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!
Tuesday, March 2, 2010
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!
Monday, January 25, 2010
Are There Any Wholesale Banks Still Out There?
I’ve got mortgage broker clients that are in a bind because their lenders will not let them close loans if their renewals haven’t come through (even though the state banking department still allows the mortgage broker to continue to solicit new business and close loans). So, if there is anyone out there who knows of lenders out there who wish to work with retail mortgage brokers, please send me an email to: Robin@mortgagelicensesolutions.com and let me know their contact information. If anyone actually does send me any names, I will investigate whether they are legitimate, what their requirements are, and let my readers know about them. This could be beneficial for mortgage brokers looking for new lenders and for lenders who want to work with more mortgage brokers.
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!
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, January 11, 2010
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.
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 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.
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!
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