If you are thinking of starting your own mortgage broker or banker company or expanding your existing business into a new state, you need to put together your budget. One of your start-up or expansion costs is the cost of licensing. How do you calculate that? The costs vary by state but there are similar requirements in most states.
The calculation starts with whether you are creating a new corporation or limited liability corporation (LLC). There are fees to incorporate or register your LLC in your home state. If you are expanding into a new state, you must file a document that authorizes your to conduct business outside of your home state (usually called a Certificate of Authority to Transact Business). Once you are incorporated or have authority to do business, you apply for the mortgage broker or banker license. In just about every state that means starting with the Nationwide Mortgage Licensing System (NMLS). You complete an application called an MU1 about the company, an MU2 about the owners, and an MU4 for each mortgage loan originator. There is an administrative fee just to get your company onto the NMLS plus the license fee that each state charges. Each state has its own additional requirements that may require you to spend more to get your license. Those requirements may be a surety bond (so you pay an insurance premium), a financial statement prepared by an accountant (add in an accountant’s fee), credit reports for the owners and officers of the company, background checks and fingerprint cards, and required licensing of one of the owners who is responsible for day-to-day operations. There are also still some states that require a physical presence in their state so you need to rent an office.
When you add up all the fees, you could be looking at anything from $2,000 to
$4,000. That does not include the costs for getting your loan officers licensed (and you must have at least one person licensed as a loan originator, even in a one-man shop). If you are getting a new license as part of an expansion, you must do a cost benefit analysis to evaluate whether the costs of getting the license are less than the revenues that you expect to earn in that state.
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, March 15, 2010
Tuesday, March 9, 2010
Should You Attend a Mortgage Banker or Mortgage Broker Trade Show?
A mortgage banker or broker trade show is usually held over 3-4 days. That’s a lot of time to be away from your business. You may want to attend a show if you thought you could get something valuable for your business. What can you get from a trade show?
My office is located in New Jersey and next week is the 2010 Regional Conference of MBAs (I believe it’s sponsored by the mortgage bankers associations of New Jersey, New York, Pennsylvania, Connecticut, Washington D.C., Maryland, New Hampshire, Massachusetts, and Rhode Island). I’m debating whether to attend this show. Will it provide me with any benefits that I can translate into new business? What would I like to see at a trade show for mortgage bankers or brokers? Obviously, what I would like to get out of a trade show, as a lawyer who works a great deal with the mortgage industry, is different from what you, a mortgage banker or mortgage broker, would want to get out of such a conference.
I’d look at the programming details first to see if there were any sessions that I would want to attend. Lately, there are a lot of regulatory changes that are raising many questions for mortgage brokers and bankers and there should be sessions addressing these questions. Many of you want to know how to survive in this new business climate and there are hopefully sessions that will speak about these issues. If the speakers are listed, are they regulators that you would like to meet or other successful business owners that you’d like to network with? That would be a good reason to attend.
Check the list of exhibitors. Can you find new vendors for your business? Can you find out if they have a solution for your problem or can they save you money over your existing vendors? Can you form a strategic alliance with any of the exhibitors?
Lastly, a trade show can be a great opportunity to meet other mortgage bankers and mortgage brokers. Meeting and talking to some of these people can help you find out what your competition is doing, how they are dealing with the problems that you are facing, and how you can be better than they are. If you are not in competition with them, you can find mortgage bankers and brokers who are licensed in states that you are not, so you can take advantage of leads that you cannot use and vice versa. When you talk with mortgage bankers and brokers who are not in competition with you, they are more likely to open up with their strategies for solving the same problems you are having.
It may be useful to attend a local trade show or conference so that you can limit your costs, both in travel and hotel expenses and the number of days you are away from your business.
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!
My office is located in New Jersey and next week is the 2010 Regional Conference of MBAs (I believe it’s sponsored by the mortgage bankers associations of New Jersey, New York, Pennsylvania, Connecticut, Washington D.C., Maryland, New Hampshire, Massachusetts, and Rhode Island). I’m debating whether to attend this show. Will it provide me with any benefits that I can translate into new business? What would I like to see at a trade show for mortgage bankers or brokers? Obviously, what I would like to get out of a trade show, as a lawyer who works a great deal with the mortgage industry, is different from what you, a mortgage banker or mortgage broker, would want to get out of such a conference.
I’d look at the programming details first to see if there were any sessions that I would want to attend. Lately, there are a lot of regulatory changes that are raising many questions for mortgage brokers and bankers and there should be sessions addressing these questions. Many of you want to know how to survive in this new business climate and there are hopefully sessions that will speak about these issues. If the speakers are listed, are they regulators that you would like to meet or other successful business owners that you’d like to network with? That would be a good reason to attend.
Check the list of exhibitors. Can you find new vendors for your business? Can you find out if they have a solution for your problem or can they save you money over your existing vendors? Can you form a strategic alliance with any of the exhibitors?
