Reality Check for Brokers, Bankers and anyone Originating in Texas

Don't be fooled into thinking that licensing for mortgage banking "might or might not" happen.

President Bush signed the law July, 2008, and Doug Foster, TDSML Commissioner, posted a notice about it the same month. Since then there have been numerous postings and updates on the TDSML website;

http://www.sml.state.tx.us/tdsml_important_information.html#safe_nmlsr

Here is a summary of the timeline for the postings and note that those loan originators that don't have a mortgage broker or loan officer's license will have to comply in April or May, 2010:

April 1 - May 31, 2010 All Mortgage Banker Companies; Financial Services Companies; Credit Union Subsidiary Organizations; State Agencies and Non-profits Engaged in Residential Mortgage Loan Origination; Contracted Processors and Underwriters; and Contracted Residential Mortgage Loan Originators Working for Commercial Banks Submit Licensing/Registration Application (MU1/MU2/MU3) on the NMLSR

All Residential Mortgage Loan Originators (RMLOs) Employed or Contracted by Mortgage Banker Companies; Financial Services Companies; Credit Union Subsidiary Organizations; and State Agencies and Non-profits Engaged in Residential Mortgage Loan Origination; and Independently Contracted Processors and Underwriters and Residential Mortgage Loan Originators Working for Commercial Banks Submit Licensing Application (MU4) on the NMLSR

July 1 – August 31, 2010 All Currently Licensed Mortgage Broker Entities Submit Application (MU1/MU2/MU3) on the NMLSR.

All Currently Licensed Individual Mortgage Brokers and Loan Officers Submit Application (MU4) on the NMLSR

The complete posting for this timeline is available at:

http://www.sml.state.tx.us/publications/important_information/NMLSR_Transition_Timeline_6_24_2009.pdf

Ask good questions and get REAL answers so you can make good decisions about for you and your family. Those of you who haven't got on the bus and started your CE credits are behind and have alotof classroom time ahead of you. To get up to speed you can hit up Marie Murry with Apex Training Group and get in her licensing CE classes. I have almost all of my training done so I am doing good.

Can a Real Estate Agent Become a Mortgage Banker/Broker?

So today I got a question about whether a Real Estate Agent can be a Loan Officer so here are some answers to help you.

While the addition of mortgage brokerage services to a real estate broker’s practice may produce additional income, there are a number of legal issues raised by such a business combination.

The questions and answers below, which are largely taken from the Texas Savings and Loan Department’s Web site (http://www.sml.state.tx.us/), address some of the issues raised concerning obtaining a mortgage broker license.

Q How do I become a mortgage broker?

A Anyone engaging the business of brokering mortgages in Texas must be licensed by the Texas Savings and Loan Department. The process involves filing an application and paying the application fee. There are experience and education requirements to be licensed as either a mortgage broker or a loan officer. Applicants must meet minimum financial requirements and post a surety bond. There is no examination.

Q Can i originate an FHA secured loan if I am a Licensed Real Estate Agent?

A The answer is "NO" a Realtor can not originate FHA loans.
The answer is found in the HUD Handbook 4060.1 Title II Mortgagee Approval Chapter 2
"and excerpt from said manual"
G. Full Time, Part Time and Outside Employment. A mortgagee may employ staff full time or part time (less than the normal 40 hour work week). They may have other employment including self employment. However, such outside employment may not be in mortgage lending, real estate, or a related field. Direct endorsement underwriters are included in this provision. An underwriter may not work on a part time basis for any other mortgagee, even underwriting conventional mortgage loans. An underwriter may not underwrite loans for a parent or subsidiary of the underwriter’s approved employer. A direct endorsement underwriter’s authority is through the employer and does not extend under any corporate “umbrella.”

Q I am a real estate salesperson. Am I exempt from the Mortgage Broker License Act?

A No. Real estate brokers and salespersons are not exempt from the act. A real estate broker’s license qualifies for the experience requirement under the act and would enable real estate brokers to qualify for a license. But if you are brokering first-lien mortgage loans, you must apply for and establish that you meet all of the criteria for a mortgage broker license. A real estate sales license does not meet the experience requirement for a mortgage broker license under the statute.

Furthermore, if you are not currently licensed as an active real estate broker in Texas (e.g., you are licensed in another state or, although licensed in Texas, your license has lapsed), you would not meet the requirements for a mortgage broker license.

