As published in Scotsman Guide Magazine, Titled: Know What’s Needed to Cross State Lines
The first thing to keep in mind when deciding to get licensed in multiple states is that every state is different. Mostly in the last 10 years, every state has come up with their own licensing scheme. The state congress passess a bill requiring mortgage companies, branches, and/or loan officers to get licensed. The bill then designates a regulatory agency such as the Department of Financial Institutions in the state to come up with a plan to license all required individuals according to the bill passed by congress. I’m giving you this background, because it helps to understand the reason why ever state is different. Although the state congressmen and regulators often help each other come up with these licensing schemes, they almost always add their own little twist to it. In general, however, most states require the mortgage company (whether it be a corporation, LLC, or sole proprietorship) to be licensed, the branch locations to be licensed, and the loan originators to be licensed. Some exceptions are Colorado for example, which requires only the loan originators to be licensed and not the company they work for. There is also a common thread to the types of documentation the states require in an application for a license. I’ll be going over this in the rest of the article.
Almost every state has the following requirements: Filing for certificate of authority as a foreign entity, registered agent, surety bond, fingerprints, education, experience, and exams, detailed ownership and officer information, financials, and a final application. For details on each states license requirements go to: State Mortgage License Requirements
Certificate of Authority as a Foreign Entity and Registered Agent
Usually this is filed with the Secretary of State. It can range from $25 to as high as $700 but usually costs about $100. The filing is basic information on the company, its owners, officers, and directors. It is required to be filed in almost every state prior to applying for a license.
A registered agent is someone physical in the state that can receive service of process from a court, attorney, or regulatory agency. There are many companies that handle this service nationwide for about $125 per state per year. Information on the registered agent is required to be sent with the filing for the certificate of authority
Almost every state is now requiring licensed mortgage companies to obtain a surety bond. I have written an article about this at: Surety Bond Overview. Basically a surety bond protects the consumer, third party, and state against any claims made against a mortgage company that does not have the ability to pay. This is not insurance and will be required to be paid back if you ever get a claim against your surety bond. The best thing to do is to never allow your surety bond to be drawn against. Most states require between a $10,000 to $100,000 surety bond to obtain a mortgage license. The cost usually ranges from 0.7% to as high as 3% if you have bad credit or financials.
Fingerprints or other Criminal Background Check
Every state has some way of determining if the owners, officers, directors, and loan originators have a criminal history which would exclude them from being able to be licensed. Often states handle this by obtaining fingerprints. You will have to go to your local law enforcement office to get the fingerprints. If you do have any criminal or civil background, you will want to provide the state with the information up front. Many people have minor violations, which could become an issue when licensing if the information is not provided up front. The cost for this is around $40 to $75 per person.
Education, Experience, and Exams
Each state requires some sort of proof that an officer of the company has enough knowledge and experience to adequately run a mortgage company. Normally states will require 1 to 3 years of experience for a principal officer of the company. Many states also require initial education and almost every state requires continuing education in order to renew your license. Initial education can be taken online in some states but is required to be live in others. There are about 5 states that require an exam for a principal officer. Even if you have a detailed knowledge of federal laws, you will have to study a lot for these exams since they have a lot of state law questions.
Detailed Ownership, Officer, and Director Information
Every state requires you to provide details on the owners, officers, and directors of the company. The information is similar to filling out an application for a loan or a new job. They always want your social security number, your residence history, employement history, and criminal history. Again, being as detailed as possible eliminates the state coming back and asking for more information
A majority of states have a net worth requirement. Net worth is the difference between your assets and liabilities. Personal assets are not included in this calculation unless you put those assets in your company. The average net worth requirement for mortgage brokers is about $25,000 but can be as high as $100,000. Fortunately only a few states require audited financials in order to obtain a mortgage license. Audited financials can be very costly and time consuming. Recent quotes I have seen on audited financials have been between $2,000 to $10,000 per year.
The final application is the last step to getting licensed in the state. Every state has different questions they may ask about your business plan, quality control plan, company information, articles of incorporation or organization, etc. The list can go on quite long some times. The prices for the final license application range from as low as $100 to as high as $3,000. Most state license applications are around $750.
If you are ready to go through this process, we have the experience at Integrity Mortgage Licensing to make the process simple and expedited.