The number of licensed mortgage brokers, lenders, and loan officers is a fraction of what it was five (5) years ago. If you are still working in the mortgage industry, you are serious about your business. But, the industry has changed and is still changing. What worked in the past is not a viable business model anymore. You are (hopefully) doing things differently to stay in business. Do you have a strategic plan for surviving and then growing your business? Can you afford not to?
There is a lot more regulation about licensing. Every state requires that mortgage brokers, lenders and loan officers be licensed. The exceptions to licensing that used to exist if you did only a few loans in a state are largely gone. So, what are you doing to ensure that your new loan officers get licensed?
Fraud played a large enough part in the mortgage meltdown to push states to enact new laws and regulations that require licensees to create fraud prevention programs. What have you done to ensure that your employees are complying with your procedures?
The number of new loan applications is down sharply from even the start of the housing bubble. Do you have a plan that you are following to get a steady stream of real estate agent referrals, other referral partners, past and present customers, and internet leads? Do you track from where you are getting your leads so you can do more of those actions? Do you know which marketing strategies are not working enough to justify spending much time on them?
Are you training your staff so that they know what your vision of your business is and how you want them to implement that vision? In addition to the required continuing education, do you offer in-house education on new laws, new products, the best ways to get iffy borrowers approved for their loans? Those loan officers who are still in the business want to work for the best companies.
Borrowers want their loans approved faster and want to close their loans more conveniently. Is your technology able to provide your customers with the best loan application experience? Do your employees also add to the loan application process or are your borrowers ready to complain to their friends, family, and state regulators how much of a hassle working with your company was? Do you even survey your customers to know what they liked about working with you and what they hated about their loan application process?
What the industry will look like in the next five (5) years is only everyone’s guess. To stay in business, you need to adapt your procedures, work with the current regulatory environment, and use it to your advantage, wherever possible. Make a plan to use the best ideas out there and then keep testing to see what works.
Showing posts with label mortgage banker. Show all posts
Showing posts with label mortgage banker. Show all posts
Tuesday, February 22, 2011
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, May 24, 2010
Why You Should Tell Your Potential Customers About Your Licensing Requirements
Many of the mortgage brokers and lenders that I have been talking to in the past few months have been complaining about the need to get licensed. Most of the griping stems from the costs involved. A few mortgage brokers have pointed why licensing is better for the industry. You should be telling your potential and past customers why the licensing of loan originators is beneficial to them and how it differentiates the mortgage loan originators from bank loan officers.
You should be pointing out in all of your marketing materials that licensing means that your loan originators are more educated about federal and state laws because of the pre-licensing requirements. You should also emphasize how the testing requirement weeds out those loan originators who don’t take the courses very seriously. And don’t forget to tell everyone how your loan originators needed to go through criminal background checks to ensure that you and the state regulators evaluate whether any criminal convictions could impact their ability to act as honest loan originators.
You should call attention to the fact that borrowers have no idea who their bank loan officer is, yet they can find out pertinent information about your loan originators on the NMLS Consumer Access database. All of your marketing channels should be stressing these reasons why they should be using you, a licensed mortgage loan originator, rather than the unknown quantity that is a bank loan officer. Start shouting it from the rooftops right now.
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!
You should be pointing out in all of your marketing materials that licensing means that your loan originators are more educated about federal and state laws because of the pre-licensing requirements. You should also emphasize how the testing requirement weeds out those loan originators who don’t take the courses very seriously. And don’t forget to tell everyone how your loan originators needed to go through criminal background checks to ensure that you and the state regulators evaluate whether any criminal convictions could impact their ability to act as honest loan originators.
You should call attention to the fact that borrowers have no idea who their bank loan officer is, yet they can find out pertinent information about your loan originators on the NMLS Consumer Access database. All of your marketing channels should be stressing these reasons why they should be using you, a licensed mortgage loan originator, rather than the unknown quantity that is a bank loan officer. Start shouting it from the rooftops right now.
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, 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, February 25, 2009
Is Your Competition Out of Business? Market To Their Referral Sources
I am probably not the only licensing lawyer who has had some of her clients go out of business. In probably every state, the number of licensed mortgage brokers and lenders is down. Many of them have gone out of business or placed their license in “inactive” status until the market turns around.
This is your opportunity to find those referral sources – realtors, builders, buyers, and sellers who no longer have a mortgage professional to whom they will automatically turn if they know of someone who needs a mortgage. This is your chance to contact everyone who you heard was referring business to your competitors and try to get a relationship started.
And of course, stay in contact with everyone who already is a referral source to you. They need to know you are still in business, ready to serve their needs. Don’t forget the borrowers you already have done business with. Although there is little loyalty between mortgage brokers and their customers, you can increase your retention rate if you keep your name in front of people that you have already helped and liked you.
