The number of licensed mortgage brokers, lenders, and loan officers is a fraction of what it was five (5) years ago. If you are still working in the mortgage industry, you are serious about your business. But, the industry has changed and is still changing. What worked in the past is not a viable business model anymore. You are (hopefully) doing things differently to stay in business. Do you have a strategic plan for surviving and then growing your business? Can you afford not to?
There is a lot more regulation about licensing. Every state requires that mortgage brokers, lenders and loan officers be licensed. The exceptions to licensing that used to exist if you did only a few loans in a state are largely gone. So, what are you doing to ensure that your new loan officers get licensed?
Fraud played a large enough part in the mortgage meltdown to push states to enact new laws and regulations that require licensees to create fraud prevention programs. What have you done to ensure that your employees are complying with your procedures?
The number of new loan applications is down sharply from even the start of the housing bubble. Do you have a plan that you are following to get a steady stream of real estate agent referrals, other referral partners, past and present customers, and internet leads? Do you track from where you are getting your leads so you can do more of those actions? Do you know which marketing strategies are not working enough to justify spending much time on them?
Are you training your staff so that they know what your vision of your business is and how you want them to implement that vision? In addition to the required continuing education, do you offer in-house education on new laws, new products, the best ways to get iffy borrowers approved for their loans? Those loan officers who are still in the business want to work for the best companies.
Borrowers want their loans approved faster and want to close their loans more conveniently. Is your technology able to provide your customers with the best loan application experience? Do your employees also add to the loan application process or are your borrowers ready to complain to their friends, family, and state regulators how much of a hassle working with your company was? Do you even survey your customers to know what they liked about working with you and what they hated about their loan application process?
What the industry will look like in the next five (5) years is only everyone’s guess. To stay in business, you need to adapt your procedures, work with the current regulatory environment, and use it to your advantage, wherever possible. Make a plan to use the best ideas out there and then keep testing to see what works.
Tuesday, February 22, 2011
Thursday, February 17, 2011
What To Do When You Don’t Want to Originate From a State Anymore
Are you one of the many mortgage brokers or lenders who applied for numerous state licenses during the housing boom and now you wonder why you are still paying for the licenses and the additional costs associates with those licenses? I’ve counseled all of my clients that at least once a year, they should compare how much they earn from each state against how much each state’s license costs them. Included in the calculations are the costs of the licenses, the filing fee for the annual report to the state’s Secretary of State Corporations Division, the cost of the surety bond, and the payment to the company who acts as your registered agent. If there hasn’t been much origination activity lately, you may decide that it’s not worth the expense of the license and the hassle of keeping the license. What do you do when you decide you want to give up a license?
You can decide to do nothing until renewal season. At that point, you can simply not renew your license. If you choose this course of action, you must comply with all license requirements, even if you do not originate any loans for the entire year.
If you don’t want to wait until the license expires on December 31st, you need to find out the requirements for each state where you want to surrender your license. Some states require prior notice of your surrender of a license. Other states require notice within a certain number of days after you decide to surrender the license. What is the notice that is required? You go to your MU1 record on the NMLS and indicate that you wish to surrender your license in a particular state.
After you change your MU1 record, you may need to take additional action. Some states require a final Annual Report to be filed within a specified number of days after surrender. Other states may have additional forms that you need to submit. If you have branch offices licensed in the state whose license you are surrendering, you must surrender the branch license as well as the company license.
After the state has accepted the surrender of your license, then you can cancel your surety bond and registered agent. Don’t forget to file a Certificate of Withdrawal of your Certificate of Authority to Transact Business as a Foreign Corporation/LLC. Some states charge annual fees if you haven’t withdrawn, regardless of whether you are conducting business in that state or not.
You can decide to do nothing until renewal season. At that point, you can simply not renew your license. If you choose this course of action, you must comply with all license requirements, even if you do not originate any loans for the entire year.
If you don’t want to wait until the license expires on December 31st, you need to find out the requirements for each state where you want to surrender your license. Some states require prior notice of your surrender of a license. Other states require notice within a certain number of days after you decide to surrender the license. What is the notice that is required? You go to your MU1 record on the NMLS and indicate that you wish to surrender your license in a particular state.