Lastly, a trade show can be a great opportunity to meet other mortgage bankers and mortgage brokers. Meeting and talking to some of these people can help you find out what your competition is doing, how they are dealing with the problems that you are facing, and how you can be better than they are. If you are not in competition with them, you can find mortgage bankers and brokers who are licensed in states that you are not, so you can take advantage of leads that you cannot use and vice versa. When you talk with mortgage bankers and brokers who are not in competition with you, they are more likely to open up with their strategies for solving the same problems you are having.
It may be useful to attend a local trade show or conference so that you can limit your costs, both in travel and hotel expenses and the number of days you are away from your business.
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, March 2, 2010
Changing Your Address, Name, Owners, Control Person
There are a thousand things to do when you move your offices, change your company’s name, add new owners or when your control person (the person who has the day-to-day operations responsibilities or have the necessary number of years in the mortgage industry for your company to keep its license) leaves. Don’t forget to notify the state agency who regulates your license.
Nowadays, before you have any type of change to your company, you must start with notifying your state regulator in advance of the change by making changes through the Nationwide Mortgage License System (NMLS). You need to update your MU1 company record. Most states require a change of address fee to be paid when you notify them of your move. If your company has moved, all of your loan originators need to change their MU4 records to show their current employment address. If you have FHA approval, you need to change your address in the FHA Connection. Many states require that, in addition to making changes to your NMLS record, you submit a copy of your new lease.
When you change owners and control, most states treat you almost as a new applicant for a license. You are allowed to close all of the loans in your pipeline, but you are not allowed to solicit new business until the state regulators have approved the change of control. The change of control application process is fairly similar to the new application process – the new controlling shareholder or member must submit all of the information that the original owner initially submitted on the NMLS (MU1 and MU2) and also submit fingerprints, legal documents evidencing the change of control, personal financials and credit reports, resume, and must answer disclosure questions regarding criminal convictions, bankruptcies, regulatory problems, and litigation.
Of course, there are fees to be paid to the state regulators for each change that you notify them of, which vary by state.
Make sure you plan to notify your state regulators on a timely basis. Most states have laws or regulation on how much notice you must provide to the state. Failure to notify the regulators of these changes can leave you open to penalties, fines, and regulatory action.
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!
Nowadays, before you have any type of change to your company, you must start with notifying your state regulator in advance of the change by making changes through the Nationwide Mortgage License System (NMLS). You need to update your MU1 company record. Most states require a change of address fee to be paid when you notify them of your move. If your company has moved, all of your loan originators need to change their MU4 records to show their current employment address. If you have FHA approval, you need to change your address in the FHA Connection. Many states require that, in addition to making changes to your NMLS record, you submit a copy of your new lease.
When you change owners and control, most states treat you almost as a new applicant for a license. You are allowed to close all of the loans in your pipeline, but you are not allowed to solicit new business until the state regulators have approved the change of control. The change of control application process is fairly similar to the new application process – the new controlling shareholder or member must submit all of the information that the original owner initially submitted on the NMLS (MU1 and MU2) and also submit fingerprints, legal documents evidencing the change of control, personal financials and credit reports, resume, and must answer disclosure questions regarding criminal convictions, bankruptcies, regulatory problems, and litigation.
Of course, there are fees to be paid to the state regulators for each change that you notify them of, which vary by state.
Make sure you plan to notify your state regulators on a timely basis. Most states have laws or regulation on how much notice you must provide to the state. Failure to notify the regulators of these changes can leave you open to penalties, fines, and regulatory action.
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, February 22, 2010
How Much Money Should a Mortgage Broker or Lender Put into Its Business?
The answer to this question is different state by state and whether you are a mortgage broker or a mortgage lender.
If you are a mortgage broker, many states have a required minimum net worth of $25,000. New Jersey even requires a minimum net worth of $50,000. What is net worth? It is your company’s assets minus liabilities. For a new company, assets usually consist of cash (in your company's checking account), computer equipment and furniture. It does not include your car, unless title is in the company's name. Existing companies might also have accounts receivable and prepaid expenses. Liabilities are the amount of money a company owes. New companies usually do not have any liabilities.
Even if the state that you are interested in does not have a minimum net worth requirement, the licensing department might want to see a company's financial statement. They are looking to make sure that you can pay any claim that may arise after you are licensed. In order to get approval for a license, you must demonstrate to the banking department that you are serious about your financial responsibilities. Many states require an audited financial statement. This requires a very thorough review of your records by a CPA. Many accountants do not even prepare audited financial statements anymore. The accountants that do this type of work charge thousands of dollars to prepare the audited financials. If your state does not require a CPA-audited financial statement, it requires the president (or other officer) to swear that the financial statement is true and accurate.
The more assets you can show, the better. For existing companies, I counsel my clients not to distribute all of the profits to the shareholders of a corporation or members of a limited liability company. That lowers the net worth of a company. If the company shows that profits are retained to maintain operations or grow the business, the licensing department looks favorably at the company's application. Obviously if you are a start-up, you may have a limited amount of assets, but if you are adding new states, the licensing departments want to see how you have done in the past few years, when times have been more challenging.
