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.

NEW Changes to Truth In Lending Act MUST READ!!!

Summary Effective for applications taken on or after July 30, 2009, the Federal Reserve Board

and Legal (“FRB”) adopts the final rule amending Regulation Z, 12 C.F.R. §§226.1 et seq. ("REG

Reference: Z"), which implements the Truth in Lending Act, 15 U.S.C. §§1601 et seq. ("TILA") and the Home Ownership and Equity Protection Act of 1994, 15 U.S.C. §§1639 et seq. Public Law 103-25 ("HOEPA").

The final rules revise the disclosure requirements for mortgage loans under REG Z. The intention is to ensure that consumers receive cost disclosures earlier in the mortgage process. The revisions to REG Z implement the Mortgage Disclosure Improvement Act (“MDIA”). On July 30, 2008, the MDIA was signed into law as part of the Housing and Economic Recovery Act of 2008 (“Public Law 110-289”).

Changes: The key changes to TILA effective in July are listed below:

· TILA disclosures are now required on all dwelling-secured, closed-end mortgage loans and applications. Previously, only certain transactions required these disclosures.

· There is a new statement that must be provided with the early TIL: “"You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."

· The “early” TILA disclosures must be delivered or placed in the mail not later than 3 business days after the creditor receives the consumer's written application, and at least 7 business days before consummation of the transaction. This is a new “waiting period.”

o For the above purpose “business days” include each day (other than Saturday or Sunday) when the head office is open to the public for carrying on substantially all our business functions.

· If the annual percentage rate (“APR”) on the “early” disclosure becomes inaccurate, by increasing or decreasing beyond established tolerance levels, the creditor must now make corrected disclosures to the consumer with a revised APR. The consumer must receive the corrected disclosures no later than 3 business days before consummation.

o The APR is considered accurate for a regular transaction if it is not more than 1/8 of 1 percentage point above or below the actual annual percentage rate.

o The APR is considered accurate for an irregular transaction if it is not more than 1/4 of 1 percentage point above or below the actual annual percentage rate

o For this purpose, the definition of business day is the “rescission” standard for business day, which includes all calendar days except Sunday and legal public holidays.

· Except for a reasonable fee for a credit report, no other fees may be collected before the consumer has received the “early” disclosure.

o If the creditor mails the disclosures, the creditor may assume the consumer has received the disclosures after midnight on the third business day following mailing of the disclosures.

o For this purpose, the definition of business day is the “rescission” standard for business day, which includes all calendar days except Sunday and legal public holidays

Mortgage Update for Monday June 29th 2009

Monday's bond market has opened in positive territory as investors prepare for this week's economic news. The stock markets have opened the holiday-shortened week in positive ground with the Dow up 83 points and the Nasdaq up 10 points. The bond market is currently up 13/32, which should improve this morning's mortgage rates slightly. We haven't gotten any improvements from our investors but if it stays like this it wont be long.

This week brings us the release of only four economic reports for the markets to digest, but three of them are considered to be important and one of those three is arguably the most influential report we see each month. In addition, these reports are being released over just three trading days.

There is no relevant economic data scheduled for release today. June's Consumer Confidence Index (CCI) is the first report of the week and will be posted late tomorrow morning. This index is important to the financial markets because it measures consumer willingness to spend, which is important because consumer spending makes up two-thirds of the U.S. economy. If it shows a sizable increase in confidence from last month, we can expect to see the bond market falter and mortgage rates rise slightly. Current forecasts are calling for a reading of 55.1, up slightly from last month's 54.9 reading.

Overall, tomorrow and Wednesday's data (Consumer Confidence Index and ISM index) should bring some volatility in trading and mortgage rates, but Thursday's Employment report is definitely the most important of the week. Its impact can single handily lead to an improvement or increase in mortgage rates for the week.

The financial markets will be closed Friday in observance of the Independence Day holiday, but there will be no early close for the bond market Thursday as has been the case previous years. However, it will still probably be a light afternoon in trading as traders head home for the long weekend. Oil prices will also be higher because of the holiday so that will affect the oil traders. My family is not planning on traveling for the 4th so increased fuel prices will not affect us as much as other people.

I hope AHK can get my personal production loan completed this week so the investor can buy it and the loan can be on its merry way. It closed on the 5th of June but is still stuck between the Title Co and Gold Financial getting the HUD-1 corrected. I have my fingers crossed that it will happen today, I would hate to have to tell a borrower that the house is not theirs after they have moved everything in because it closed almost a month ago :(

Well that will be all for now if you guys have any tips, hints or comments you want to post let me know and they will be put up. Thanks for reading and hope you enjoyed it.

Mortgage News for Thursday June 25th 2009

I just found out at AHK we have 3 investors who will do the IRS Down payment Assistance Program using the $8000 tax credit available to new home buyers. I will have more information on this exciting news tomorrow.
Thursday's bond market has opened up slightly despite no highly important economic data on the calendar today and a positive opening in stocks. The stock markets are showing minor gains with the Dow up 34 points and the Nasdaq up 15 points. The bond market is currently up 4/32 from yesterday's close, which should improve this morning's mortgage rates by approximately .250 of a discount point over yesterday's morning rates.