After you change your MU1 record, you may need to take additional action. Some states require a final Annual Report to be filed within a specified number of days after surrender. Other states may have additional forms that you need to submit. If you have branch offices licensed in the state whose license you are surrendering, you must surrender the branch license as well as the company license.
After the state has accepted the surrender of your license, then you can cancel your surety bond and registered agent. Don’t forget to file a Certificate of Withdrawal of your Certificate of Authority to Transact Business as a Foreign Corporation/LLC. Some states charge annual fees if you haven’t withdrawn, regardless of whether you are conducting business in that state or not.
Monday, February 7, 2011
Is There a Specific Order For Completing the Licensing Requirements for a Loan Originator?
I’ve been receiving phone calls and emails from people who want to get licensed as mortgage loan originators (usually known as loan officers). One of their questions is whether there is a required order in which to complete the various requirements that must be satisfied in order to get your loan officer license. There is no required order but certain requirements should be completed before other requirements. You should familiarize yourself with all of the requirements before you even start of the process of licensing.
The licensing laws of each state contain certain disqualifiers to licensing. If you have one of the disqualifiers, you should not even start the licensing process. If you have a dishonesty criminal conviction in your past, no matter how good a citizen you have been since you have been convicted, you will not be approved for a license. A dishonesty crime is theft, embezzlement, fraud, perjury, passing bad checks, among others. These types of crimes are total disqualifiers. If you have a criminal conviction within the past seven (7) years, you are disqualified from licensing. A very bad credit report is not an automatic disqualifier, depending upon the reasons for the bad credit. Were you unemployed for several months and had no income to pay your bills? Or did you declare bankruptcy because you had so much consumer debt due to purchases of lots of “stuff” that you were overwhelmed with bills? Depending upon the circumstances of your bad credit items, you may still get approved for your license.
Assuming you have no automatic disqualifiers, you need to create an MU4 record in the Nationwide Mortgage Licensing System (NMLS) database. The creation of your record gives you an NMLS number that you will keep throughout your life. In the mortgage broker/lender world, your NMLS number is your identifier the same way your social security number is your identifier elsewhere.
After you get your NMLS number, you start to complete the licensing requirements: taking pre-licensing education, passing the state and national tests, sending your authorization so that your state regulators can pull your credit report, and getting your background check done. There is no required sequence in which to complete these requirements. The stumbling block for many applicants is passing the tests so make sure you prepare for them.
The licensing laws of each state contain certain disqualifiers to licensing. If you have one of the disqualifiers, you should not even start the licensing process. If you have a dishonesty criminal conviction in your past, no matter how good a citizen you have been since you have been convicted, you will not be approved for a license. A dishonesty crime is theft, embezzlement, fraud, perjury, passing bad checks, among others. These types of crimes are total disqualifiers. If you have a criminal conviction within the past seven (7) years, you are disqualified from licensing. A very bad credit report is not an automatic disqualifier, depending upon the reasons for the bad credit. Were you unemployed for several months and had no income to pay your bills? Or did you declare bankruptcy because you had so much consumer debt due to purchases of lots of “stuff” that you were overwhelmed with bills? Depending upon the circumstances of your bad credit items, you may still get approved for your license.
Assuming you have no automatic disqualifiers, you need to create an MU4 record in the Nationwide Mortgage Licensing System (NMLS) database. The creation of your record gives you an NMLS number that you will keep throughout your life. In the mortgage broker/lender world, your NMLS number is your identifier the same way your social security number is your identifier elsewhere.
After you get your NMLS number, you start to complete the licensing requirements: taking pre-licensing education, passing the state and national tests, sending your authorization so that your state regulators can pull your credit report, and getting your background check done. There is no required sequence in which to complete these requirements. The stumbling block for many applicants is passing the tests so make sure you prepare for them.
Monday, January 31, 2011
Filing Reports with the State Regulators and the NMLS
Several of my clients and the NMLS have sent an email about a new reporting requirement. Within forty-five (45) days after the end of each quarter, all mortgage companies must file a report through the NMLS, reporting their mortgage activity in each state in which they are licensed or registered. If the company does not submit the report, then each loan originator in that company must file his/her own report. Each company must also submit a financial condition report (basically, an unaudited financial statement) once a year, within ninety (90) days after the end of the company’s fiscal year.
