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 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.