becoming a mortgage broker??

[King Curtis]

hey guys,

I am thinking of becoming a mortgage broker or mortgage originator? I think they are the same thing. my college is offering the 20 mandatory hours to apply for the state and national test.

my question is after I pass both national and state tests. how do brokers get loans for the clients exactly?

would I have to apply to all the banks? how would I go about getting loans from all the banks so I can pick the best loan for my client? do all banks work with mortgage brokers?

[Bill Gulley]

Thanks Ned,

King, Big difference between a Mortgage Broker (MB) and a Mortgage Originator (MO).

First, take the class! Even if you don't follow through and go into lending it will be a good introduction to mortgage originations. As with any class the experience of the instructor determines what you get out of it. Anyone who is active as an investor would benefit from the class, IMO.

I say that and I have not taken the class, LOL. I went to a practice test for the national exam and got 94 of the 100 questions, the 6 I missed had to do with new disclosures that are now required, so by taking the test I can see what the class basically covers. A good instructor could provide additional information of their liking as in any class that wouldn't be on the test. The degree of difficulty is very similar to a real estate license for agents, but doesn't cover RE aspects in detail.

What you get will be the regulations pertaining to residential loans, Reg Z, TILA, RESPA and disclosure requirements. Types of loan products and loan processing aspects will be part. You'll learn the interactions between lenders and appraisers, settlement agents and others as to restraints from influencing or steering aspects or ethical aspects.

Having a RMLO doesn't mean you can just hit the streets doing business, you must have a sponsoring entity or brokerage, similar to RE agents working under a RE broker. RMLOs will have bonding requirements, rather low and be insurable under the sponsor's insurance coverage. State requirements vary and all require a background check.as required under federal requirements.

The RMLO license sets you up as much to being a MO as an agent's license allows a RE agent to be hired by a real estate brokerage, but you'll be an employee of a lender in most situations. Basically, this means you could be hired by a bank to meet loan applicants and take their application legally. As with any job, your employer will have their own training on their products and expectations of how business will be conducted. Depending on the MO, they will be supervising your work for a few months, at least in a bank, a broker may "cut you lose" when the feel comfortable with your abilities.

In a bank, MOs are in the residential loan department and I've seen the majority of these officers stay in that job for years. Most banks will want a college degree but for MOs often it's not a requirement. Your pay will be based on production, a salary and commission is common. You can make average income, many factors and variables, but you won't be driving a new Caddy unless you live in it :) guessing, 25 to 35K starting off, banks don't pay much at this level. You can advance in some banks and get to high 5 figures, possibly 6 figures in a management role.

While I say banks, you could be with a credit union or a mortgage banker or broker too. I paid my loan originators .375% starting off and on a sliding scale to production to .75%, that was generous and with the exception of two, all were past loan officers with years of experience in banks.

So, being a MO is a good job, I wouldn't say you'll get rich but with years of experience, managerial abilities you can make a very good living.

MBs are another matter. An MO may work for a sponsoring MB.

State requirements to open an office as a MB will vary. Generally, you'll have net worth requirements, some require cash or closely follow the qualifying assets of a qualified investor under SEC but at lower amounts, meaning you home an car and other assets may be excluded, they want cash or securities. Many states will allow you to post a bond to cover asset requirements and many will require a bond. The only state I found, as of last month, that didn't have requirements was Kansas.

That's just the first hurdle, you'll need an office, a toll free number, posted office hours and you may have other hard business type requirements. Again, while state requirements vary you'll then move into reality.

In order to get hooked up with a mortgage banker or institutional lender you'll need to meet their requirements, in other words who really controls you going into business will be the secondary market bankers.

Any MB originating secondary market loans will need experience in the business before they get on with a mortgage banker. They are interested in your production levels and the quality of business. After you're in the business, some mortgage bankers will pick up a MB that meets state requirements and fog a mirror, that's usually not the case with the first company that picks you up. When I started, I had no experience originating. I began by hiring two others, a loan officer and a loan processor both with a few years of experience. No, that's still not enough as there were concerns of management. I gave my resume and was quickly approved because I had been a bank examiner for FDIC that exceeded their expectations for management and I was in the business.

MBs gain affiliate lending relationships under contract with as many mortgage bankers or institutions as possible or as the market requires to offer a product line.

In reality, experience matters getting affiliate relationships, a bad egg can present huge liability issues for a lender, you'll find too that many banks won't allow third party originations outside their organization. Large banks, such as Wells Fargo have brokerage programs but that is different from the bank down the street, actually you may be competing with them.

There are MBs that don't originate secondary market loans, few and far between that may deal in residential lending. An example of these guys might be a private investor funding new home construction loans, these loan may be originated in portfolio and sold off to a variety of mortgage buyers, smaller banks might be involved in buying loans but these arrangements may be heavily anchored in the business relationship of the investor(s) and/or the builder. I'd guess compensation would be lower with this type of operation.

So, the RMLO designation won't set you out on the street as a lender. It's a beginning position in residential lending. You are not a loan underwriter as that requires experience in assessing risks, apply prudent lending practices which is not really covered in that 20+ hour class. The lending business is much like any other profession a junior attorney must pay his dues and gain experience before they are promoted to bigger bucks. The RMLO is like getting a pilot's license for a single engine aircraft, before you fly a 777 you'll need experience, hours and training.

It's a good carrier, I made very good money as a broker in a rather small metro area. Residential leads to commercial and into other business arrangements as well as note brokering that can be fantastic!

Now, due to the Dodd-Frank Act there is an opportunity for someone with a RMLO to do originations for seller financed obligations. I know there are newish RMLOs doing this. If they can get a sponsor or meet the state requirements as a lender that is pretty much all they need to operate legally. Seller financing is actually more difficult to underwrite than a secondary market loan if done properly. A newish originator will know the regulations but may not (usually in any case) not have a clue as to the ramifications of what they might do, they may take off on pure guts and be entrepreneurial generating business, but they really are not qualified as to experience, as there are many other lending issues that may apply that aren't touched on in the basic education they received. If you go this route I really suggest you get with another experienced lender to review your work and not get into creative operations until you have experience. There are many in the industry that will assist you, really, while you may have competition you develop friendly relationships and you may pass business around as someone may have a product or service that better suits the client.

That's it! You got my morning book for the day! :)