FHA mortgages have been an increasing share of all loan originations for the past few years. For mortgage brokers, this has pushed them to become an FHA-approved Loan Correspondent. However, the FHA approval process has been onerous, especially the requirement that the mortgage broker pay for an audited financial statement that confirms that the broker has a net worth of at least $63,000. Accountant fees for an audited fiancial statement have run into thousands of dollars.
FHA has announced that it will not be approving mortgage brokers to act as Loan Correspondents after May 20, 2010. If your company already has an application pending with FHA, you can still get FHA approval for 2010. But what if you didn’t apply yet?
The new FHA rule provides that all non-FHA-approved Loan Correspondents (mortgage brokers) may participate in FHA programs provided they are sponsored by FHA-approved lenders. This puts the onus on FHA-approved lenders to create the requirements they will have before they accept loan applications for FHA loans from mortgage brokers. Have FHA-approved lenders created their requirements? If anyone has heard specifics about various lenders and their requirements, let me know.
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!
Showing posts with label mortgage brokers. Show all posts
Showing posts with label mortgage brokers. Show all posts
Monday, May 17, 2010
Tuesday, April 13, 2010
Should Your Mortgage Broker Company Stick It Out or Find A Different Opportunity?
I read an article in a Buffalo newspaper that quoted a spokesman from the New York Banking Department who revealed that 315 mortgage brokers gave up their licenses last year. The number of licensed mortgage broker companies and loan originators is down in every state. There are a number of reasons for this situation. I’m sure you’ve experienced many of them.
The requirements of the SAFE Act have caused many loan originators who cannot meet its qualifications. There were loan originators who had criminal pasts, bankruptcies, bad credit, or no knowledge of federal and state laws who were working as loan originators. Many of these people have left or will be leaving the business as all of the loan originator licensing requirements become effective (no later than December 31, 2010). There are many loan originators who don’t deserve to be in the mortgage business, with their backgrounds, but I have spoken to many, who may not be able to stay in the business because of stupid decisions made when they were young or bad luck with their finances.
Others in the industry have spoken to me about their frustration with the requirements that the lenders are placing on them. Many lenders only wish to take applications from the highest volume brokers. But, volume is down all over the country. Most consumers are too nervous about their job situation to go out and buy a new house. Other consumers want to buy but cannot sell their existing home. Many brokers cannot bring the kinds of volume that the lenders insist on.
The new regulations are also causing mortgage companies to close up shop. Licenses cost more, surety bond requirements have gone up so the premiums cost more and the annual assessments have gone up as the need for banking department income is spread among a smaller number of licensees.
So, do you close up your business and work for a lender? Become a net branch? Leave the business? If you became a mortgage broker to make a lot of money, then the opportunities of being a net branch or working for a branch may make sense to you. After all, loan officers working for banks don’t need to be licensed as mortgage brokers or loan originators. You make the money without the headaches. Or you affiliate with another mortgage broker or lender and you are one of their branches. They worry about surety bonds and license fees. You just bring them loan applications and they pay you for them. There are many ways to stay in the business without necessarily maintaining your own mortgage broker business. There are companies out there that are looking for good brokers. You may want to explore every possibility out there and make a change to your employment situation.
But, if you feel that you provide a valuable service to consumers and you want to retain your independence, you need to hang on and educate your past and future customers about why an independent mortgage broker is better for them than their going to a bank. Mortgage brokers have not done the job they need to do to convince consumers that they are worth the fee that they are charging. The comments that were posted after that article that I read largely charged mortgage brokers with allowing fraud (if they didn’t cause it themselves) and with putting borrowers into loans that made the most money for the broker, not the loans that made sense for the borrowers. Are you doing anything to counteract these types of opinions? Can you give a borrower any reason why they should use a mortgage broker rather than going to a lender or a bank?
Some of you will hang in there because this is what you have been doing for the last 10-15 years. You feel that you are helping people, you like being your own boss and you believe that the shakeout in the industry will leave the strongest surviving and that will include you. If that is your reason for staying in business, go out and make your customers want your services. Show them how you help them when they are dealing with one of the biggest financial transactions of their lives.