This morning's release of the final reading to the1st Quarter GDP didn't reveal any significant surprises. It showed that the economy contracted at a 5.5% annual rate during the first three months of the year. This was a small upward revision from the previous estimate of a decline of 5.7%, meaning that the economy did not shrink as much as previously thought. However, since this data is old now (second quarter initial reading comes next month), the size of the revision was not enough to influence bond trading or mortgage rates.

The Labor Department gave us last week's unemployment figures, reporting that 627,000 new claims for benefits were filed. This was an increase from the previous week's revised total of 612,000 and much higher than forecasts of 600,000. But, as with today's GDP reading, this data is not considered to be of high importance to the markets or mortgage rates.

Also worth noting is today's 7-year Treasury Note sale. Yesterday's 5-year Note sale went pretty well, but the FOMC statement took center stage during afternoon trading. If today's sale is also met with a good demand from investors, we may see bond prices rise later today and mortgage rates move lower. Results will be posted at 1:00 PM ET.

Tomorrow morning has two reports on its calendar. May's Personal Income and Outlays data will be posted early morning. This report gives us an indication of consumer ability to spend and current spending activity. Analysts are expecting to see an increase of 0.2% in income and a 0.4% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. An upward revision from the preliminary reading of 69.0 would be considered a negative for bonds. The earlier data is the more important of tomorrow's two releases.

The Mortgage Business and Stanley Bing

I regularly read Fortune magazine just to see whats going on in the financial world since since mortgage rates are driven so much by oil prices as of late and the bond markets. The last page of Fortune Magazine always has cool stories and this months editorial by Stanley Bing caught my eye. His column this month is about his experience with refinancing his coop in New York City and the hoops he had to jump through to get it done. Stanley Bing is the alter ego of Gil Schwartz a high ranking Exec at CBS. Since he is a pretty well off fellow you would think he would have no problem refinancing or doing anything to do with money. But his story really hit home because of what documentation he was required to provide to satisfy the underwriters.

As with most large companies the bank he was refinancing through had outsourced their underwriting to a foreign country. His particular underwriter only knows what the computer tells her is required and if she doesn't get these documents she will not approve Stanley's loan for his apartment. Things went from bad to worse. Every document needed at least two pieces of paper for backup, which then required additional documentation. Sometimes things got "lost." He began to have trouble sleeping. Then one morning He got an e-mail from the Speedy Approval Department. This situation is what we deal with everyday all day with underwriters and setup clerks everywhere. I tell all my loan officers to document, document and then document some more just for things like this.

Last week, when all seemed perched on the verge of success, Mr Bing got an e-mail from the Speedy Approval Department requesting my appearance at a certain time and a certain date at Room 101 of the corporate headquarters. "For final adjudication of this matter," the note said. It was not signed. That was a week ago. I'm happy to tell you that I did get my refinancing package through at last. And in the end, I don't think I had to sacrifice too much.If more borrowers were like Stanley it would be a lot easier for us to get loans through in a timely fashion. But the same can be said about Loan Officers that turn in packages to processing with an incomplete 1003 and the loan has to close yesterday.

The point of this new blog is to relay stories like these and many others to more people within our company. We need to all roll upour sleeves and get back to doing business like we used to before we got in this mess. If you want to read more of Stanley Bings editorials you can go to http://money.cnn.com/magazines/fortune/stanleybing/ or http://www.stanleybing.com .

If you have a funny story or an informative blog posting you want to share feel free to email me at nick@ahkloan.com.

New blog about the mortgage business and AHK!

Hey everyone I have finally got America Home Key Inc a blog where we can find out the latest happenings at corporate and the mortgage industry as a whole. I will also be including links to training available from AHK Corporate and through Marie Murry at Apex Training Group. We will try to get as many of our underwriters as we can to do guest blogs and tell us whats coming up as far changes they see and changes that have occurred and affect our daily lives as loan originators.

Our industry is steadily changing at a pace that hasn't been seen in many years and definitely not by the current generation of loan originators. This blog will be available to everyone at AHK to comment and respond to our posts. We will be posting new legislation that has been passed recently and what is in the pipeline for future legislation sessions that will change out industry. Most people I have talked to said the mandatory registration as a mortgage originator will be a good thing since everyone will be on the same level and we will not have Broker title versus the Loan Officer title. The only problem is everyone will have to get their 20-30 hours of Continuing Education in before the deadline.

Marie Murry with Apex Training Group has been doing her CE classes since the beginning of 2009 with America Home Key employees to get everyone ready for the change we saw coming. She has put on classes about Ethics and Morals to the most basic of How to Complete a 1003 Loan Application. These classes are open to everyone even if you do not work for AHK since everyone needs their required hours of CE.

Chas Winckel and Don Harris have really stepped up to try and fill the void that was left by Melinda Truitt who did so much for our company. Chas and Don have stressed that everyone needs to make sure they use Oasys and check your email on the system everyday to stay informed about changes. This blog will also be a place to keep up with changes but more on the public level.
Bryon Cunningham is probably one of the best DE underwriters in the FHA mortgage world and a make sense underwriter that wants to approve your loans. I know AHK is working to improve our rates and be able to bring us competitive pricing to help you close more loans.

I hope this blog is what everyone was talking about at our last meeting with Chas on Wednesday at our USDA Training and CE we had with Marie. Please comment and let me know what you guys want to see on the blog and where you want it to go from here.