Many states are still requiring their own form of annual report in addition to the quarterly filings that you will need to start doing. These states (e.g., Pennsylvania, Virginia, Washington D.C., California, and Massachusetts) have, in the past, required elaborate paper or electronic forms, with financial information, loan activity, names of appraisers, title companies and lenders with whom they do business, and warehouse line of credit information. For 2011, many of these states have already sent out their forms to their licensees. If you are licensed in a state in which you have, in the past, filed an annual report, you must check with that state to find out whether they have changed their annual reporting requirement. These annual reporting requirements are in addition to the new NMLS quarterly reporting requirements.
As you know, some of the state annual reports are quite lengthy and take a fair amount of time to prepare. If you are too busy to get your reports ready, hire an outside company or law firm to do them for you. It is true that the SAFE Act has increased the amount of regulation reporting with which you must comply. Don’t let ignorance of the new compliance requirements and lack of time to organize your office to carry out your compliance obligations cost you in enforcement penalties and fines.
Many states are still requiring their own form of annual report in addition to the quarterly filings that you will need to start doing. These states (e.g., Pennsylvania, Virginia, Washington D.C., California, and Massachusetts) have, in the past, required elaborate paper or electronic forms, with financial information, loan activity, names of appraisers, title companies and lenders with whom they do business, and warehouse line of credit information. For 2011, many of these states have already sent out their forms to their licensees. If you are licensed in a state in which you have, in the past, filed an annual report, you must check with that state to find out whether they have changed their annual reporting requirement. These annual reporting requirements are in addition to the new NMLS quarterly reporting requirements.
As you know, some of the state annual reports are quite lengthy and take a fair amount of time to prepare. If you are too busy to get your reports ready, hire an outside company or law firm to do them for you. It is true that the SAFE Act has increased the amount of regulation reporting with which you must comply. Don’t let ignorance of the new compliance requirements and lack of time to organize your office to carry out your compliance obligations cost you in enforcement penalties and fines.
Monday, January 24, 2011
What Do You Do If an Investor Asks For a Copy of Your License?
Many times in the past (especially just after renewal season), I have received calls from my clients asking for copies of their licenses because an investor had asked for it. Most states have stopped sending out paper licenses.
If an investor needs proof that you are licensed in a particular state, you can either send that person to the NMLS Consumer Access database, at http://www.nmlsconsumeraccess.org/ or you can go to your own company record in the NMLS, click on Composite View, click on View Company, (or Branch if a branch license is needed), click on View License/Registration list (on left side of screen) and then print out the list. You can do the same with any loan originator. For some states, this is the only record they will have for you; many states do not send out paper licenses or keep a database on their state agency website.
This is the new normal.
If an investor needs proof that you are licensed in a particular state, you can either send that person to the NMLS Consumer Access database, at http://www.nmlsconsumeraccess.org/ or you can go to your own company record in the NMLS, click on Composite View, click on View Company, (or Branch if a branch license is needed), click on View License/Registration list (on left side of screen) and then print out the list. You can do the same with any loan originator. For some states, this is the only record they will have for you; many states do not send out paper licenses or keep a database on their state agency website.
This is the new normal.
Monday, January 17, 2011
What Should You Expect From the Loan Originator Licensing Process?
If you want to be a mortgage loan originator, what do you need to do to get licensed? What should you expect from the licensing process?
There are several requirements that are common to each state because of the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. These requirements are:
1. Registering with the Nationwide Mortgage Licensing System (NMLS) and applying for a license through the NMLS;
2. Taking 20 hours of pre-licensing education;
3. Passing state and national exams;
4. Submitting fingerprints for a federal background check that cannot show a conviction for a dishonesty crime;
5. A satisfactory credit report (“satisfactory” as defined by the state regulatory agency).
Once you have applied for your license, you may need to send in additional documentation to the state regulatory agency that approves loan originator licenses. Some states have extra documents and other states require an additiona set of fingerprints for a state background check.
Then, you complete the balance of the requirements in any order that you wish. The completion of each requirement must be done through the NMLS, as the regulatory agency will be checking the NMLS to see if you complete your requirements. Likewise, you must monitor your record on the NMLS to see if the state regulator has posted a request for clarification of anything you have sent in or a reminder that you still need to do something.
