Over the next year, many states who do not currently license loan officers will start doing so. The push comes from a belief that registration/licensing will improve the professionalism of loan officers. The various states that already have loan officer licensing require pre-licensing education or experience, registration or licensing of the individual loan officers, and continuing education needed for renewals of the registration or licensing. The new states will have similar requirements but each state will have a different date for starting the registration/licensing process and who is required to comply.
I will be keeping readers of this blog up-to-date with the new loan officer regulations as the states roll out their new regulations. This will allow you plenty of time to familiarize yourself with your state's new requirements and to get you ready for compliance with the new law.
Tuesday, June 26, 2007
Friday, June 22, 2007
License Expiration Dates
If your company has more than one license, someone needs to keep track of your license expiration dates so that you do not let any license lapse. A very few states have licenses that never expire so you only have to keep track of other compliance issues such as annual reports.
If you are in a large mortgage company, you probably have a compliance department and it is their job to keep track of all expiration dates. But if you don't have a compliance department, you need a compliance person. In a very small company, that person might be the owner. Or it might be an administrative assistant. You might even outsource the function to a law firm or company that provides compliance services. I have several clients that just send me all of the compliance paperwork that they receive from the various banking departments and secretaries of state.
I have a calendar marked with all my clients' license expiration dates and also marked about 2-1/2 months before each license expiration date. At 2-1/2 months before each expiration date, I send emails to my clients reminding them that they should be receiving renewal materials from the banking department and that they should forward them to me as soon as they receive them. I start the renewal process as soon as the state permits so that I can get any additional information that is required from the client. For example, in states that require continuing education, the license renewal application asks for details about what courses were taken and who the education provider was.
If you are keeping track of your own license expiration dates, you need to set up your own system so that you get the renewal process completed before the expiration date. In some states, going past the deadline means you pay a late fee. In other states, you might need to start all over with the application process and that can take several weeks, time that you cannot take in any new applications in that state.And who can afford that?
Monday, June 11, 2007
Subleasing Office Space
When times are tough, the way they are now, some companies find that they must reduce expenses. The fastest way to do this is to close offices and lay off staff.
When you close an office, you will frequently find that your lease does not let you just walk away with no repercussions. Most leases require that you pay rent until the end of the lease term (which could be years away). If you stop paying rent, your landlord will sue you for the rent for the balance of the lease term.
However, most leases will let you assign or sublet your space. If you can find another company who wants your office space and the landlord approves the new company, you won’t be sued for breaking the lease. You still will remain liable if the new tenant doesn’t pay but it will save you plenty of money until that problem happens, if it ever does.
How do you find this new company? Talk to a commercial real estate agent. The more time left on the lease, the more money you have at risk for breaking the lease.
What if you are looking for new office space – either because you are expanding or contracting? Also check out space that is being sublet. Plenty of companies are going out of business or just consolidating space so there are a lot of options out there that could offer you a very cheap rent.
Whatever you do, consult a lawyer before entering into a sublease. It is a much more complicated document that a regular lease so you need expert advice before you sign on the dotted line.
When you close an office, you will frequently find that your lease does not let you just walk away with no repercussions. Most leases require that you pay rent until the end of the lease term (which could be years away). If you stop paying rent, your landlord will sue you for the rent for the balance of the lease term.
However, most leases will let you assign or sublet your space. If you can find another company who wants your office space and the landlord approves the new company, you won’t be sued for breaking the lease. You still will remain liable if the new tenant doesn’t pay but it will save you plenty of money until that problem happens, if it ever does.
How do you find this new company? Talk to a commercial real estate agent. The more time left on the lease, the more money you have at risk for breaking the lease.
What if you are looking for new office space – either because you are expanding or contracting? Also check out space that is being sublet. Plenty of companies are going out of business or just consolidating space so there are a lot of options out there that could offer you a very cheap rent.
Whatever you do, consult a lawyer before entering into a sublease. It is a much more complicated document that a regular lease so you need expert advice before you sign on the dotted line.
Tuesday, May 22, 2007
Avoid These 5 Advertising Mistakes
Advertising plays a prominent role in many mortgage companies’ efforts to find new borrowers. As your customers get bombarded by more and more advertising messages, the urge to create an advertising piece that will stand out from the crowd becomes more urgent. This sense of desperation leads many mortgage lenders and brokers to create promotion pieces that cross the lines of permissible advertising. Make sure you don’t make these mistakes that can lead to costly penalties.
