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MAMB
Members > Frequently Asked Questions
1.
Who must apply for a mortgage originator license
under the new law?
2. Do owners of mortgage broker companies
who are also mortgage originators need to be licensed
individually as mortgage originators in addition
to their company license (Maryland Mortgage Lender
License)?
3. Are there exemptions to the licensing
requirement?
4. How is a net branch office defined?
5. What are the license limitations?
6. What are the qualifications for
a mortgage originator license?
7. Should a mortgage originator seek
approval from the Commissioner prior to changing
employers? If the mortgage originator terminates
employment with a mortgage broker and becomes
employed with a lender, is approval from the Commissioner
or notification necessary? When should a license
be surrendered?
8. If the mortgage lender's business
activity consists of brokering loans and making
loans, must their mortgage originators apply for
a license?
9. If the home state of an out-of-state
mortgage lender has a brick and mortar requirement
for out-of-state mortgage lenders, would Maryland
require a physical presence of that out-of-state
lender?
10. I am an existing licensed mortgage
lender/broker in the State of Maryland. I do not
have a physical presence in Maryland. My home
state requires a physical presence of an out-of-state
mortgage lender, how does the new law affect me?
11. What is the cost of the mortgage
originator license?
12. When will mortgage originator
licenses expire and have to be renewed?
13. What are the required courses?
Where are they offered? Do online courses satisfy
the requirement?
14. How does the education requirement
affect loan officers or covered employees who
have been in the mortgage lending business for
a number of years?
15. If classroom education is not
completed at time of application, will the Commissioner
issue a provisional license?
16. When will applications become
available? Can applicants apply on online?
17. Are there any regulations or
guidelines on the contents of advertising by Mortgage
Brokers specifically with respect to possible
discriminatory advertising?
18. Does the 8 point limit include
the YSP?
19. Under what
circumstances can a loan officer can be properly
classified as an Outside Sales Employee, exempt
from both minimum wage and overtime under the
federal Fair Labor Standards Act?
20. How long must
a broker retain the records of his or her customers?
21. Can I pay employees
using a form 1099 vs. W-2 form?
22.
What are frequent consumer complaint issues?
1.Who
must apply for a mortgage originator license under
the new law?
The plain language of Chapter 590 indicates that
it applies to a mortgage originator who: (1) either
is employed by a mortgage lender that is a mortgage
broker under FI 11-501(i) or has a net branch
office out of which the individual works; (2)
directly contacts prospective borrowers for the
purpose of negotiating with or advising the prospective
borrowers regarding mortgage loan terms and availability;
(3) receives compensation on a percentage basis;
and (4) is authorized to accept a loan application
on behalf of the mortgage lender.
If you are an employee of a mortgage lender (that
makes mortgage loans), no license is required
unless you work out of a net branch and meet the
other criteria of a "mortgage originator".
If
you are an employee of a mortgage broker and meet
the other criteria of a "mortgage originator,"
you will need a license.
2.
Do owners of mortgage broker companies who are
also mortgage originators need to be licensed
individually as mortgage originators in addition
to their company license (Maryland Mortgage Lender
License)?
Yes, but if they own 25% or more of the mortgage
lender licensee, they do not need mortgage originator
licenses. (FI §11-601(k)(2))
3. Are there exemptions to
the licensing requirement?
Yes. The new law does not apply to an individual
who is currently licensed under the Maryland Mortgage
Lender Law ("MMLL") or an independent
contractor. Independent contractor means a person
whose compensation is paid without a deduction
for federal or state income tax. An independent
contractor must obtain a mortgage lender license.
(FI §§11-601(k)(2) and 11-602)
4.
How is a net branch office defined?
(FI 11-601)(l)
(1) "Net branch office" means a branch
office of a mortgage lender that is separately
licensed under Title 11, Subtitle 5 if:
(i) As a condition of establishing the net branch,
the mortgage lender requires the mortgage originator
who works in or out of the branch office, or a
person controlled by the mortgage originator,
to pay an application, licensing, franchise, start-up,
or other fee to the mortgage lender or directly
to the Commissioner;
(ii) The overhead expenses of the net branch are
paid in whole or in part by:
1. Mortgage originator who works in or out of
the branch office; or
2. A person controlled by a mortgage originator
who works in or out of the branch office; or
(iii) The mortgage lender is not:
1. An obligor on a lease of the premises of the
branch location; or
2. An owner of the premises of the branch location.
(2) "Net branch office" does not include
the mortgage lender's principal office.