Once you have completed all of your requirements, you must wait for the regulators to review your license application and approve or deny it. The waiting period varies by state and by time of year. If your state has just transitioned its licenses to the NMLS, then your new application will be reviewed after all the transitioning licenses are reviewed. If you apply for a license during renewal season (November and December), then you will likewise have to wait until all the renewals have been processed. If you are applying for a New York license, they are severely backlogged and you could be waiting for a year to get a decision on your license application.
Check with your state regulator to make sure that he/she has received all of the required elements of your application. You may want to periodically check in to see how much longer you will need to wait for your application decision.
There are several requirements that are common to each state because of the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. These requirements are:
1. Registering with the Nationwide Mortgage Licensing System (NMLS) and applying for a license through the NMLS;
2. Taking 20 hours of pre-licensing education;
3. Passing state and national exams;
4. Submitting fingerprints for a federal background check that cannot show a conviction for a dishonesty crime;
5. A satisfactory credit report (“satisfactory” as defined by the state regulatory agency).
Once you have applied for your license, you may need to send in additional documentation to the state regulatory agency that approves loan originator licenses. Some states have extra documents and other states require an additiona set of fingerprints for a state background check.
Then, you complete the balance of the requirements in any order that you wish. The completion of each requirement must be done through the NMLS, as the regulatory agency will be checking the NMLS to see if you complete your requirements. Likewise, you must monitor your record on the NMLS to see if the state regulator has posted a request for clarification of anything you have sent in or a reminder that you still need to do something.
Once you have completed all of your requirements, you must wait for the regulators to review your license application and approve or deny it. The waiting period varies by state and by time of year. If your state has just transitioned its licenses to the NMLS, then your new application will be reviewed after all the transitioning licenses are reviewed. If you apply for a license during renewal season (November and December), then you will likewise have to wait until all the renewals have been processed. If you are applying for a New York license, they are severely backlogged and you could be waiting for a year to get a decision on your license application.
Check with your state regulator to make sure that he/she has received all of the required elements of your application. You may want to periodically check in to see how much longer you will need to wait for your application decision.
Monday, January 10, 2011
FHA Requires Your NMLS Number
Major changes were enacted by the Federal Housing Administration (FHA) in 2009 that applied to the approval, renewal, and loan submission process for FHA-approved mortgagees, starting in 2010. Those changes are still coming as FHA continues to revamp its procedures. The latest changes intersect the requirements that all mortgagees and loan originators have to be licensed under the SAFE Act and maintain a record of their licensing status on the Nationwide Mortgage Licensing System (NMLS).
The latest Mortgagee Letter (Mortgagee Letter 2011-4) requires all FHA-approved mortgagees to provide their Nationwide Mortgage Licensing System (NMLS) number in a number of places during the approval, renewal, and loan origination process. FHA also requires that mortgagees obtain and provide to FHA the NMLS numbers, names and tax identification numbers of the mortgage brokers for whom the mortgagee is acting as a sponsor. This process has been designed to allow FHA to provide performance data on the mortgagees’ third-party originators. If a particular originator is having high rates of default, the mortgagee can choose to no longer underwrite any loan applications from that mortgage broker. The FHA Connection has also been revised to capture the name and NMLS number of the loan officer involved in submitting an FHA loan. The entry of the NMLS number and name of the loan officer involved in a loan origination is optional until April 1, 2011.
The latest Mortgagee Letter (Mortgagee Letter 2011-4) requires all FHA-approved mortgagees to provide their Nationwide Mortgage Licensing System (NMLS) number in a number of places during the approval, renewal, and loan origination process. FHA also requires that mortgagees obtain and provide to FHA the NMLS numbers, names and tax identification numbers of the mortgage brokers for whom the mortgagee is acting as a sponsor. This process has been designed to allow FHA to provide performance data on the mortgagees’ third-party originators. If a particular originator is having high rates of default, the mortgagee can choose to no longer underwrite any loan applications from that mortgage broker. The FHA Connection has also been revised to capture the name and NMLS number of the loan officer involved in submitting an FHA loan. The entry of the NMLS number and name of the loan officer involved in a loan origination is optional until April 1, 2011.
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