| There are thousands of mortgage processors | | | | Then you can have your primary customer |
| acting on a contract basis in the United States. | | | | sponsor your mortgage loan originator license. This |
| The SAFE Mortgage License Act that passed in | | | | will allow you to process loans for your primary |
| July 2008 requires contract mortgage processors | | | | customer on a 1099 contract basis. The problem |
| to be licensed by July 2010. How does the new | | | | is that if you want to have other customers, you |
| law affect contract mortgage processors? | | | | would have to set up your contract between |
| Obtaining mortgage loan originator (MLO) licenses | | | | your sponsoring primary employer and the other |
| in multiple states can be very costly. What can a | | | | customers. So when you want to get paid by |
| contract mortgage processor do to comply and | | | | your other customers, the other customers |
| not break the bank? | | | | would have to pay your primary customer and |
| Let's first look at the definition of a contract | | | | then your primary customer could pay you. This |
| mortgage processor under the SAFE Mortgage | | | | obviously poses a huge problem for most |
| Licensing Act. The Act defines a mortgage | | | | contract processors since it is very unlikely you |
| processor as an individual that gathers documents | | | | will find a primary customer that will be willing to |
| from borrowers and submits the documents to a | | | | sign processing contracts with your other |
| lender, but does not take residential loan | | | | customers. However, this is how the states are |
| applications. The Act then goes on to state that a | | | | saying it must be done. Some states may be |
| mortgage processor is exempt from mortgage | | | | implementing this slightly differently, so I |
| loan originator licensing as long as they are a w-2 | | | | recommend contacting the state or a licensing |
| employee of just one mortgage company. Thus a | | | | service to determine how the state is interpreting |
| mortgage processor that is 1099 and/or | | | | these requirements. |
| processes loans for more than one mortgage | | | | Option 3 |
| company must be licensed as a mortgage loan | | | | You can choose to obtain a mortgage company |
| originator (MLO) and is considered a contract | | | | license and a mortgage loan originator (MLO) |
| mortgage processor. If you are defined as a | | | | license in each state you want to process loans in. |
| contract processor, then what are your options | | | | This is the ideal situation, because then you do |
| for obtaining a license in each state you process | | | | not have to be limited to just one employer as in |
| loans? | | | | option 1 and you do not have to have a primary |
| Option 1 | | | | customer sponsor you and pay you for your |
| You can choose to become a w-2 employee of | | | | other customers work as in option 2. However, |
| just one mortgage company and process | | | | this is the most costly option. It usually costs |
| mortgage loans for only that one company. This | | | | about $1,000 to $3,000 to apply for a mortgage |
| is probably not the ideal situation for most | | | | company license per state. And some states |
| contract mortgage processors, but it may be the | | | | have net worth requirements, experience |
| only option for some. The cost of licensing can be | | | | requirements, and bonding requirements that can |
| expensive and a license is required in each state | | | | be difficult barriers to overcome. |
| you process loans. Also, as we will discuss shortly, | | | | If you are able to go this option, you will actually |
| you may need to obtain a mortgage company | | | | be able to avoid the mortgage loan originator |
| license too. This is even more costly than | | | | licensing in many of the states by paying yourself |
| obtaining just the mortgage loan originator license. | | | | as a w-2 employee of your contract processing |
| The down side to this option is obvious. You can't | | | | company, but the costs will still be much higher. If |
| continue to process mortgage loans for your | | | | you are thinking of going this way, you will want |
| other customers. Also, it may be hard to find a | | | | to get licensed only in states you plan on |
| company that will hire you on a full-time w-2 basis. | | | | processing ten or more loans in each month. In |
| Most smaller companies just do not have the | | | | fact, most people that go this route will benefit |
| resources to maintain a full-time processor on | | | | from having a few contract processors work |
| staff. | | | | with them to offset the costs. |
| Option 2 | | | | Conclusion |
| You can choose to obtain a mortgage loan | | | | There are really no good answers to this dilemma. |
| originator (MLO) license in each state you want to | | | | In fact, this may be one of the worst problems |
| process loans in. Then you can have your primary | | | | facing the mortgage industry right now that most |
| customer sponsor those mortgage loan originator | | | | people are not even aware of. Plan for the |
| licenses. To get a mortgage loan originator license, | | | | business of contract processing to change |
| you will need to complete 20 hours of education, | | | | dramatically starting August 2010. And make sure |
| two tests, fingerprinting, credit check, and pay an | | | | to be prepared to fall under one of these 3 |
| application fee between $100 and $400 per state. | | | | options or you could be out of business. |