5.
What are the license limitations?
A mortgage originator license authorizes a loan
officer to be employed by only one mortgage lender.
The new law prohibits a loan officer from maintaining
employment with multiple lenders. Moreover, a
mortgage originator may hold only one license.
(FI § 11-603)
6.
What are the qualifications for a mortgage originator
license?
In general, applicants must have at least 3 years
of experience in the mortgage lending business
and have completed any required courses for continuing
education as mandated by COMAR.09.03.06.17 or
have completed 40 hours of classroom education
and pass a written examination. Applicants must
also undergo criminal background checks, pay various
fees, and meet other requirements under FI §
11-605.
7.
Should a mortgage originator seek approval from
the Commissioner prior to changing employers?
If the mortgage originator terminates employment
with a mortgage broker and becomes employed with
a lender, is approval from the Commissioner or
notification necessary? When should a license
be surrendered?
The new law requires a licensee to notify the
Commissioner in writing in advance of a change
in the licensee's name or employer and obtain
an amended license. A fee of $75.00 is required
to amend the license. An individual may not act
as a mortgage originator under a name or for an
employer that is different from the name and employer
that appear on the license. (FI § 11-603)
8.
If the mortgage lender's business activity consists
of brokering loans and making loans, must their
mortgage originators apply for a license?
The new law has no exception from licensing for
minimal brokering activities. Therefore, mortgage
originators must apply for a license if the lender/employer
brokers more than one mortgage loan per calendar
year. (FI § 11-502(b)(4)(ii))
9.
If the home state of an out-of-state mortgage
lender has a brick and mortar requirement for
out-of-state mortgage lenders, would Maryland
require a physical presence of that out-of-state
lender?
Yes, in connection with an application for a mortgage
originator license. (FI § 11-603(d))
10. I am an existing licensed
mortgage lender/broker in the State of Maryland.
I do not have a physical presence in Maryland.
My home state requires a physical presence of
an out-of-state mortgage lender, how does the
new law affect me?
Your mortgage originators will not be eligible
for a mortgage originator license until you establish
an office in Maryland staffed by at least one
employee eligible to originate mortgage loans.
(FI § 11-603(d))
11. What is the cost of the
mortgage originator license?
Applicants must pay a nonrefundable investigation
fee of $100 and a license fee of $300.
(FI §11-606(b))
12. When will mortgage originator
licenses expire and have to be renewed?
Mortgage originator licenses will expire on a
staggered basis..
13. What are the required
courses? Where are they offered? Do online courses
satisfy the requirement?
New regulations are currently being prepared by
the agency. The Commissioner hopes to publish
the proposed regulations in the Maryland Register
in the fall of 2005.
They
will list all required courses and applicable
hours. The courses will be offered by a number
of approved course providers. A list of currently
approved courses and instructors are listed on
the agency's website at www.dllr.state.md.us/finance.
That list will be supplemented and updated periodically.
Mortgage originators may complete online courses
to satisfy continuing education requirements.
However, online courses will not be counted if
the 40-hour classroom education is a qualifying
factor.
14.
How does the education requirement affect loan
officers or covered employees who have been in
the mortgage lending business for a number of
years?
The Commissioner anticipates that the proposed
regulations will require a reduced amount of continuing
education for mortgage originators who have been
in the business for at least 10 years. This is
similar to the requirement in COMAR 09.03.06.17C.(3).
These courses must be completed during the 24
months immediately preceding application.
15. If classroom education
is not completed at time of application, will
the Commissioner issue a provisional license?
No, to qualify for a license the new law specifically
requires prior completion of the required education.
(FI §11-605)
16. When will applications
become available? Can applicants apply on online?
The new law takes effect October 1, 2005. However,
the licensing requirement for mortgage originators
will not take effect until January 2007. Applications
will be available by June 2006. Mortgage originators
must be licensed no later than January 2007. You
are encouraged to apply online.
