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.

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.