What Should You Do If You Want to Surrender a License?

A number of mortgage brokers and lenders obtained licenses in multiple states for varying reasons. Lately, a number of clients have decided that those reasons are no longer valid (usually it has to do with not getting enough income from that state) and I get asked what they need to do to surrender the license.

Each state has its own procedures for surrendering a license and you must comply with that state’s procedure. To find out what that procedure is, check with the regulatory agency that issued your license. It may be on their website or it may involve a telephone call. If the state has already transitioned to the Nationwide Mortgage Licensing System (NMLS), the requirements will be there.

If the state is already on the NMLS, you must surrender through the NMLS. There may be additional requirements that appear on a checklist once the surrender request has been submitted through the NMLS. You may need to send in the original wall license. You may need to give prior written notice of your intention to surrender. You may need to file your final annual report within a set number of days after surrender.

Lastly, you must clear out your pipeline. Some states require you to immediately cease all activity once you surrender your license and other states may give you 30 days or so to close all loans in your pipeline. When you surrender your license, you must stop originating new loans.

Lastly, don’t forget that when you entered a new state, you had to file with the Secretary of State (or whichever agency regulates new and foreign corporations and LLCs). When you surrender your license, you need to also withdraw your authority to conduct business in that state. If you forget to do this last step, you could be liable for hundreds of dollars of annual registration fees.

Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you need help with the NMLS or with your licensing applications (company or loan originator). 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.

Should You Renew All of Your Licenses?

The mortgage business is still very quiet and predicted to stay that way for at least another year. Those mortgage companies that hold licenses in multiple states may be wondering whether it is economically feasible to maintain all of the licenses it holds.

I recommend that every license should undergo an analysis of whether the costs of keeping the license are justified by the fees and commissions earned in each state. How much do you earn in each state? Then you must calculate how much the renewal fee for each license is, add in the fees to file the company annual report with the Secretary of State, the premiums for surety bonds, whether you must maintain a certain minimum net worth that is greater than you would normally retain in your business account, and the cost of any brick and mortar offices and employees in each state. Don’t forget to subtract any taxes you must pay on the income that you earn from each state. The resulting number should determine whether you want to renew that state’s license.

If the income you earn from any state is outweighed by the costs of sustaining the license, you must determine whether there are other factors that could tip the scales in favor of renewing the license. Do you have a great referral source for that state that you do not want to lose? Do your customers have second homes in that state and use you for the mortgages on both homes?

Maybe there is no good reason to keep the license. In that case, you may want to inquire as to whether the license can be made inactive. Some of the states that permit inactive status are Arizona, Florida, Montana, New Jersey, New York, Oklahoma, Texas, and Washington. When a license is inactive, you cannot broker or originate mortgages in that state. However, you do not have to go through the licensing process again when the market turns and you want to go back into business in that state. All that you must typically do is apply for re-activation and pay a re-activation fee. It is quicker and much less difficult than re-applying for a new license even if you had perfect examinations in years past.

If your marketing plan has drastically changed for the next few years and the state in which you don’t want to be licensed does not have inactive status, then it makes sense to surrender the license.