals who have been what you’re going through and have shepherded clients through your challenges. They have expertise that you do not have and should have contacts in other businesses that will help your business (such as technology, marketing, or pricing strategies). They will ask you questions that you haven’t even thought of yet. But, you must be willing to take the advice of your trusted advisors because they will help you build the business of your dreams.
How do you find these trusted advisors? Start with one advisor who you trust and ask them for referrals to the other types of advisors that you want to have. Interview them about their experience and ask yourself whether you would be willing to work with these individuals over an extended period of time. You must be comfortable with your team because they will know you and your business intimately. Only by being open and honest with your advisors can they really help you.
A good team will get you to your goals faster than if you do it on your own. Go find the help and support to get to your business goals faster.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Tuesday, March 9, 2010
Should You Attend a Mortgage Banker or Mortgage Broker Trade Show?
A mortgage banker or broker trade show is usually held over 3-4 days. That’s a lot of time to be away from your business. You may want to attend a show if you thought you could get something valuable for your business. What can you get from a trade show?
My office is located in New Jersey and next week is the 2010 Regional Conference of MBAs (I believe it’s sponsored by the mortgage bankers associations of New Jersey, New York, Pennsylvania, Connecticut, Washington D.C., Maryland, New Hampshire, Massachusetts, and Rhode Island). I’m debating whether to attend this show. Will it provide me with any benefits that I can translate into new business? What would I like to see at a trade show for mortgage bankers or brokers? Obviously, what I would like to get out of a trade show, as a lawyer who works a great deal with the mortgage industry, is different from what you, a mortgage banker or mortgage broker, would want to get out of such a conference.
I’d look at the programming details first to see if there were any sessions that I would want to attend. Lately, there are a lot of regulatory changes that are raising many questions for mortgage brokers and bankers and there should be sessions addressing these questions. Many of you want to know how to survive in this new business climate and there are hopefully sessions that will speak about these issues. If the speakers are listed, are they regulators that you would like to meet or other successful business owners that you’d like to network with? That would be a good reason to attend.
Check the list of exhibitors. Can you find new vendors for your business? Can you find out if they have a solution for your problem or can they save you money over your existing vendors? Can you form a strategic alliance with any of the exhibitors?
Lastly, a trade show can be a great opportunity to meet other mortgage bankers and mortgage brokers. Meeting and talking to some of these people can help you find out what your competition is doing, how they are dealing with the problems that you are facing, and how you can be better than they are. If you are not in competition with them, you can find mortgage bankers and brokers who are licensed in states that you are not, so you can take advantage of leads that you cannot use and vice versa. When you talk with mortgage bankers and brokers who are not in competition with you, they are more likely to open up with their strategies for solving the same problems you are having.
It may be useful to attend a local trade show or conference so that you can limit your costs, both in travel and hotel expenses and the number of days you are away from your business.
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!
My office is located in New Jersey and next week is the 2010 Regional Conference of MBAs (I believe it’s sponsored by the mortgage bankers associations of New Jersey, New York, Pennsylvania, Connecticut, Washington D.C., Maryland, New Hampshire, Massachusetts, and Rhode Island). I’m debating whether to attend this show. Will it provide me with any benefits that I can translate into new business? What would I like to see at a trade show for mortgage bankers or brokers? Obviously, what I would like to get out of a trade show, as a lawyer who works a great deal with the mortgage industry, is different from what you, a mortgage banker or mortgage broker, would want to get out of such a conference.
I’d look at the programming details first to see if there were any sessions that I would want to attend. Lately, there are a lot of regulatory changes that are raising many questions for mortgage brokers and bankers and there should be sessions addressing these questions. Many of you want to know how to survive in this new business climate and there are hopefully sessions that will speak about these issues. If the speakers are listed, are they regulators that you would like to meet or other successful business owners that you’d like to network with? That would be a good reason to attend.
Check the list of exhibitors. Can you find new vendors for your business? Can you find out if they have a solution for your problem or can they save you money over your existing vendors? Can you form a strategic alliance with any of the exhibitors?
