Mortgage broker businesses need to be licensed to provide services. Licensing is regulated at state and federal levels. Mortgage broker license requirements vary by state and by the services offered.

What Is a Mortgage Broker License?

Mortgage brokers help homebuyers and refinancing homeowners obtain the loans they need to complete their purchase or transaction. They are often the intermediary between the borrower and the lending institution. Mortgage brokers are independent parties who work solely on behalf of their clients to find the best deals. Examples of specific duties include:

• Rate shopping - This is the process of helping homebuyers or homeowners apply for pre-approvals or mortgage quotes.
• Explaining the mortgage loan process - Brokers walk homebuyers through the mortgage loan process, including how it works, the required documentation, and the timeline for approval.
• Providing education on the current loan environment - The real estate industry is complex, which can make the mortgage process stressful for homebuyers and homeowners. Brokers provide information on market changes and how they impact a purchase or refinance.
• Saving borrowers time and money - Mortgage brokers eliminate the time homebuyers and homeowners need to use to shop loans, compare interest rates, and select a lender.

Licensure is required to operate as a mortgage broker. State requirements vary in terms of the application and renewal process, so it’s important to have a comprehensive understanding of what is required of your business.

Mortgage Broker License Requirements

The process to obtain a mortgage broker license is detailed. Elements include the following:

• Required coursework
• An examination
• State registration requirements
• Surety bond insurance
• Renewal requirements

If you’re in the process of obtaining licensure, Harbor Compliance can assist with the formation of your business as well as the state application and renewal process.

Education and Testing Requirements

Most states require mortgage broker applicants to have at least one to three years of experience in the finance industry. In addition to that, applicants must take 20 to 30 hours of classes through a state or the Nationwide Multistate Licensing System (NMLS).

The training includes three hours on federal laws and regulations, three hours on ethics, two hours on nontraditional mortgage products, and twelve hours on elective courses. Training needs to be completed no more than three years after an application is submitted.

Once training is complete, applicants must pass a two-part SAFE Mortgage Loan Originator exam. A passing grade is 75% or higher. In the event an applicant does not pass the exam, they must wait 30 days before retaking the test.

Insurance Requirements

Obtaining a surety bond is one of the most common mortgage broker licensing requirements. Surety bonds protect clients from damages resulting from misrepresentation and fraud. The amount of the bond required depends on state law. For example, some states require lower bonds if brokers only work with institutional investors like state or federal banks. Other states base surety bonds on the amount of a broker’s loan volume. In most instances, surety bonds range between $10,000 to $150,000.

Registering as a Mortgage Broker

The registration process for mortgage brokers varies by state. However, in most instances, there are specific registration steps businesses go through. You should expect having to do the following:

• Choose a business structure. The most common business structures chosen by new mortgage brokers are sole proprietorship, partnership, and a limited liability company. Each entity type has its pros and cons, so picking the structure that best suits your business goals is essential.
• Choose a location. Most mortgage broker offices are located in the service area in which they operate. However, some states allow mortgage brokers to operate exclusively online.
• Determine a budget. There are a number of costs associated with obtaining mortgage broker licensure. Examples include the coursework and exam, registering the entity with the state, and potentially office rent. There are also costs for basic office supplies like computers, telephones, and software.
• Submit a mortgage broker application. Once you’ve chosen your location, determined your initial budget, passed the necessary testing requirements, and secured your bond certificate, it’s time to submit your license application to the state in which you’re looking to operate. Most applications include information about the business, a web address, your appointed registered agent information, and disclosure statements. You’ll also likely need to submit fingerprints and an FBI criminal background check. Once the state approves your license, you can focus on getting clients and building relationships with real estate agents.

Maintenance and Renewal

Most states require annual license renewals for mortgage brokers. Renewal may be possible through the online NMLS platform. Fees change depending on the domicile.

Continuing education is also required. States require different annual training hours to ensure mortgage brokers stay abreast of industry changes and legal requirements. Mortgage brokers also have the option of taking optional courses to obtain mortgage and real estate certifications.

Continuing education can be completed online or in person. While some find in-person learning to be a more manageable environment, online offers convenience and flexibility.

State Licensing Requirements for Mortgage Brokers

As mentioned, mortgage broker rules and regulations vary drastically across the United States. To properly apply for and maintain a license, it is imperative to stay on top of your requirements.

Click on the link below to view licensing information in your state.

Meeting the mortgage broker license requirements is not always an easy process. Fortunately, Harbor Compliance License Manager helps finance professionals maintain their licenses by automating repetitive tasks like tracking renewals. Through License Manager, you can also access Compliance Core™ data for the states you operate, reducing the time you need to spend researching state requirements. Contact our licensing experts today to learn more.