There are business opportunities even in a recession. I hope you take advantage of them and keep yourself in business.
This is your opportunity to find those referral sources – realtors, builders, buyers, and sellers who no longer have a mortgage professional to whom they will automatically turn if they know of someone who needs a mortgage. This is your chance to contact everyone who you heard was referring business to your competitors and try to get a relationship started.
And of course, stay in contact with everyone who already is a referral source to you. They need to know you are still in business, ready to serve their needs. Don’t forget the borrowers you already have done business with. Although there is little loyalty between mortgage brokers and their customers, you can increase your retention rate if you keep your name in front of people that you have already helped and liked you.
There are business opportunities even in a recession. I hope you take advantage of them and keep yourself in business.
Thursday, January 8, 2009
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.
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.
Monday, December 15, 2008
Delaware Loan Originator Licensing Requirements
Delaware has sent out a letter to its licensees informing them of how it will comply with the federal SAFE law in connection with mortgage loan originators.
The first step you would have noticed is that, unlike in prior years, when you renewed your Delaware company license, the application asked for the names and addresses of the loan originators that you employ. In the future, on a quarterly basis, you will be required to report any newly hired mortgage loan originators.
If a loan originator is currently employed by a licensed Delaware lender or broker, the loan originator will be required to submit a license application through the Nationwide Mortgage License System (NMLS) by March 31, 2009. The loan originator will be allowed to keep originating while the license application is pending, once the application is timely submitted.
If you hire a loan originator after January 1, 2009, that originator must first submit a license application through the NMLS immediately upon beginning employment (he/she can’t wait until March 31, 2009). Once the application is submitted, the loan originator may start to originate loans until a decision on his/her license application is made.
If your loan originator is already on the NMLS because of licensing in another state, he/she doesn’t need to create a new record. A simple amendment to the MU4, adding Delaware as a new state, is all that is required. Delaware is not yet requiring fingerprinting, credit reports, education hours or a national test yet. But if your loan officer answers ”yes” to any of the disclosure questions, he/she must send in additional information, giving all of the details about the problem that caused the “yes” answer.
There will be a $280.00 application fee which must be paid through the NMLS with a credit card or through electronic debit from a checking account. Once the loan originator license is approved, another $250.00 license fee will be required. There will also be annual assessment fees and annual NMLS processing fees.
Delaware has not announced when it will transition company licensing to the NMLS. The above information is for the licensing of individual loan officers only.
The first step you would have noticed is that, unlike in prior years, when you renewed your Delaware company license, the application asked for the names and addresses of the loan originators that you employ. In the future, on a quarterly basis, you will be required to report any newly hired mortgage loan originators.
If a loan originator is currently employed by a licensed Delaware lender or broker, the loan originator will be required to submit a license application through the Nationwide Mortgage License System (NMLS) by March 31, 2009. The loan originator will be allowed to keep originating while the license application is pending, once the application is timely submitted.
If you hire a loan originator after January 1, 2009, that originator must first submit a license application through the NMLS immediately upon beginning employment (he/she can’t wait until March 31, 2009). Once the application is submitted, the loan originator may start to originate loans until a decision on his/her license application is made.
If your loan originator is already on the NMLS because of licensing in another state, he/she doesn’t need to create a new record. A simple amendment to the MU4, adding Delaware as a new state, is all that is required. Delaware is not yet requiring fingerprinting, credit reports, education hours or a national test yet. But if your loan officer answers ”yes” to any of the disclosure questions, he/she must send in additional information, giving all of the details about the problem that caused the “yes” answer.
There will be a $280.00 application fee which must be paid through the NMLS with a credit card or through electronic debit from a checking account. Once the loan originator license is approved, another $250.00 license fee will be required. There will also be annual assessment fees and annual NMLS processing fees.
Delaware has not announced when it will transition company licensing to the NMLS. The above information is for the licensing of individual loan officers only.
Monday, November 3, 2008
Hire Talent Now
Although much of the mortgage industry is disappearing, you may be bucking the tide and having a good year. Or you may be holding your own, unlike your competitors who are closing up their shops. If you have any plans to be around at the next up part of the cycle, now is the time to hire the talent that is flooding the streets.
Although wages and commissions may be the most costly part of your overhead, if you don’t have the best people working for you, you will never get ahead. Now you have the time to be choosy. You have time to read the resumes, interview the candidates, and check references. You are not desperate to just get bodies in the office, talking to customers. In addition to the hard skills that you always ask for (ability to bring in lots of new loans or strong processing experience), you can now look at how your newest employees will fit into your organization and how likeable they are.
Don’t hire people who seem desperate to get any job. They will leave you when the good times come. And that will cost you in company morale and training costs. You will uncover some excellent talent in a slow job market so wait until the hidden gems emerge. And snatch them up. They will help you move into the next profitable business cycle.
