Getting Annual Report Correspondence to The Right Person

I’ve been writing a lot recently about the annual reports that are due at the beginning of the year. A whole bunch are due at the end of March. This is in addition to or instead of the Mortgage Call Report that will start becoming required at the end of April.

Some states send letters in January or February with log-in information for their online reports. These letters typically go to one of the owners in the mortgage company. Unless the owner is the one who will be preparing the Annual Report or inputting the Annual Report, my experience is that this letter will likely get mislaid. If you are receiving a letter from a banking department about the Annual Report, and you have either appointed someone in your company to prepare and input the Report or are using an outside company or law firm for Annual Report submissions, please forward these letters immediately to that person. If you are now scrambling to find that letter, have your outside company or law firm call the banking department to get them to re-send the letter. Then, send a letter to the banking department, on company letterhead and signed by an owner of the company, requesting that the banking department send all correspondence in the future to your outside company or law firm. It will save you a lot of aggravation and time that you won’t need to spend looking for a letter that you may not understand that you need.

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.

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Staying in Compliance

I recently had a conversation with one of the state banking department regulators about ongoing compliance with that state's rules. This particular state had a minimum net worth requirement.

I have many clients who ask me about how to comply with a minimum net worth requirement when they first get their license. For example, New Jersey has a $50,000 minimum net worth requirement for first mortgage brokers. The minimum net worth is $150,000 for first and second mortgage brokers. This is a very high hurdle for many companies. Potential clients ask me all the time "do I need to keep that amount in the company name all the time?" They figure that they can put the money in when they apply for the license and immediately pull it out after the license is granted. Unfortunately, that isn't allowed. The rules usually state "must maintain a minimum net worth of $_______" or "shall register all loan orginators."

How do the state regulators find out that a company hasn't been following the rules after the license is granted? It is carelessness that trips up many companies. Many times that carelessness is uncovered when an examination is conducted by the banking department. Mortgage companies hand the examiner a balance sheet with a negative net worth or a file that has a 1003 signed by a loan officer who is not registered. Or a branch office has not been licensed.

The penalties can be huge. That state regulator that I was talking to mentioned that a company that had not maintained the minimum net worth had their license revoked. Other infractions have cost other brokers and lenders thousands of dollars in fines.

Can you afford to pay large fines or lose a license just because you think you won't get caught breaking the rules? The state regulators don't go after just the big fish. They will go after any licensee, no matter how small or large.