1. Don’t lead consumers to believe the government or their existing lender is sending them mail. Many mortgage brokers use direct mail to solicit new business. Companies have distributed solicitations that use names of mortgage lenders in such a way that consumers believe it was sent to them by their lender, leading consumers to also believe, based on these solicitations, that their private financial information has been shared with another entity. These actions are a violation of the regulations of HUD and of the various states that regulate mortgage brokers and lenders. In addition, they can lead to consumer complaints to the regulatory agencies. The number of complaints the agency receives about you impacts how often you will be examined.
2. Do not omit the APR when advertising an interest rate. No matter what state you are conducting mortgage activity, all lenders and brokers are subject to the application of federal Truth-in-Lending laws, specifically Regulation Z. The statute requires, among other things, that if a lender or broker advertises a particular interest rate, they must also quote the Annual Percentage Rate, or APR. The APR is correctly defined as the "cost of money borrowed, expressed as an annual rate." The APR takes into account the note rate, which is the rate a borrower’s monthly payment is based on and any and all lender fees and finance charges. Yes, most borrowers don’t understand APR but you are still required to use it in your advertising and be able to explain it to a potential customer.
3. Do not use terms that indicate unlimited access to credit. Advertisements that contain terms such as "bad credit no problem" (or similar phrases) or language that implies that an applicant will have total access to credit without clearly and conspicuously disclosing the material limitations on the availability of credit are prohibited under many state laws. In most states, lenders and brokers need to list any limitations to getting the advertised mortgage, including income requirements, limitations for consumers with bad credit (such as a higher rate), and that restrictions as to the maximum principal amount of the loan offered may apply.
4. Many states require names, addresses, and license numbers in advertising. This one is easy to comply with. You just need to know which of the states in which you are licensed requires such information on advertising materials. In some cases, there is also specific language that must be used such as New York’s broker language: “Registered New York Mortgage Broker by the NYS Banking Department - all loans arranged by third party lenders.” Or California’s requirement to use this language: “Licensed by the Department of Corporations under the California Finance Lenders law (or Department of Real Estate or Residential Mortgage Act).” Just remember to add the required information to all advertising materials, including, but not limited to, direct mail, brochures, web sites and television and radio advertisements.
5. Be aware of the catch-all “fraudulent, deceptive or misleading” prohibitions. Both the Federal Trade Commission and different state regulatory agencies have statutes that prohibit an “unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading” or variations of this phraseology. Lately, the regulators are cracking down on advertisements regarding low interest rate loans that fail to mention that there may be negative amortization. If you think, but are not sure that your advertising contains inaccurate or misleading language, change the advertisement.
If you violate an advertising statute or regulation, at best, you will be asked to “cease and desist” the prohibited advertising and be subjected to increased scrutiny of all of your business activities. At worst, you could lose your licenses and pay heavy fines.
1. Don’t lead consumers to believe the government or their existing lender is sending them mail. Many mortgage brokers use direct mail to solicit new business. Companies have distributed solicitations that use names of mortgage lenders in such a way that consumers believe it was sent to them by their lender, leading consumers to also believe, based on these solicitations, that their private financial information has been shared with another entity. These actions are a violation of the regulations of HUD and of the various states that regulate mortgage brokers and lenders. In addition, they can lead to consumer complaints to the regulatory agencies. The number of complaints the agency receives about you impacts how often you will be examined.
2. Do not omit the APR when advertising an interest rate. No matter what state you are conducting mortgage activity, all lenders and brokers are subject to the application of federal Truth-in-Lending laws, specifically Regulation Z. The statute requires, among other things, that if a lender or broker advertises a particular interest rate, they must also quote the Annual Percentage Rate, or APR. The APR is correctly defined as the "cost of money borrowed, expressed as an annual rate." The APR takes into account the note rate, which is the rate a borrower’s monthly payment is based on and any and all lender fees and finance charges. Yes, most borrowers don’t understand APR but you are still required to use it in your advertising and be able to explain it to a potential customer.
3. Do not use terms that indicate unlimited access to credit. Advertisements that contain terms such as "bad credit no problem" (or similar phrases) or language that implies that an applicant will have total access to credit without clearly and conspicuously disclosing the material limitations on the availability of credit are prohibited under many state laws. In most states, lenders and brokers need to list any limitations to getting the advertised mortgage, including income requirements, limitations for consumers with bad credit (such as a higher rate), and that restrictions as to the maximum principal amount of the loan offered may apply.
4. Many states require names, addresses, and license numbers in advertising. This one is easy to comply with. You just need to know which of the states in which you are licensed requires such information on advertising materials. In some cases, there is also specific language that must be used such as New York’s broker language: “Registered New York Mortgage Broker by the NYS Banking Department - all loans arranged by third party lenders.” Or California’s requirement to use this language: “Licensed by the Department of Corporations under the California Finance Lenders law (or Department of Real Estate or Residential Mortgage Act).” Just remember to add the required information to all advertising materials, including, but not limited to, direct mail, brochures, web sites and television and radio advertisements.