17.
Are there any regulations or guidelines on the
contents of advertising by Mortgage Brokers specifically
with respect to possible discriminatory advertising?
Both federal and Maryland (or another State)
law will govern the content of advertising by
a mortgage broker. As to federal law, the federal
Fair Housing Act prohibits discrimination in advertising.
See 42 USC 3604(c) and 3605 (http://www4.law.cornell.edu/uscode/html/uscode42/usc_sec_42_00003604----000-.html).
I also suggest that a mortgage broker consider
the advertising rules in the federal Truth in
Lending Act regulations, found at 12 CFR 226.24
(http://a257.g.akamaitech.net/7/257/2422/01jan20061500/edocket.access.gpo.gov/cfr_2006/janqtr/12cfr226.24.htm).
As
to Maryland law, a mortgage broker must comply
with regulations found at COMAR 09.03.06.05 (http://www.dsd.state.md.us/comar/09/09.03.06.05.htm).
Also, a review of Maryland's Consumer Protection
Act's Unfair or Deceptive Trade Practices, Commercial
Law Article Section 13-301(5) (http://mlis.state.md.us/cgi-win/web_statutes.exe)
and Maryland's False Advertising law, Commercial
Law Article Section 11-701 (http://mlis.state.md.us/cgi-win/web_statutes.exe)
is recommended.
Remember
that each State's advertising rules will be different
and must be considered before advertising in a
certain State.
This
is not an opinion of law. MAMB suggests that you
contact your own legal counsel to discuss the
question you asked that the response you have
received as it applies to your specific situation.
18.
Does the 8 point limit include the YSP?
Maryland's
limit on broker fee (called "finder's fee")
is 8% of the amount of the loan or advance. "Finder's
fee" includes "any compensation directly
or indirectly imposed by a broker and paid by
or on behalf of the borrower for the broker's
services . . . ." [Emphasis added]. This
definition suggests that compensation paid by
the lender to the broker (often called "YSP")
could be included in finder's fee. However, the
Commissioner's office does not take that position
and, instead, takes the position that lender-paid
broker fee is NOT included in finder's fee. (Indeed,
we believe the Commissioner's office is required
to take the position that lender-paid broker fee
is NOT included in finder's fee based on on statements
made by the then Commissioner Fell at the hearing
on the law that clarified the meaning of finder's
fee.) Please note, for compliance with RESPA Section
8, I always recommend that a Maryland broker limit
its aggregate compensation (i.e., fees paid directly
by the borrower plus lender-paid fees) to no more
than 8% of the loan amount. A discussion is recommended
if more information is desired.
20.
How long must a broker retain the records of his
or her customers?
Under
Maryland's mortgage broker licensing law, brokers
are required to keep customer records for at least
25 months after a loan is made or denied.
Cite: MD Code Ann., Fin. Inst. 11-513; COMAR 09.03.06.04.
21.
Can I pay employees using a form 1099 vs. W-2
form?
W2
employees are covered by the MD Mortgage Lender
License held by the company. Loan officers who
are paid by 1099 tax forms are independent contractors
and are not covered by the company's license.
Hiring unlicensed independent contractors is prohibited
under COMAR 09.03.06.03.
22.
What happens when a consumer files a complaint
with the Commissioner of Financial Regulation?
Any
consumer aggrieved by the conduct of a licensee
may file a written complaint with the Commissioner
who will investigate the complaint. If you are
named in a consumer complaint, a Financial Examiner
will contact you for a written response. A licensee's
books and records are subject to review during
hte complaint investigation.
22.
What are frequent consumer complaint issues?
- Foreclosure
- Escrow
account practices
- Prepayment
penalties
- Requirements
under the Homeowner's Protection Act
- Broker
agreement (overstating finder's fee, broker
agreement not separate and distinct from financing
agreement)
- Questionable
third-party fees
- Disclosure
issues (rate, points, terms, etc....)
- Failure
to respond to payoff requests
- Lender
fails to record release
- Appraisal
transfer requests
- Failure
to process loan application timely
- Loan
rescission issues
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