Lastly, a trade show can be a great opportunity to meet other mortgage bankers and mortgage brokers. Meeting and talking to some of these people can help you find out what your competition is doing, how they are dealing with the problems that you are facing, and how you can be better than they are. If you are not in competition with them, you can find mortgage bankers and brokers who are licensed in states that you are not, so you can take advantage of leads that you cannot use and vice versa. When you talk with mortgage bankers and brokers who are not in competition with you, they are more likely to open up with their strategies for solving the same problems you are having.
It may be useful to attend a local trade show or conference so that you can limit your costs, both in travel and hotel expenses and the number of days you are away from your business.
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!
Wednesday, December 2, 2009
New Jersey Transitioning to NMLS Starting January 4, 2010
New Jersey will start its transition to the Nationwide Mortgage Licensing System (NMLS) on January 4, 2010. In the meantime, while they are preparing the transition, the Department of Banking and Insurance (DOBI) is not accepting any new license applications or changes to an existing license.
All current licensees must complete the transition process by April 30, 2010. If you hold an inactive license, you also must transition your license to the NMLS and fulfill all of the requirements under the new law to maintain your license. Mortgage solicitors who are currently registered with DOBI have until May 15, 2010 to transition their registration onto the NMLS and fulfill the new licensing requirements. All existing licenses and registrations expire on July 31, 2010. New Jersey will still require an officer, member, director, partner or owner to maintain an Individual License for each company under the new law.
Companies and mortgage solicitors who have not yet been licensed will start the application process on the NMLS starting January 4, 2010. All licenses that are issued in 2010 will expire on December 31, 2010.
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!
All current licensees must complete the transition process by April 30, 2010. If you hold an inactive license, you also must transition your license to the NMLS and fulfill all of the requirements under the new law to maintain your license. Mortgage solicitors who are currently registered with DOBI have until May 15, 2010 to transition their registration onto the NMLS and fulfill the new licensing requirements. All existing licenses and registrations expire on July 31, 2010. New Jersey will still require an officer, member, director, partner or owner to maintain an Individual License for each company under the new law.
Companies and mortgage solicitors who have not yet been licensed will start the application process on the NMLS starting January 4, 2010. All licenses that are issued in 2010 will expire on December 31, 2010.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Monday, August 11, 2008
Surety bonds
Mortgage brokers and mortgage lenders are frequently required to submit a surety bond as part of the licensing process. The bond guarantees that the mortgage broker/lender will obey the laws and regulations of the state in which it is licensed. In the event that the state banking department finds a violation of its laws or regulations, it can impose a fine or require the company to issue refunds to its customers. If the company does not make the required payments, the surety bond will be used to make the payments. When the bonding company makes the payment to the banking department, it then requires the mortgage company to reimburse the bonding company for all amounts it paid out under the bond.
Each state has its own language and required amount for its surety bond. Based on the language and amount of the bond, certain bond companies will not write surety bonds in certain states or will make the premiums to buy the bond very high. In the boom years that ended in 2006, it was very easy to get a surety bond. Underwriting was simple and premiums were low. But in the last two years, mortgage companies have gone out of business or filed for bankruptcy, leaving the bond companies to pay the claims that the mortgage companies should have. Since the risk has gone up to the bond underwriters, the costs of getting a surety bond have gone up for mortgage companies. Additionally, as the net worths of mortgage companies have gone down, it becomes harder for them to qualify to obtain or renew their surety bonds. Moreover a surge in litigation against mortgage brokers and lenders has made it more difficult to get approval for a surety bond. Start-up companies are being especially hard-hit by the new underwriting climate. Many of the surety bond companies refuse to underwrite surety bonds to new companies.
If you need a surety bond, you will have to expect to pay more than you have in the past. You can also anticipate that you may not qualify for as many bonds as you did in the past. This is the time to do your cost benefit analysis of each state in which you are licensed. Are the costs of maintaining your license in each state less than the fees you are making in each state? If not, get out of that state (follow each state’s rules for inactivating or surrendering a license) and cancel your registered agent and surety bond. If you intend to stay in the business, keep your financials looking healthy by putting earnings back into the business. Individual loan officers should be cognizant that in some states, their credit report must be submitted. You should also be aware that part of the underwriting process requires personal guarantees from the owners of the mortgage broker and lender companies. Even if the company goes out of business, the surety bond companies reserve the right to go after the owners to pay the claims from the banking departments.