Q I work for a company that closes loans in its own name. Is it exempt?

A Not necessarily. The act exempts employees of a mortgage banker and defines a mortgage banker as a HUD-approved lender with direct endorsement authority, a FNMA or FHLMC seller/servicer, or a GNMA issuer. Whether a company closes loans in its own name is not an issue.

The act also distinguishes persons who are employees from those who are independent contractors. Employees are persons who receive W-2s. Those who receive a 1099 are not employees but rather are independent contractors or other agents.

Finally, in order to be exempt from the act, such employees must be acting for the benefit of their employers. So persons who moonlight and broker loans on the side to companies other than their primary employer would be required to obtain a mortgage broker license.

Q I am a mortgage broker, and a real estate agent wants to come and work for me as a loan officer. Can they be a loan officer and a real estate agent on the same transaction?

A The law does not preclude a person from serving as a mortgage broker or loan officer and a real estate agent on the same transaction. However, the Mortgage Broker License Act requires that the mortgage broker or loan officer provide a written disclosure to the client in advance and obtain the client’s written consent. The Texas Savings and Loan Department makes available on its Web site a form for making this disclosure.

Q What do I need to do to be in compliance when I advertise?

A There are a number of very specific requirements in the Mortgage Broker License Act. You need to disclose that a mortgage broker or loan officer is running the ad. An easy way to do this is to place your license number in the ad. False, misleading, or deceptive advertisements are prohibited. You may advertise only products that are actually available, and if they are subject to any special or unusual conditions or requirements, those conditions and requirements must be disclosed.

You must comply with all other applicable consumer disclosure laws, including the Truth in Lending Act and Regulations. One of the most common violations is the failure to disclose APRs. If you are disclosing a rate, you must show it as an annual percentage rate or APR calculated in accordance with Regulation Z.

Q I am a real estate agent. I take loan applications and I get paid for it. Do I need to be licensed?

A Under the regulations implementing the Mortgage Broker License Act, there is a three-part test to determine whether you must be licensed. First, are you taking the application? Second, are you deciding where the loan application is being sent? Third, are you being compensated for your role with respect to the loan? If the answer is yes to all of these questions, you must be licensed as a mortgage broker or loan officer.

Q Where can I find the actual Website with the Mortgage Broker License Act for me to read?

A To read this important document that is required in obtaining your Mortgage broker License go to Here.

For additional questions and answers, see the Mortgage Broker Licensing FAQs on the Texas Savings and Loan Department Web site, http://www.sml.state.tx.us/.

I will keep adding to the Q & A as I find more answers.

Mortgage News for July 6th 2009

I hope everyone had a great Independence Day and had a safe 4th of July. Monday's bond market has closed in negative territory despite a day of ups and downs. The stock markets are starting the week with minor losses as concerns over this week's events prevent gains in the major indexes. The Dow closed up 44 points while the Nasdaq lost 9 points. The bond market closed down 28/32, which should push tomorrow morning's mortgage rates lower by approximately .125-.25 of a discount point over Monday's morning rates.

This week brings us the release of only two monthly economic reports and they both will be posted this Friday. It also is the beginning of corporate earnings season that can lead to significant volatility in the stock markets and has the potential to influence bond trading and mortgage rates. So far this year it has been a mixed bag with corporate earnings with some companies showing a higher than expected gain or a better outlook on the losses.

There are a couple of Treasury auctions that are scheduled to take place this week, with some that took place today. This sale isn't exactly the most important auction of the week, but with no relevant data being posted until later in the week it may influence bonds and possibly mortgage rates if we see a very strong or extremely poor demand from investors. So don't go burying your savings in the backyard quite yet.
President Obama has announced that he will need to reappoint Ben Bernanke the current Fed Chief or appoint a new head of the department. All the analysts predict that President Obama will keep Bernanke in place in order to keep on his plan of economic restructure.

Overall, we are expecting to see a very active week in mortgage rates. So far no day in particular will be the most important of the week. Friday is the easy candidate with two monthly reports scheduled to be posted, but neither is considered to be a major release. Wednesday is also a possibility due to the 10-year Note auction and the opening act of earnings season. I suspect that we may see some pressure in bonds the first part of the week unless the major stock indexes continue Thursday's selling.