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!
The requirements of the SAFE Act have caused many loan originators who cannot meet its qualifications. There were loan originators who had criminal pasts, bankruptcies, bad credit, or no knowledge of federal and state laws who were working as loan originators. Many of these people have left or will be leaving the business as all of the loan originator licensing requirements become effective (no later than December 31, 2010). There are many loan originators who don’t deserve to be in the mortgage business, with their backgrounds, but I have spoken to many, who may not be able to stay in the business because of stupid decisions made when they were young or bad luck with their finances.
Others in the industry have spoken to me about their frustration with the requirements that the lenders are placing on them. Many lenders only wish to take applications from the highest volume brokers. But, volume is down all over the country. Most consumers are too nervous about their job situation to go out and buy a new house. Other consumers want to buy but cannot sell their existing home. Many brokers cannot bring the kinds of volume that the lenders insist on.
The new regulations are also causing mortgage companies to close up shop. Licenses cost more, surety bond requirements have gone up so the premiums cost more and the annual assessments have gone up as the need for banking department income is spread among a smaller number of licensees.
So, do you close up your business and work for a lender? Become a net branch? Leave the business? If you became a mortgage broker to make a lot of money, then the opportunities of being a net branch or working for a branch may make sense to you. After all, loan officers working for banks don’t need to be licensed as mortgage brokers or loan originators. You make the money without the headaches. Or you affiliate with another mortgage broker or lender and you are one of their branches. They worry about surety bonds and license fees. You just bring them loan applications and they pay you for them. There are many ways to stay in the business without necessarily maintaining your own mortgage broker business. There are companies out there that are looking for good brokers. You may want to explore every possibility out there and make a change to your employment situation.
But, if you feel that you provide a valuable service to consumers and you want to retain your independence, you need to hang on and educate your past and future customers about why an independent mortgage broker is better for them than their going to a bank. Mortgage brokers have not done the job they need to do to convince consumers that they are worth the fee that they are charging. The comments that were posted after that article that I read largely charged mortgage brokers with allowing fraud (if they didn’t cause it themselves) and with putting borrowers into loans that made the most money for the broker, not the loans that made sense for the borrowers. Are you doing anything to counteract these types of opinions? Can you give a borrower any reason why they should use a mortgage broker rather than going to a lender or a bank?
Some of you will hang in there because this is what you have been doing for the last 10-15 years. You feel that you are helping people, you like being your own boss and you believe that the shakeout in the industry will leave the strongest surviving and that will include you. If that is your reason for staying in business, go out and make your customers want your services. Show them how you help them when they are dealing with one of the biggest financial transactions of their lives.
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, January 25, 2010
Are There Any Wholesale Banks Still Out There?
I’ve got mortgage broker clients that are in a bind because their lenders will not let them close loans if their renewals haven’t come through (even though the state banking department still allows the mortgage broker to continue to solicit new business and close loans). So, if there is anyone out there who knows of lenders out there who wish to work with retail mortgage brokers, please send me an email to: Robin@mortgagelicensesolutions.com and let me know their contact information. If anyone actually does send me any names, I will investigate whether they are legitimate, what their requirements are, and let my readers know about them. This could be beneficial for mortgage brokers looking for new lenders and for lenders who want to work with more mortgage brokers.
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!
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, January 11, 2010
How to Close Loans if Your Renewal License Hasn’t Come Through
I have received a number of phone calls from mortgage broker clients who have submitted renewals of their licenses but either the new license hasn’t been sent out yet or the approval of whether the license would be renewed has not yet been received. Either way, their lenders were refusing to let loans close without a new license. They were asking what they should do so their loans could close.
Many states are not printing new licenses when the old licenses expire. These states have made the decision to save on postage and paper costs and they will never go back to printing paper licenses. But, lenders are acting as if they are not aware of these decisions. If you are licensed in a state that has stopped printing paper licenses, you should look at the state’s licensing database. Many times, the state is updating their database to show which licensees are currently licensed and which licensees have expired licenses. If your state’s database shows that you are currently licensed, many lenders will accept a copy of the database which shows that your license is active. Then, they will let you close loans in that state.