Although wages and commissions may be the most costly part of your overhead, if you don’t have the best people working for you, you will never get ahead. Now you have the time to be choosy. You have time to read the resumes, interview the candidates, and check references. You are not desperate to just get bodies in the office, talking to customers. In addition to the hard skills that you always ask for (ability to bring in lots of new loans or strong processing experience), you can now look at how your newest employees will fit into your organization and how likeable they are.
Don’t hire people who seem desperate to get any job. They will leave you when the good times come. And that will cost you in company morale and training costs. You will uncover some excellent talent in a slow job market so wait until the hidden gems emerge. And snatch them up. They will help you move into the next profitable business cycle.
Wednesday, September 10, 2008
New Law in North Carolina
There is a new law set to go into effect on October 1, 2008. This new law affects all mortgage companies currently licensed in North Carolina as well as those companies thinking of getting licensed in that state.
The most cutting edge provision of the law is the ban on yield spread premiums on loans that are defined in North Carolina as “rate spread” loans. Basically, yield spread premiums on subprime loans are not permitted in North Carolina as a result of this new law. North Carolina is the first state to eliminate yield spread premiums on any type of loans.
In addition, the new law provides that all branch offices must be located in commercial office space. Home offices are now prohibited. I am aware that many loan officers operate out of their own houses, and no one even thinks of this arrangement as a branch office. But in North Carolina, this pattern on cutting down on office space will not be allowed. And remember that North Carolina is a brick-and-mortar state so that if you are an out-of-state mortgage company thinking of getting licensed in North Carolina, your in-state office cannot be a home office.
If you are a loan officer who is now employed by a North Carolina licensee, you are classified as an employee and must receive a W-2 at the end of each year, showing your wages. There are no loan officer independent contractors in North Carolina.
If you want to apply for a license as a loan officer, you must now take 24 hours of approved pre-licensing education and pass an exam. When you have passed the exam, and are submitting your application, your background check must show a FICO score of at least 600. Moreover, your credit report cannot show any outstanding tax liens or judgments in the past 7 years.
The new law also affects minimum net worth requirements. If you are a mortgage broker, you must maintain a minimum net worth of at least $25,000. Your statement of net worth does not need to be from an accountant but must be certified by an authorized officer or member of the company. Additionally, the mortgage broker must provide the Commissioner of Bank’s office with bank statements or other proof that they have liquid funds of at least $10,000. For mortgage bankers, the net worth requirement is a minimum of $100,000 and that amount must be proven by an audited financial statement. In addition, the mortgage banker must show evidence of a line of credit or other available funds of $1,000,000.
Other provisions of the new law:
1. Reporting about closed loans will now be on a quarterly basis.
2. Renewals will be done at the end of the year as all licenses expire on December
31st.
3. Requires licensing for servicers as of January 1, 2009, however, you do not need an additional license if you are a mortgage banker who will be servicing (you will need to provide notice to the Commissioner of Banks).
If you need further information about the new law, you should look at the Commissioner of Bank’s website at www.nccob.org, place your cursor on Mortgage and then on Legal Compliance References.
The most cutting edge provision of the law is the ban on yield spread premiums on loans that are defined in North Carolina as “rate spread” loans. Basically, yield spread premiums on subprime loans are not permitted in North Carolina as a result of this new law. North Carolina is the first state to eliminate yield spread premiums on any type of loans.
In addition, the new law provides that all branch offices must be located in commercial office space. Home offices are now prohibited. I am aware that many loan officers operate out of their own houses, and no one even thinks of this arrangement as a branch office. But in North Carolina, this pattern on cutting down on office space will not be allowed. And remember that North Carolina is a brick-and-mortar state so that if you are an out-of-state mortgage company thinking of getting licensed in North Carolina, your in-state office cannot be a home office.
If you are a loan officer who is now employed by a North Carolina licensee, you are classified as an employee and must receive a W-2 at the end of each year, showing your wages. There are no loan officer independent contractors in North Carolina.
If you want to apply for a license as a loan officer, you must now take 24 hours of approved pre-licensing education and pass an exam. When you have passed the exam, and are submitting your application, your background check must show a FICO score of at least 600. Moreover, your credit report cannot show any outstanding tax liens or judgments in the past 7 years.
The new law also affects minimum net worth requirements. If you are a mortgage broker, you must maintain a minimum net worth of at least $25,000. Your statement of net worth does not need to be from an accountant but must be certified by an authorized officer or member of the company. Additionally, the mortgage broker must provide the Commissioner of Bank’s office with bank statements or other proof that they have liquid funds of at least $10,000. For mortgage bankers, the net worth requirement is a minimum of $100,000 and that amount must be proven by an audited financial statement. In addition, the mortgage banker must show evidence of a line of credit or other available funds of $1,000,000.