It’s a difficult climate to be in the mortgage business and the state regulation will get tighter. Stay on top of the licensing requirements to ensure that your business stays in business.
Each state has its own language and required amount for its surety bond. Based on the language and amount of the bond, certain bond companies will not write surety bonds in certain states or will make the premiums to buy the bond very high. In the boom years that ended in 2006, it was very easy to get a surety bond. Underwriting was simple and premiums were low. But in the last two years, mortgage companies have gone out of business or filed for bankruptcy, leaving the bond companies to pay the claims that the mortgage companies should have. Since the risk has gone up to the bond underwriters, the costs of getting a surety bond have gone up for mortgage companies. Additionally, as the net worths of mortgage companies have gone down, it becomes harder for them to qualify to obtain or renew their surety bonds. Moreover a surge in litigation against mortgage brokers and lenders has made it more difficult to get approval for a surety bond. Start-up companies are being especially hard-hit by the new underwriting climate. Many of the surety bond companies refuse to underwrite surety bonds to new companies.
If you need a surety bond, you will have to expect to pay more than you have in the past. You can also anticipate that you may not qualify for as many bonds as you did in the past. This is the time to do your cost benefit analysis of each state in which you are licensed. Are the costs of maintaining your license in each state less than the fees you are making in each state? If not, get out of that state (follow each state’s rules for inactivating or surrendering a license) and cancel your registered agent and surety bond. If you intend to stay in the business, keep your financials looking healthy by putting earnings back into the business. Individual loan officers should be cognizant that in some states, their credit report must be submitted. You should also be aware that part of the underwriting process requires personal guarantees from the owners of the mortgage broker and lender companies. Even if the company goes out of business, the surety bond companies reserve the right to go after the owners to pay the claims from the banking departments.
It’s a difficult climate to be in the mortgage business and the state regulation will get tighter. Stay on top of the licensing requirements to ensure that your business stays in business.
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.
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, June 3, 2008
NMLS Participating States
This is just an update of which states are now using the Nationwide Mortgage Licensing System (NMLS), the national database of mortgage lenders, brokers and loan originators.
Currently using the system are Idaho, Iowa, Kentucky, Massachusetts, Mississippi, Nebraska, New Hampshire, New York, North Carolina, Rhode Island, Vermont, and Washington. Some of these states are fully using the NMLS for all licensee information and others are just transitioning to the NMLS, with a date in the future, up to September 1, 2008, to be fully transitioned. If you are licensed in one of the states listed here, you should have been notified by your regulatory agency that you need to input all company and loan originator information into the NMLS database during the transition period. If you have not received such a notice, I suggest that you check with your banking department to get the latest information to keep you in compliance.
Forty-two states have signed up for the NMLS so expect that you will be on the system within the next couple of years.
Currently using the system are Idaho, Iowa, Kentucky, Massachusetts, Mississippi, Nebraska, New Hampshire, New York, North Carolina, Rhode Island, Vermont, and Washington. Some of these states are fully using the NMLS for all licensee information and others are just transitioning to the NMLS, with a date in the future, up to September 1, 2008, to be fully transitioned. If you are licensed in one of the states listed here, you should have been notified by your regulatory agency that you need to input all company and loan originator information into the NMLS database during the transition period. If you have not received such a notice, I suggest that you check with your banking department to get the latest information to keep you in compliance.
Forty-two states have signed up for the NMLS so expect that you will be on the system within the next couple of years.
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.
Monday, May 19, 2008
Lowering Your Chances of Getting Sued
From time to time, clients ask me if they can get sued for this or that. My response is always “yes.” In America, we have a very open system that allows anyone to start a lawsuit. The lawsuit may have no merit and may be quickly dismissed, but in the meantime, you will be spending time and money to get the dismissal.
Are there ways to minimize the likelihood that you will be sued? Yes, there are.
You can be sued by your employees, you can be sued by your customers, and you can be sued by your investors who purchased the loans you underwrote that are now in foreclosure.