If you are in one of the states which has stopped updating its licensing database, you must ask lenders to call your state’s banking department to confirm that you are licensed. The regulators will not give out letters to each mortgage broker to confirm that it has an active license nor will it give out letters to lenders who want to know whether a specific mortgage has a current license.
What if your renewal license application has not yet been approved? Most states will allow you to close loans while the decision on approving your renewal is pending, if you had submitted your renewal application in a timely manner. If you are licensed in such a state, you too can ask your lenders to call the state regulator to confirm that they permit you to close out your pipeline, while your renewal is pending. Some states also allow you to solicit new business while you are waiting for your license renewal.
Eventually, the public will have access to the NMLS databases, which will make it very easy for lenders to confirm that you are licensed where you say you are licensed. Until that actually happens, the beginning of the new year can be a scramble for mortgage brokers.
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!
Many states are not printing new licenses when the old licenses expire. These states have made the decision to save on postage and paper costs and they will never go back to printing paper licenses. But, lenders are acting as if they are not aware of these decisions. If you are licensed in a state that has stopped printing paper licenses, you should look at the state’s licensing database. Many times, the state is updating their database to show which licensees are currently licensed and which licensees have expired licenses. If your state’s database shows that you are currently licensed, many lenders will accept a copy of the database which shows that your license is active. Then, they will let you close loans in that state.
If you are in one of the states which has stopped updating its licensing database, you must ask lenders to call your state’s banking department to confirm that you are licensed. The regulators will not give out letters to each mortgage broker to confirm that it has an active license nor will it give out letters to lenders who want to know whether a specific mortgage has a current license.
What if your renewal license application has not yet been approved? Most states will allow you to close loans while the decision on approving your renewal is pending, if you had submitted your renewal application in a timely manner. If you are licensed in such a state, you too can ask your lenders to call the state regulator to confirm that they permit you to close out your pipeline, while your renewal is pending. Some states also allow you to solicit new business while you are waiting for your license renewal.
Eventually, the public will have access to the NMLS databases, which will make it very easy for lenders to confirm that you are licensed where you say you are licensed. Until that actually happens, the beginning of the new year can be a scramble for mortgage brokers.
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, July 22, 2008
Paying Your Loan Officers a Commission
Do you pay any of your loan officers a commission when a loan is closed? Are you aware that state law may control the details of when a commission must be paid, whether you can deduct any costs or expenses from the commission, or what commissions, if any, are due to a loan officer who leaves your employ before the loan closes? In some states, you must pay their commissions no later than the last day of the month following the month in which these commissions are earned. In other states, such as California, commissions must be paid on the next regular payday after they have been earned and are "reasonably calculable." An employer has the flexibility to deem commissions earned either when the sale is made or when the customer pays for the service.
Some states, such as New York, generally prohibit an employer from deducting any sum from an employee's commissions and other wages, except for deductions for the benefit of the employee (e.g., pension, health benefits). Examples of prohibited deductions are deductions for spoilage or breakage, cash shortages or losses, and fines or penalties for lateness, misconduct, or quitting by an employee without notice. The reasoning is that the employer should bear the risk of such losses rather than the employee. This means that you may not deduct anything from a loan officer's commission if there is any reason that the full fee on a particular loan cannot be collected.
The largest source of conflict regarding the payment of commissions occur when a loan officer leaves before a loan closes. Certain states require you to pay the wages, including earned commissions, no later than the regular payday for the pay period during which the termination (voluntary or involuntary) occurred. In other states, employees who are discharged, or who resign with 72 hours' notice, are entitled to all wages due at the time of termination. If the resigning employee fails to provide notice, the employer has 72 hours after the resignation to make payment. In those states, an employer may not wait until the customary time for calculating the commissions of current employees, nor delay payment of earned commissions until the next regularly scheduled pay date.
You must have a policy as to when commissions are earned if the loan officer leaves your employ before the loan closes. The policy should be in writing and each new loan officer should be made aware of it. Remember, once a commission is earned, it cannot be forfeited, even if the loan officer was terminated for cause or left you with no notice.