Other provisions of the new law:
1. Reporting about closed loans will now be on a quarterly basis.
2. Renewals will be done at the end of the year as all licenses expire on December
31st.
3. Requires licensing for servicers as of January 1, 2009, however, you do not need an additional license if you are a mortgage banker who will be servicing (you will need to provide notice to the Commissioner of Banks).
If you need further information about the new law, you should look at the Commissioner of Bank’s website at www.nccob.org, place your cursor on Mortgage and then on Legal Compliance References.
Monday, August 18, 2008
Are You Licensed in the Right States?
During the height of the real estate boom, mortgage companies were getting licensed in the states that had the most active selling climate. Assuming you could meet the brick and mortar and other licensing requirements, Nevada and Arizona were on everyone’s “hot” list. So were California and Florida.
Times are different now and the “hot” states are experiencing very high rates of foreclosures. This means a slow sales climate and selling prices that are plummeting. It is much more difficult now to make money in these states.
If you are licensed in a state that is not your home state, you should do some market research for that state. How much business are you doing in this state and how much profit are you making? Are there any very active markets in that state (not every city is experiencing the same level of sales meltdown)? Have sales prices fallen or risen? Do you have contacts in those active markets or can you create referral relationships?
Do the same market research in states that you are not licensed in now but could be if the conditions were favorable for you to make money. First, find the cities and states where sales levels are greater than the national average. Do you have any contacts in these cities? Can you find referral sources through your contacts? Don’t forget to use your business and social contacts to reach out to others who are living and working in other states and can lead you to those referral sources (the six degrees of separation phenomenon). If you join LinkedIn or Facebook or other internet social media, can you locate possible referral sources or borrowers?
You want to be one of the survivors in this very difficult market. This means changing strategies to take advantage of changes in the lending environment. Use the ability to be licensed in more than one state strategically to make more money.
Times are different now and the “hot” states are experiencing very high rates of foreclosures. This means a slow sales climate and selling prices that are plummeting. It is much more difficult now to make money in these states.
If you are licensed in a state that is not your home state, you should do some market research for that state. How much business are you doing in this state and how much profit are you making? Are there any very active markets in that state (not every city is experiencing the same level of sales meltdown)? Have sales prices fallen or risen? Do you have contacts in those active markets or can you create referral relationships?
Do the same market research in states that you are not licensed in now but could be if the conditions were favorable for you to make money. First, find the cities and states where sales levels are greater than the national average. Do you have any contacts in these cities? Can you find referral sources through your contacts? Don’t forget to use your business and social contacts to reach out to others who are living and working in other states and can lead you to those referral sources (the six degrees of separation phenomenon). If you join LinkedIn or Facebook or other internet social media, can you locate possible referral sources or borrowers?
You want to be one of the survivors in this very difficult market. This means changing strategies to take advantage of changes in the lending environment. Use the ability to be licensed in more than one state strategically to make more money.
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.
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, 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, April 7, 2008
Notification of Changes
I hope you are aware that when you change addresses or get a new qualifying person (one whose experience and maybe residency permits the company to get and maintain a license), add or close a branch, or change contact persons for licensing, audits, complaints, etc., you are supposed to notify the banking department. Each state has its own requirements of how much advance notice it requires, but generally the timeframe is thirty days prior written notice. You may be required to send a letter on company letterhead or complete a form that is on the banking department website. Check your state’s regulations so that you are in compliance.
The most radical change is change of control. Most states treat this situation as a new license application, when you notify them. There is usually an extensive form to complete and all new owners, officers, and directors must complete personal biographies, financial statements, and undergo fingerprinting, if it was required with the initial application for the company license. The new owners are not permitted to solicit new business until they receive approval from the banking department of the change in control. The new company owners can only finish out the existing pipeline. Because there is extensive background checking by the regulatory agency, the timeframe for approval is similar to that of a new license application. And approval is not just a rubber stamp. If the new owners would not have been licensed on their own, they will not be approved by the banking department just because they are part of a going concern.
The most radical change is change of control. Most states treat this situation as a new license application, when you notify them. There is usually an extensive form to complete and all new owners, officers, and directors must complete personal biographies, financial statements, and undergo fingerprinting, if it was required with the initial application for the company license. The new owners are not permitted to solicit new business until they receive approval from the banking department of the change in control. The new company owners can only finish out the existing pipeline. Because there is extensive background checking by the regulatory agency, the timeframe for approval is similar to that of a new license application. And approval is not just a rubber stamp. If the new owners would not have been licensed on their own, they will not be approved by the banking department just because they are part of a going concern.
Subscribe to:
Posts (Atom)