You should start by getting all agreements in writing. Nothing will protect you if the arrangement is verbal. Your word against someone else’s word means the lawsuit will be drawn out and expensive. Have your lawyer review the proposed contract before it is signed. The money you spend now to have that review will seem cheap if you are sued and have to pay litigation costs. But also recognize that even having an agreement in writing cannot stop a lawsuit from being started.
Supervise your managers closely. You should have a good idea of what is happening to your employees in terms of how they treat other employees (sexual harassment or discrimination suits) and how they treat your customers. Make sure that employees that are not following your company’s procedures are made aware that they are not following your company’s procedures. Document in writing all employee issues and how you resolve those issues. Consult with an employment law attorney so that you know how to handle these problems in accordance with all relevant laws.
Do not ignore customer complaints or let your managers do so. Customer complaints will result in lawsuits and complaints with the banking department. It may be cheaper to settle a complaint monetarily than to ignore the complaint. Customers hate being ignored or having their concerns ridiculed. If they feel as if they were not heard or were disrespected, then they get angry, and it starts a cycle of animosity that results in the lawsuit (and a difficult case to settle since they want "justice"). And the breakdown in communication may not even be intentional. It can as simple as one side being out of town (unbeknownst to the other side) and not returning a phone call. If you express your willingness to satisfy your customer, this may prevent a costly lawsuit or complaint. If you solve the problem even better than the customer expected, you can turn that angry customer into one who will rave about your customer service and send all of her family and friends to you with their business. Sometimes (actually, many times), it’s not the principle that counts. Many times, you will spend so much time and money on defending the principle that you will damage your company so severely that it may never recover.
Talk to your insurance company about managing risk before you have an inkling about a lawsuit (and you should have liability, professional practices, and errors and omissions insurance). They may suggest various procedures to put in place and strategies to use that help you lower your risk of being sued. Having those procedures in place may also lower your insurance premiums.
The subprime mess and current wave of foreclosures is also leading to lawsuits by borrowers claiming that they were misled about mortgage terms. Cities are suing lenders claiming that their lending policies have led to the cities’ losing tax revenue due to homeowners in foreclosed houses not paying their real estate taxes and trying to recoup their costs of maintaining vacant houses. In turn, the lenders are suing the mortgage brokers alleging that the mortgage brokers supplied fraudulent asset and income information about their borrowers. Homeowners are suing lenders, mortgage brokers, real estate agents, appraisers, and everyone else involved in a mortgage transaction. Some of these lawsuits are the typical “sue everyone in sight” nature of our current litigation practice and difficult to prevent. However, you must know that your loan officers are not engaging in any actions that leave you vulnerable to losing such a lawsuit. Although the focus of a loan officer may be his commission, you must ensure that you have procedures in place to ensure that neither your customers nor your loan officers are engaging in mortgage fraud.
We live in a litigious society and lawsuits are part of the cost of doing business. But there are many steps you can take to make lawsuits a smaller cost than it is now.
Are there ways to minimize the likelihood that you will be sued? Yes, there are.
You can be sued by your employees, you can be sued by your customers, and you can be sued by your investors who purchased the loans you underwrote that are now in foreclosure.
You should start by getting all agreements in writing. Nothing will protect you if the arrangement is verbal. Your word against someone else’s word means the lawsuit will be drawn out and expensive. Have your lawyer review the proposed contract before it is signed. The money you spend now to have that review will seem cheap if you are sued and have to pay litigation costs. But also recognize that even having an agreement in writing cannot stop a lawsuit from being started.
Supervise your managers closely. You should have a good idea of what is happening to your employees in terms of how they treat other employees (sexual harassment or discrimination suits) and how they treat your customers. Make sure that employees that are not following your company’s procedures are made aware that they are not following your company’s procedures. Document in writing all employee issues and how you resolve those issues. Consult with an employment law attorney so that you know how to handle these problems in accordance with all relevant laws.
Do not ignore customer complaints or let your managers do so. Customer complaints will result in lawsuits and complaints with the banking department. It may be cheaper to settle a complaint monetarily than to ignore the complaint. Customers hate being ignored or having their concerns ridiculed. If they feel as if they were not heard or were disrespected, then they get angry, and it starts a cycle of animosity that results in the lawsuit (and a difficult case to settle since they want "justice"). And the breakdown in communication may not even be intentional. It can as simple as one side being out of town (unbeknownst to the other side) and not returning a phone call. If you express your willingness to satisfy your customer, this may prevent a costly lawsuit or complaint. If you solve the problem even better than the customer expected, you can turn that angry customer into one who will rave about your customer service and send all of her family and friends to you with their business. Sometimes (actually, many times), it’s not the principle that counts. Many times, you will spend so much time and money on defending the principle that you will damage your company so severely that it may never recover.