If your policy is badly drafted, you will ultimately find yourself dealing with the Labor Department in your state. You will be answering the complaint of an unhappy ex-employee. In addition to awarding the commission that you disputed, the Labor Department can also assess penalties for your "willful misconduct." It can get very expensive if a complaint is filed against you. Subsequent complaints will be even more expensive.
You need to know what your state's law requires you to do when you create a compensation policy for your employees. You should have the assistance of a lawyer who is well-versed in employment law if you insist in drafting your own agreements. Make sure that you specify when and how a commission is earned and when that commission will be paid. Your agreement should also state when and how any draws against commissions earned will be reconciled, as well as how and when all commissions will be paid if the employee leaves. If you are doing business in more than one state, your agreements might differ in each state, depending upon the law in each state. One form of agreement may not be sufficient.
Some states, such as New York, generally prohibit an employer from deducting any sum from an employee's commissions and other wages, except for deductions for the benefit of the employee (e.g., pension, health benefits). Examples of prohibited deductions are deductions for spoilage or breakage, cash shortages or losses, and fines or penalties for lateness, misconduct, or quitting by an employee without notice. The reasoning is that the employer should bear the risk of such losses rather than the employee. This means that you may not deduct anything from a loan officer's commission if there is any reason that the full fee on a particular loan cannot be collected.
The largest source of conflict regarding the payment of commissions occur when a loan officer leaves before a loan closes. Certain states require you to pay the wages, including earned commissions, no later than the regular payday for the pay period during which the termination (voluntary or involuntary) occurred. In other states, employees who are discharged, or who resign with 72 hours' notice, are entitled to all wages due at the time of termination. If the resigning employee fails to provide notice, the employer has 72 hours after the resignation to make payment. In those states, an employer may not wait until the customary time for calculating the commissions of current employees, nor delay payment of earned commissions until the next regularly scheduled pay date.
You must have a policy as to when commissions are earned if the loan officer leaves your employ before the loan closes. The policy should be in writing and each new loan officer should be made aware of it. Remember, once a commission is earned, it cannot be forfeited, even if the loan officer was terminated for cause or left you with no notice.
If your policy is badly drafted, you will ultimately find yourself dealing with the Labor Department in your state. You will be answering the complaint of an unhappy ex-employee. In addition to awarding the commission that you disputed, the Labor Department can also assess penalties for your "willful misconduct." It can get very expensive if a complaint is filed against you. Subsequent complaints will be even more expensive.
You need to know what your state's law requires you to do when you create a compensation policy for your employees. You should have the assistance of a lawyer who is well-versed in employment law if you insist in drafting your own agreements. Make sure that you specify when and how a commission is earned and when that commission will be paid. Your agreement should also state when and how any draws against commissions earned will be reconciled, as well as how and when all commissions will be paid if the employee leaves. If you are doing business in more than one state, your agreements might differ in each state, depending upon the law in each state. One form of agreement may not be sufficient.
Wednesday, May 14, 2008
New Requirements in Maryland
Maryland has new laws taking effect on June 1, 2008 that affect licensed lenders (which also includes mortgage brokers). The new requirements concern surety bonds and minimum net worths for licensees.
Maryland has always had a system of requiring surety bonds based on the volume of business in the previous 12 months. Effective June 1, 2008, if your company has done no business anywhere in the prior 12 months (you are a start-up) or up to $3,000,000 in closed mortgage loans, you will need a $50,000 bond. If you closed more than $3,000,000 but less than $10,000,000 in mortgage loans, you need a $100,000 bond. If your closed volume is more than $10,000,000 in the previous 12 months, you need a $150,000 bond. If your company has multiple offices, the largest surety bond you will need for all of the offices combined is $750,000.
Additionally, mortgage lender licensees will need a net worth of $25,000 if your company had no activity or up to $1,000,000 in loans closed in the previous 12 months. If you closed more than $1,000,000 and less than $5,000,000, you need at least $50,000 in net worth. If your dollar volume of loans closed was more than $5,000,000 you need a net worth of at least $100,000. Starting January 1, 2009, if you closed more than $10,000,000 in mortgage loans in the previous 12 months, you will be required to maintain a minimum net worth of $250,000.
