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Does Your Lender Have Their Mortgage License?

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Acquiring a mortgage loan requires either working with a mortgage broker to get matched with a lender for financing or working directly with a loan officer who works for a specific lender.

Both loan officers and brokers need to be licensed, since the licensure process is an attempt to increase transparency and protect consumers. Checking for both a broker and originator’s license isn’t terribly difficult and can be done through a national database. In the case when a mortgage professional isn’t licensed, you can take steps to report the individual. You can also review complaints against mortgage professionals using a national database.

In this post, we’ll explain how to find a licensed loan professional and also some of the key distinctions between the different types of professionals you might encounter on your hunt for financing.

Understanding the terms: Broker vs. loan officer

Mortgage broker: A mortgage broker is a professional who helps borrowers obtain mortgage financing. Financing comes from a wholesale mortgage lending company, so mortgage brokers act as the bridge between borrowers and these companies.

Simply put, anyone working to help individuals acquire a mortgage but who are not employees of a banking institution are considered brokers, explained Josh Stevens, president of the National Association of Mortgage Brokers.

Since brokers don’t work for a single lender, they can offer a broader range of products from several different financial organizations.

Mortgage loan officer/originator: A mortgage loan officer works for a single financial organization; they have in-depth knowledge of all of that organization’s products and help borrowers decide between those products. Loan officers also help clients understand what requirements need to be met when applying for those loans. Sometimes, loan officers are also referred to as mortgage loan originators.

While brokers may be able to offer a wider breadth of products from multiple companies, loan officers have greater control over the application process. Working directly with an officer may in some circumstances lower the cost and time investment of the application process.

Why mortgage licensing is important

Both residential mortgage loan originators and brokers are required under the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act to be licensed.

Individuals who work for banks receive federal registration, while all other individuals have to be licensed by a state organization. Both types of registration can be completed through the National Multistate Licensing System (NMLS) system.

The SAFE Act was designed to make originators and brokers more accountable and protect consumers from issues like fraud. Registered loan originators also have to make their backgrounds available at no cost to the consumer. Disciplinary issues and other questionable behaviors have to be made available for the public to research.

Licensing is intended to ensure that loan originators and brokers are knowledgeable in their field, Stevens emphasized. Consumers should have access to individuals who can properly help them acquire a mortgage.

“It’s important for them [brokers and originators] to be licensed because it gives them the knowledge necessary to be more than just a loan officer: [it allows them] to become a mortgage professional,” Stevens said. “And they’re able to provide the borrower with the most recent and most important information that’s up to date.”

The licensing system was also intended to promote honesty within the industry. Licensed mortgage professionals are expected to be open with consumers, make recommendations that benefit the consumer and be honest about conditions on a loan. They are also expected to clearly explain terms used within their field and clarify points that may confuse a consumer.

It is illegal for anyone to be employed as a mortgage loan originator without a license, while hiring an individual who does not have a license to act as an originator is also illegal. Consequently, while the goal of the SAFE Act is to protect the consumer, it is also strictly illegal for loan origination to happen without a license.
 

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How to check for a mortgage broker or originator license

Checking out whether a mortgage broker or an  originator is licensed is as simple as visiting the NMLS consumer website. The NMLS consumer site is a free service that can be used to research whether organizations and individuals are authorized to do business in a state.

The NMLS operates a licensing and registration website for financial organizations throughout the country. It is the only way that mortgage loan originator and brokers can be licensed. While the NMLS doesn’t actually license anyone itself, it does manage licensing and registration on behalf of U.S. states and territories.

The NMLS also coordinates information sharing between regulators in an attempt to streamline the process of licensing and reviewing licensure. Previously, states maintained their own website directories where licenses could be looked up. However, since the introduction of the NMLS, states have transitioned license lookups over to the national database.

The website provides a range of information about companies, individuals and branches recognized by the NMLS who operate in the areas of consumer finance, debt, mortgage, and money services.

The NMLS database is also updated regularly to maintain updated information about companies and professionals that has been reported to a regulatory agency. Although the website endeavors to provide as much information as possible regarding licensed organizations and individuals that provide various financial services, it draws its information from state agencies.

Since not all state level lenders participate in the NMLS access service, certain financial organizations are sometimes not discoverable on the consumer database. Questions about these lenders can be directed to a state agency.

Reviewing mortgage broker complaints

NMLS: Start with the NMLS consumer access website, which displays regulatory actions and consumer complaints. After searching for and selecting a broker or originator, a list of regulatory actions taken against them may be listed in either the individual’s main profile header or the section labeled “Regulatory Actions.”

You can also view consumer complaints against an individual by looking in the section labelled “State Licenses/Registration.” If you have previous negative experience with the individual, you can also submit a complaint in this section.

One thing to be aware of is that not all agents have sections for regulatory actions or consumer complaints. However, at the minimum, disciplinary actions are typically listed in their profile header.

You can also look up the profiles of financial institutions. These profiles include the states the institution is licensed in, the trade names it operates under, and its contact information. You can also find regulatory actions taken against them, including published documents regarding what actions were taken against the organization.

Consumer Financial Protection Bureau: Stevens also recommended that consumers visit the CFPB to look up complaints against mortgage offering institutions. The federal watchdog maintains a complaint database where consumers can review complaints against an organization. Consumers who feel a broker behaved inappropriately also have the option of filing a complaint while on the site.

What to do if your mortgage broker isn’t licensed

Stevens emphasized the importance of working through an individual who either worked at a bank or was licensed. In cases when a broker wasn’t licensed, he encouraged consumers to report the individual through the CFPB.

States also maintain their own reporting agencies, such as a Department of Corporations or Division of Real Estate, where consumers can file their report. By state and federal law, consumers are offered protections against working with brokers who are unlicensed and who lack the knowledge to fulfill their duties adequately. Actions against these unlicensed individuals can be initiated by first filing a complaint with these agencies.

Conclusion

Researching a mortgage broker or officer is a part of a consumer’s due diligence. Licensure is designed to make sure that brokers and officers act ethically and knowledgeably. This helps to protect consumers. Fortunately, researching an individual’s license and background can be done using the NMLS.

The NMLS consumer database helps to make searching for an individual’s license more streamlined and effective. Complaints can also be found using the NMLS service or by searching through the CFPB. In the case where a broker doesn’t have a license, you can address those concerns by filing a complaint and speaking with an attorney.

 

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