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   ARTICLE   |   From Scotsman Guide Residential Edition   |   October 2005

Legislating Licenses

As state licensing requirements evolve, mortgage professionals are feeling the impact

Over the past several years, mortgage professionals have been faced with a new and changing regulatory environment, particularly in light of the national effort to eradicate the fraudulent lending practices that have plagued the industry. One challenge, in particular, has surfaced as a result of these new and changing regulations, and, if not addressed, could impact the business of individual mortgage professionals and companies alike.

Mortgage-professional licensing is quickly becoming an essential component of conducting business in this industry. Many states are either proactively establishing new licensing requirements or are revisiting existing legislation to implement changes in licensing requirements. Because these requirements are state-specific and vary from state to state, it has become a challenge for many mortgage professionals to fully understand, effectively manage and comply with these mandates, particularly if they conduct business in more than one state.

For example, in Texas, legislation was recently passed that addresses eligibility requirements for individuals applying for loan-officer licenses. One of the requirements is to either successfully complete 30 hours of approved education courses, an increase from the current 15-hour requirement, or have at least 18 months of experience as a loan officer. Changes to continuing-education requirements have also been made. The requirement remains at 15 hours of continuing education for license renewal; however, the new law specifies the course material that must be covered and the training method that must be used. Mortgage professionals are now required to attend two hours of live classroom training to complete the required ethics course.

This year in Maryland, legislation was passed requiring mortgage professionals to apply for a license with the Department of Labor, Licensing and Regulation, to conduct business in the state. This legislation also sets the requirements for obtaining a license, which includes a $100 application fee and $300 licensing fee. It also authorizes the commissioner to set continuing-education requirements as a condition to renew a license.

Establishing licensing requirements is a key initiative to improve the industry’s reputation and set a promising foundation for its future. However, these requirements are also placing mortgage professionals in an unfamiliar position of ambiguity. With states implementing new and changing requirements each year, it is becoming increasingly difficult for mortgage professionals to maintain compliance with the regulations, particularly as they strive to conduct business in more than one state.

Finding licensing-requirement information

Currently, there is no information repository that exists as a comprehensive resource for mortgage professionals to learn about states’ licensing requirements. Mortgage professionals and/or company compliance departments must be ready to do some research.

  • Visit state Web sites. Each state posts state laws and pending legislation. You can conduct searches for specific information.
  • Visit state mortgage-association Web sites. Oftentimes, these sites will feature the latest legislative changes and their impact on mortgage professionals.
  • Seek out industry experts. Because education is a significant part of licensing requirements, experienced mortgage-education providers typically track existing and upcoming legislation related to licensing. You can also subscribe to licensing and compliance newsletters available through some mortgage-education providers.
  • Read industry publications. Many mortgage publications feature articles on legislation and its impact on mortgage professionals.

Ideally, mortgage companies have an internal department dedicated to compliance issues. In reality, however, many companies do not have the resources for such a department and must decipher these changing regulations on their own. It can be time-consuming, but investing the time will be worthwhile as your business grows.

Developing a licensing plan

One way to effectively manage your mortgage business in more than one state is to create a licensing plan. Developing the plan requires strategy, research and regular maintenance. Create a list of each state in which you currently do business, as well as the states in which you would like to do business. Target these states based on your business goals and available resources.

The research component of the plan could quite possibly be the most time-consuming piece, but will serve as the basis for acquiring licenses and complying with requirements. Next to each state, identify each licensing requirement.

Add a calendar to your plan that clearly identifies deadlines for license renewal and establish your own deadlines for any actions you must take before that deadline, such as completing continuing-education courses.

Review this plan regularly to ensure you are on track. Continually edit your plan as new licensing requirements are established in the states you have targeted for business. 


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