5. Be aware of the catch-all “fraudulent, deceptive or misleading” prohibitions. Both the Federal Trade Commission and different state regulatory agencies have statutes that prohibit an “unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading” or variations of this phraseology. Lately, the regulators are cracking down on advertisements regarding low interest rate loans that fail to mention that there may be negative amortization. If you think, but are not sure that your advertising contains inaccurate or misleading language, change the advertisement.
If you violate an advertising statute or regulation, at best, you will be asked to “cease and desist” the prohibited advertising and be subjected to increased scrutiny of all of your business activities. At worst, you could lose your licenses and pay heavy fines.
Wednesday, April 25, 2007
Continuing education
About half of the states require continuing education for loan officers, branch managers and company principals after you get your license. The number of hours varies by state. The type of education also is dictated by each state's regulations.
Most of the states permit online coursework. This is very convenient for those who need the continuing education hours for a state outside their home state. You sign up, take the coursework, and then pass a test to show that you paid attention to the coursework. You must make sure you get your certificate from the continuing education provider to show that you completed the courses.
A few of the states require that you attend in-classroom education which means you need to travel if this is not your home state. Other states require that you use only approved providers.
The important thing to remember about the continuing education requirement is to complete it in a timely manner. Some states require that it be completed during a calendar year and other states permit you to take your continuing education anytime before you need to renew a license or to submit an annual report. For mortgage brokers who are licensed in many states this means being very organized about when to take the continuing education for each state.
If you don't take the continuing education, you might not get your license renewed - a very expensive lesson in compliance.
Most of the states permit online coursework. This is very convenient for those who need the continuing education hours for a state outside their home state. You sign up, take the coursework, and then pass a test to show that you paid attention to the coursework. You must make sure you get your certificate from the continuing education provider to show that you completed the courses.
A few of the states require that you attend in-classroom education which means you need to travel if this is not your home state. Other states require that you use only approved providers.
The important thing to remember about the continuing education requirement is to complete it in a timely manner. Some states require that it be completed during a calendar year and other states permit you to take your continuing education anytime before you need to renew a license or to submit an annual report. For mortgage brokers who are licensed in many states this means being very organized about when to take the continuing education for each state.
If you don't take the continuing education, you might not get your license renewed - a very expensive lesson in compliance.
Wednesday, April 18, 2007
Need a mortgage license solution?
I've been writing about topics that come up frequently in my practice as an attorney to mortgage brokers and lenders. But I'd love some ideas from my readers. If anyone has a topic they would like to see addressed in my blog or has a question that they need an answer to, please send me an email to Robin@mortgagelicensesolutions.com and I can write about it here.
Tuesday, April 10, 2007
Timing and Your License Application
One of my clients just received his Pennsylvania licenses last week. He has separate licenses for 1st and 2nd mortgages and a main Pennsylvania office and a branch office in another state where his company is headquartered. This week, he received the paperwork for his renewal licenses. He asked me if he needed to bother with a renewal since he just had received his licenses. Unfortunately, I had to tell him that his licenses would expire on June 30th and if he didn't renew, he would not have any Pennsylvania licenses when they expired.
No one has any control over how long it will take the banking departments to review and approve a license application. Sometimes, you get lucky and your new license is approved just after all the renewals were processed. So your license is good for the maximum number of months. Or you've applied in one of the states, like California or Virginia, where the licenses never expire. But, in most states, you can only hope that the approval will be given long before the license period runs out before you have to renew.
I also caution my clients not to submit license applications during renewal season (which varies by state). When it is renewal season, most of the reviewers are concentrating on the renewal applications and the new applications sit unnoticed. I urge them to wait a few weeks so that the application and license fees are still in their bank accounts, not in the Banking Department accounts, just gathering interest for someone else.
Check with a licensing expert before you make a timing mistake.
No one has any control over how long it will take the banking departments to review and approve a license application. Sometimes, you get lucky and your new license is approved just after all the renewals were processed. So your license is good for the maximum number of months. Or you've applied in one of the states, like California or Virginia, where the licenses never expire. But, in most states, you can only hope that the approval will be given long before the license period runs out before you have to renew.
I also caution my clients not to submit license applications during renewal season (which varies by state). When it is renewal season, most of the reviewers are concentrating on the renewal applications and the new applications sit unnoticed. I urge them to wait a few weeks so that the application and license fees are still in their bank accounts, not in the Banking Department accounts, just gathering interest for someone else.
Check with a licensing expert before you make a timing mistake.
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