The requirements for a mortgage lender license are even higher, typically $100,000 to $250,000. And most states do have a net worth requirement for lenders. If a mortgage lender needs a warehouse line of credit in order to fund its loans, the warehouse line creditor now requires a much higher net worth (I’m hearing numbers in excess of $1,000,000).
Regardless of whether a state requires a minimum net worth, at least at the very beginning of your company's existence, you should put in and keep as much money in the business as you can to show the licensing departments that you are serious about being a successful company that intends to be an upstanding member of the community.
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!
If you are a mortgage broker, many states have a required minimum net worth of $25,000. New Jersey even requires a minimum net worth of $50,000. What is net worth? It is your company’s assets minus liabilities. For a new company, assets usually consist of cash (in your company's checking account), computer equipment and furniture. It does not include your car, unless title is in the company's name. Existing companies might also have accounts receivable and prepaid expenses. Liabilities are the amount of money a company owes. New companies usually do not have any liabilities.
Even if the state that you are interested in does not have a minimum net worth requirement, the licensing department might want to see a company's financial statement. They are looking to make sure that you can pay any claim that may arise after you are licensed. In order to get approval for a license, you must demonstrate to the banking department that you are serious about your financial responsibilities. Many states require an audited financial statement. This requires a very thorough review of your records by a CPA. Many accountants do not even prepare audited financial statements anymore. The accountants that do this type of work charge thousands of dollars to prepare the audited financials. If your state does not require a CPA-audited financial statement, it requires the president (or other officer) to swear that the financial statement is true and accurate.
The more assets you can show, the better. For existing companies, I counsel my clients not to distribute all of the profits to the shareholders of a corporation or members of a limited liability company. That lowers the net worth of a company. If the company shows that profits are retained to maintain operations or grow the business, the licensing department looks favorably at the company's application. Obviously if you are a start-up, you may have a limited amount of assets, but if you are adding new states, the licensing departments want to see how you have done in the past few years, when times have been more challenging.
The requirements for a mortgage lender license are even higher, typically $100,000 to $250,000. And most states do have a net worth requirement for lenders. If a mortgage lender needs a warehouse line of credit in order to fund its loans, the warehouse line creditor now requires a much higher net worth (I’m hearing numbers in excess of $1,000,000).
Regardless of whether a state requires a minimum net worth, at least at the very beginning of your company's existence, you should put in and keep as much money in the business as you can to show the licensing departments that you are serious about being a successful company that intends to be an upstanding member of the community.
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, February 16, 2010
Home Offices for Loan Originators - Are They Allowed?
Many of us would like to work from home for many reasons - to save on rent, you like the short commute, or maybe you need to take care of your children. But are you allowed to work from home?
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. If your local ordinance prohibits home offices, then your banking department will not permit you to have a home office. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
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!
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. If your local ordinance prohibits home offices, then your banking department will not permit you to have a home office. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
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, February 9, 2010
Fingerprinting on the NMLS
The Nationwide Mortgage Licensing System (NMLS) has opened up the ability to get your fingerprints done through their system. All states’ SAFE Acts, which govern the requirements of loan originator licensing, require federal criminal background checks to be conducted by the FBI. The NMLS now permits you to input the information that the FBI needs to run the background check. There is a fee for the background check which must be paid through the NMLS. You also schedule an appointment to have your fingerprints taken by an approved vendor. Your fingerprints will become part of your NMLS record but that part of your record is not allowed to be seen by the public. In many states, you must also have a background check run by your state police.
Many times, a client has told me that they can answer “no” to all of the criminal background disclosure questions even though they have been arrested in the past. The FBI and state criminal background searches show all arrests, even if your criminal record has been expunged, even if you received probation only, or other reasons that your criminal attorney told you that you could state that you had no criminal background. If you answer “no” to all of the disclosure questions, and you have been arrested in the past, you run the risk of having to explain why you have an arrest in your background check that you did not disclose. Now your honesty is in question, as well as the circumstances of the arrest. When in doubt, answer the disclosure question “yes” and send a letter of explanation to your state regulators.
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 times, a client has told me that they can answer “no” to all of the criminal background disclosure questions even though they have been arrested in the past. The FBI and state criminal background searches show all arrests, even if your criminal record has been expunged, even if you received probation only, or other reasons that your criminal attorney told you that you could state that you had no criminal background. If you answer “no” to all of the disclosure questions, and you have been arrested in the past, you run the risk of having to explain why you have an arrest in your background check that you did not disclose. Now your honesty is in question, as well as the circumstances of the arrest. When in doubt, answer the disclosure question “yes” and send a letter of explanation to your state regulators.
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, February 1, 2010
Home Offices - Are Tthey Allowed?
Many of us would like to work from home for many reasons - to save on rent, you like the short commute, or maybe you need to take care of your children. But are you allowed to work from home?
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is either the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
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!
As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.
If your state does allow home offices, remember that regardless of whether the office is either the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.
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!
Subscribe to:
Posts (Atom)