Proof of compliance with the new net worth and surety bond obligations will be required when you renew your license or if you are being examined.
Maryland has always had a system of requiring surety bonds based on the volume of business in the previous 12 months. Effective June 1, 2008, if your company has done no business anywhere in the prior 12 months (you are a start-up) or up to $3,000,000 in closed mortgage loans, you will need a $50,000 bond. If you closed more than $3,000,000 but less than $10,000,000 in mortgage loans, you need a $100,000 bond. If your closed volume is more than $10,000,000 in the previous 12 months, you need a $150,000 bond. If your company has multiple offices, the largest surety bond you will need for all of the offices combined is $750,000.
Additionally, mortgage lender licensees will need a net worth of $25,000 if your company had no activity or up to $1,000,000 in loans closed in the previous 12 months. If you closed more than $1,000,000 and less than $5,000,000, you need at least $50,000 in net worth. If your dollar volume of loans closed was more than $5,000,000 you need a net worth of at least $100,000. Starting January 1, 2009, if you closed more than $10,000,000 in mortgage loans in the previous 12 months, you will be required to maintain a minimum net worth of $250,000.
Proof of compliance with the new net worth and surety bond obligations will be required when you renew your license or if you are being examined.
Wednesday, January 16, 2008
Post-Licensing Requirements
Although the licensing process is the one that all mortgage companies focus on in terms of compliance with state banking regulations, in many states, there are ongoing requirements to remain in compliance with state law and regulation.
Most states require the filing of an annual report each year. The report can be a simple one, asking only a few questions about number and total dollar volume of loans brokered, originated or serviced. Or it can be pages and pages of questions regarding information regarding the company’s financial situation, appraisers and title insurance companies used, and the license numbers of lenders who closed the brokered loans. Delaware requires a report twice a year. Massachusetts and New York require their licensed lenders to file quarterly reports. Failure to file the necessary reports can lead to fines and a refusal to renew a license.
Georgia raises money for its banking department budget by charging $6.50 for each loan closed. Typically, the lender pays the fee but both lenders and brokers are required to file the report stating how many loans were closed.
Those states that require a minimum net worth usually require that the licensees submit audited financial statements every year. Sometimes, it is part of the annual report process, in other states, the financials get submitted separately from the annual report.
Florida requires quarterly reporting of new loan officer hiring and firing. Many other states require annual updates of who your company’s loan officers are. This may be separate from the renewal of mortgage originator licenses.
And always keep in mind those continuing education requirements. Each state has a different number of required continuing education hours and a different timeframe within which they must be completed. If you are licensed in multiple states, you need to take the required number in each state and there is no overlap.
As you can see, getting your license is just the beginning of the work it takes to stay in compliance to keep the license.
Most states require the filing of an annual report each year. The report can be a simple one, asking only a few questions about number and total dollar volume of loans brokered, originated or serviced. Or it can be pages and pages of questions regarding information regarding the company’s financial situation, appraisers and title insurance companies used, and the license numbers of lenders who closed the brokered loans. Delaware requires a report twice a year. Massachusetts and New York require their licensed lenders to file quarterly reports. Failure to file the necessary reports can lead to fines and a refusal to renew a license.
Georgia raises money for its banking department budget by charging $6.50 for each loan closed. Typically, the lender pays the fee but both lenders and brokers are required to file the report stating how many loans were closed.
Those states that require a minimum net worth usually require that the licensees submit audited financial statements every year. Sometimes, it is part of the annual report process, in other states, the financials get submitted separately from the annual report.
Florida requires quarterly reporting of new loan officer hiring and firing. Many other states require annual updates of who your company’s loan officers are. This may be separate from the renewal of mortgage originator licenses.
And always keep in mind those continuing education requirements. Each state has a different number of required continuing education hours and a different timeframe within which they must be completed. If you are licensed in multiple states, you need to take the required number in each state and there is no overlap.
As you can see, getting your license is just the beginning of the work it takes to stay in compliance to keep the license.
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