Talk to your insurance company about managing risk before you have an inkling about a lawsuit (and you should have liability, professional practices, and errors and omissions insurance). They may suggest various procedures to put in place and strategies to use that help you lower your risk of being sued. Having those procedures in place may also lower your insurance premiums.
The subprime mess and current wave of foreclosures is also leading to lawsuits by borrowers claiming that they were misled about mortgage terms. Cities are suing lenders claiming that their lending policies have led to the cities’ losing tax revenue due to homeowners in foreclosed houses not paying their real estate taxes and trying to recoup their costs of maintaining vacant houses. In turn, the lenders are suing the mortgage brokers alleging that the mortgage brokers supplied fraudulent asset and income information about their borrowers. Homeowners are suing lenders, mortgage brokers, real estate agents, appraisers, and everyone else involved in a mortgage transaction. Some of these lawsuits are the typical “sue everyone in sight” nature of our current litigation practice and difficult to prevent. However, you must know that your loan officers are not engaging in any actions that leave you vulnerable to losing such a lawsuit. Although the focus of a loan officer may be his commission, you must ensure that you have procedures in place to ensure that neither your customers nor your loan officers are engaging in mortgage fraud.
We live in a litigious society and lawsuits are part of the cost of doing business. But there are many steps you can take to make lawsuits a smaller cost than it is 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.
Monday, March 17, 2008
Mortgage lender, correspondent lender, or broker
Some states have different licenses for mortgage lender (or banker), correspondent mortgage lender and mortgage broker. Other states simply require you to check off the appropriate box on their application, although the Uniform Mortgage Lender/Mortgage Broker Form (MU1) does not have a check-off box for correspondent lender.
How do you decide which kind of license you want? In many cases, mortgage brokers have no intention of being lenders. This may be because they cannot qualify or it may be because they do not want the problems that being a lender can create. This makes the decision quite easy.
On the other hand, mortgage lenders will usually apply for a new lender license if they can meet the qualifications of that new state. Sometimes, they don’t have enough net worth or years of experience in the industry. This will typically lead to a lender starting as a broker and eventually switching over to a lender license.
Correspondent lender is a category that does not exist in every state. It is usually an intermediate category between broker and lender. A correspondent lender does not use its own funds to close, may or may not have its name on the loan but does not service the loan. Typically, the requirements to become a correspondent lender are more onerous than those to become a broker. Correspondent lenders do make more money than brokers on each transaction.
In some states, a lender and correspondent lender can also broker loans. In other states, you need to have applied for a lender or correspondent lender and broker license.
If you are a mortgage broker looking to get licensed in a state that has a correspondent lender license, check to see whether you can qualify for that license. It might be a more lucrative proposition than being a mortgage broker.
How do you decide which kind of license you want? In many cases, mortgage brokers have no intention of being lenders. This may be because they cannot qualify or it may be because they do not want the problems that being a lender can create. This makes the decision quite easy.
On the other hand, mortgage lenders will usually apply for a new lender license if they can meet the qualifications of that new state. Sometimes, they don’t have enough net worth or years of experience in the industry. This will typically lead to a lender starting as a broker and eventually switching over to a lender license.
Correspondent lender is a category that does not exist in every state. It is usually an intermediate category between broker and lender. A correspondent lender does not use its own funds to close, may or may not have its name on the loan but does not service the loan. Typically, the requirements to become a correspondent lender are more onerous than those to become a broker. Correspondent lenders do make more money than brokers on each transaction.
In some states, a lender and correspondent lender can also broker loans. In other states, you need to have applied for a lender or correspondent lender and broker license.
If you are a mortgage broker looking to get licensed in a state that has a correspondent lender license, check to see whether you can qualify for that license. It might be a more lucrative proposition than being a mortgage broker.
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