I live in Illinois and hang my mortgage license in Illinois. The licensing process was not simple.
I have family in Ohio and want to be actively licensed to lend in Ohio. The licensing process is even harder.
I have spent more than 100 hours (yes, I’ve clocked it) trying to prepare my application for the state of Ohio. To be fair, though, the 100 hours includes 24 hours of introductory training that I was required to take within the Ohio state lines on the basics of mortgages and mortgage lending.
I like the training aspect of licensing, but by “professor” had 20+ years of experience and — aside from using a slide rule to calculate payments — was flat-out incorrect on most mortgage facts. For example, Jumbo Loans are not more expensive because they’re more risky; they’re more expensive because the cost of securitization is spread across a smaller pool of loans. The brand-new loan officers in the room had no idea they were being fed misinformation.
But all of that aside…
In order to be licensed as a mortgage broker in Ohio, I need to do the following:
- Register Mobium Mortgage as a business in Ohio
- Register Mobium Mortgage’s main office in Chicago with the state of Ohio
- Lease physical space for and then register that as the Mobium Mortgage branch office that will be located in Ohio
- Register myself as a loan officer
On the surface, not so bad. But, looking deeper at the requirements, you see these steps:
- State police background check for all officers, the operations manager, and loan officers wishing to be licensed
- FBI fingerprinting for all officers, the operations manager, and loan officers wishing to be licensed
- 24-hour in-state training for the operation manager and all loan officers wishing to be licensed
- Provide W-2 statements dating back 10 years for the operation manager
- Open and maintain a checking account in the state of Ohio for paying third-party costs (i.e. appraisal) that does not earn interest
- Maintain all financial records on-site in the Ohio branch office
You read the list and it looks fine, but then you contrast it to New York, Pennsylvania, California, Texas and other states and you wonder: why don’t the same rules apply everywhere?
If the government is intent on “cleaning up the mortgage industry”, then they can start by supporting a national licensing system similar to NASD. No license, no loans. Not only does that make policing easier, it allows loan officers to spend less time applying for a license and more time doing their jobs. Not to mention training is taken over by a national provider that teaches from a textbox instead of from on-the-job training.
To speed up licensing, my team is flying to Ohio in two weeks for FBI fingerprinting. Turns out, Ohio cannot accept electronic fingerprints from out-of-state vendors so the best option is to “fly to Ohio and have them done”. If we didn’t fly in, the turntime to take an FBI fingerprint card and have Ohio scan it is “at least 10 weeks”. For in-state processing, it’s 3 days. Crazy.
So, we are hopping a plane to Columbus for breakfast and fingerprints.
Anyway, enough about me.
I am trying to find somebody who has recently been licensed in Ohio as a Main Office, then Branch Office, then as an LO to find out how long the process will take and to tell me what to expect. The state, naturally, won’t tell me anything that isn’t written in their “instruction booklet”. Submit a clean file and the file will be approved, they say.
I am trying to find out if this is a 10-week process start-to-finish, or 10-month process. Can anybody help me?
Brian Brady says:
What a PITA, Dan. It’s grueling to say the least. NASD-type licensing would make things simpler or no licensing whatsoever.
I might suggest that you affiliate Mobium with a federal bank as an affiliated branch. Lot’s of good choices out there. Your loan programs become limited but the headaches are gone for the few loans you do there.
April 3, 2007 — 8:58 am
Morgan Brown says:
Dan,
I agree with you completely. A NASD licensing system makes too much sense for there not to be one.
April 3, 2007 — 9:48 am
Russ says:
Dan.. it will probably get worse over the next year or so as states seek to protect everyone from predatory lenders. I agree with you about the NASD type licensing. The bigger issue is that brokers are being held to a completely different standard (higher) than federally charted banks as Brian points out. It is patently unfair that these onerous state laws and licensing processes apply to brokers, but the big banks can just thumb their noses and keep on originating without licensing.
I know there are supposed to be two bills proposed right now about national licensing and this is seems to be getting traction.
April 3, 2007 — 10:10 am
Dan Green says:
I just called the Ohio Mortgage Brokers Association. They said that a member notified them that the state is not processing any new applications until June.
