There are thousands of mortgage processors working on contract in the United States. The SAFE Mortgage License Act passed in July 2008 requires mortgage contract processor to obtain a license in July 2010. How the new law affects contract mortgage processor? Getting a mortgage loan originator (MLO) license in many countries can be very expensive. What can contract a mortgage processor do go and not break the bank?
Let’s first look at the definition of contract mortgage processor under the SAFE Mortgage Licensing Act. The law defines mortgage processor as a person who collects data from borrowers and providing documents to the lender, but does not include residential loan programs. The law then goes on to state that mortgage processor is exempt mortgage originator license as long as they are m-2 employee just one mortgage company. So mortgage processor of 1099 and / or process loans for more than one mortgage company must be licensed as a mortgage loan originator (MLO) and is considered a contract mortgage processor. If you are defined as a contract processor, then what are your options for obtaining a license in each state to work out a loan?
You can choose to become a m-2 employee just one mortgage company and the mortgage process only one company. This is probably not the ideal situation for most contract mortgage processors, but it may be the only option for some. The cost of licensing can be expensive and requires a license in each state you win loan. Also, as we will discuss shortly, you may need to get a mortgage business license too. This is even more expensive than getting just the original mortgage loan license.
The down side of this option is obvious. You can not continue working mortgages for other customers. Also, it can be difficult to find a company that will hire you full m-2 basis. Most small businesses just do not have the resources to maintain a full processor on staff.
You can choose to get a mortgage loan originator (MLO) license in each state you want to work loans. Then you can have a main customer strengthen the mortgage loan originator license. To obtain a mortgage loan original license, you will need to complete 20 hours of training, two tests, fingerprints, credit check, and pay an application fee of between $ 100 and $ 400 per state. Then you can have a main customer strengthen the original mortgage loan your license. This will allow you to process loans for your customer base the 1099 agreement. The problem is that if you want to have other customers, you would have to set up your contract sponsoring the main employer and other clients. So when you want to get paid by other customers, other customers would have to pay the main customers and primarily to customers could pay you. This obviously creates a huge problem for most contract processors where it is very unlikely that you will find the main client who will be willing to sign production contracts with other customers. However, this is how states are saying it will be done. Some states may regulate this slightly differently, so I recommend you contact your state or licensing services to determine how the state is to interpret these requirements.
You can choose to get a mortgage business license and a mortgage loan originator (MLO) license in every state that you want to borrow. This is the ideal situation, because then you will not be limited to just one employer as in option 1 and you do not have a customer base empower you and pay you for other customers and in option 2. However, the most expensive option. It usually costs about $ 1,000 to $ 3,000 to apply for a mortgage business license of the state. And some states have strong capital requirements, experience and bond requirements may be difficult obstacles to overcome.
If you are able to take this option, you will actually be able to prevent mortgage loans original license in many of the states by paying yourself as W-2 employee contract processing company, but the cost will still be much higher. If you are thinking of going this route, you should obtain a license only in the countries you plan to work ten or more loans each month. In fact, most people who go this route will benefit from having some contract processors work with them to offset the cost.
There are really no good answer to this problem. In fact, this may be one of the worst problems facing the mortgage industry right now that most people are not even aware of. Plan for business contract processing to change dramatically starting August 2010. And be sure to be prepared to fall under one of these three options, or you might be out of business.