The rules established in California follow the national rules except for some of the state’s own additional standards which must be met in order to obtain certification to process mortgages. On January 4, 2010, the state began accepting filings through the Nationwide Mortgage Licensing System (NMLS). NMLS is part of the Secure and Fair Enforcement Mortgage License Act. It was designed so that the mortgage industry will have higher professional standards. This was considered after the collapse in the housing markets. Prior to the collapse, each state operated its own system for regulating the residential mortgage lenders and licensing practices. This practice resulted in varying degrees of standards regarding education, background checks, and testing.
With the new NMLS California registry consumers can check on their mortgage loan originator known to the system as a MLO. This ensures the MLO is registered at the Nationwide Mortgage Licensing System. This is beneficial for consumers by reassuring them that they are working with individuals who are in compliance with the national standards. Another benefit of this unified system is that it offers easy checking on loan originators’ past history. You can see where they have worked and if a license has been suspended in any state. This one feature should help reduce identity theft for consumers.
In the State of California, all mortgage loan originators must have their new license through NMLS California to continue operations in 2011. These steps are positive actions to aid the restoration of confidence and trust of the consumer and the companies they work for. The process starts with companies sponsoring their mortgage loan originator as employees. Prior to these changes many loan originators operated as independent businesses and were 1099 sub contractors. As part of the California Residential Mortgage Lending Act, individuals will only be approved, for what is known as a mortgage loan originator licensee, if a company is sponsoring them. This change will eliminate originators from working for multiple companies at the same time and the issues arising from this behavior, including privacy concerns, identity theft and loan flipping.
Aside from the application, there are several additional requirements that must be met before a license gets issued. First is taking a pre-license education course. Then, individuals must get a passing score of 75 for the National and the State of California’s component SAFE Act mortgage tests. Next, the applicant must complete a criminal background check which includes fingerprinting. MLOs must also authorize the NMLS to run a credit report to share it with the state of California which will review if the originator is conducting his personal finances and if applicable, business finances with same regard that would be beneficial to the financial health of the consumer. Finally individuals must be sponsored by a company which is registered and approved by the state through the NMLS.
Every location a company operates in California needs to have on-site management for the areas where the licensee conducts business. Moreover, each branch must have at least one manager who has a completed MU2 form and approved through the registry. A review of all filings and required documents will be carried out by the Department of Real Estate and the Department of Corporations, and communication will be made through the NMLS. These requirements are designed to step up the accountability in the mortgage lending industry and to provide safe guards for consumers. In closing, the Department of Real Estate will gain a new system which adds transparency and reduces time and cost with centralization. This should benefit all parties including mortgage loan originators.