Can anyone confirm this?
And how long should I expect for my paperwork to process?
April 3, 2007 — 11:30 am
apella says:
Dan,
As an appraiser that covers SE Michigan and NW Ohio I have many contacts and can help if you like you are more then welcome to contact me so that I can forward you some good people that may have information for you.
April 3, 2007 — 10:10 pm
Jillayne Schlicke says:
Dan,
Not of great help now, but in the future: Washington State’s former regulator, Chuck Cross is heading to DC to work on national licensing for all mortgage brokers and loan originators. He was a key figure in both P-lending settlements against Household and Ameriquest.
http://www.csbs.org/AM/Template.cfm?Section=Mortgage_Licensing
Russ, comparing state-licensed mortgage brokers with employees at a federally chartered bank is like comparing apples to oranges.
A federally chartered bank has deep pockets to fund things like
ongoing education/training
an actual compliance department
an auditing department
most small, one-person mortgage broker shops don’t focus on compliance unless they’re forced to, kicking and screaming all the way. They’re small business owners, struggling to make a profit and survive. Yes, the regulations are different, thank god.
If brokers want to be treated like bankers, then save up some money and become a bank.
Personally, I like seeing lots of different choices out there for consumers. If all companies were the same, life would be boring. That’s like saying I wish every guy looked as hot as Brad Pitt. Boring.
Mortgage brokers can and do differentiate themselves from the big banks. State licensing lets a small buz owner get his or her start in the world, but there’s no way we ought to regulate them in the same way. They are different.
April 4, 2007 — 11:34 pm
Dan Green says:
Jillayne, it sounds like you are saying the a loan officer at Chase Bank is more qualified to do loans that a loan officer at ABC Mortgage Broker because he has access to more training and has an auditing department.
I know that’s not how you meant it.
But, to change that perspective for you: what about a mortgage broker that handles $20 billion in loan volume annually? Or, one that has 500 employees? Is that still an apples-to-oranges comparison?
There are many 1-man shops that are struggling to survive, but not because the person running them is not good loan officer. To me, that is what the national licensing is about — authorizing good loan officers to do business anywhere.
You’re an attorney and you understand from experience how paperwork can stand between a person and his job. My point in the post was that all of the hours spent getting a license for Ohio would have to be replicated in 49 other states for me to be a nationwide lender.
A federal charter would be exempt and that is kind of screwy. The loan officer at Chase is well-funded, but that alone does not make him a mortgage expert, or even an honest one.
Thanks for the good comments. You always have something helpful to add.
April 5, 2007 — 4:44 am
Jillayne Schlicke says:
Hi Dan,
Yes, you are accurate in saying that’s not what I meant.
It is common knowledge that both competent and incompetent retail mortgage salespeople work at all types of institutions: bank, broker, lender, credit union, consumer finance company.
Institutional comparison only, the requirements for a mortgage broker and a federally chartered bank in terms of training, auditing and compliance are radically different, no matter how much loan volume the broker has per year. That same broker may decide to make choices to allocate re$ources to education, auditing and compliance, but it is that broker’s prudent choice and not a requirement.
I’m not an attorney, but thanks for the compliment. I actually like attorneys because I learn so much from them.
Getting back to your frustration in state-to-state licensing, I completely agree with you. In my perfect world, there would be a competency test for all retail mortgage salespeople, no matter where they work, that would be recognized by all states.
Level 1: Minimum standards of competency including conventional, FHA, and VA loans; A paper only.
Level 2: a test and a license to retail more difficult loan types like Alt A paper.
Level 3: a test and a license to retail subprime loans
Level 4: a test and a license to retail what has been labeled as “exotic” types of financing.
Level 1 retail mortgage salespeople would not be licensed to sell Level 4 loan products.
Test would include an ethics component at every level. The licensing law would mandate fiduciary duties owed to consumers.
A national test, a state license, and then options for a national licensing process. This would streamline the process for smaller brokerages and save them money, which they could then re-allocate to training their originators.
What do you think?
April 5, 2007 — 12:15 pm