Licensed to Loan

This New Year brought significant changes to the mortgage industry. Loan Originators who provide residential loans in Washington State are now required to be licensed. This legislature applies primarily to Mortgage Brokers and not LOs who are employed by banks or credit unions. As I am employed by a Mortgage Broker (technically, we are a Correspondent Lender…I’ll save that for a later article), I thought I would share some tidbits of what I’ve found so far during the first two weeks into the licensing period.

I completed my online application with DFI, submitted my MU4 forms and 2 sets of fingerprints all prior to the due dates so that my background check to determine that I am not a felon and do not have any gross-misdemeanors can be performed. DFI is inundated with applications and they are posting the list of licensed loan originators on line. I’ve been checking the list daily for my name and license number. As of Tuesday, DFI is showing 9,913 licensees from 123 Cash to Zippy Cash. Loan Originators must display their license number on their business cards, loan applications, marketing and websites. This seems kind of odd to me. Realtors and Escrow Officer’s (L.P.O.) do not have to attach their number to their name for the public to see…don’t they trust us?

Currently, Loan Originators who have completed the required steps of the online application, MU4 and fingerprints are operating under an “interim license

54 thoughts on “Licensed to Loan

  1. Ronda,

    Excellent post! I just reviewed the list and 3 mortgage brokers that I feel are very slimy are not on the list as of yet. If this new law helps keep them off the streets I would have to say this is a good thing.

  2. Allen, I’m not on the list yet, either! 😉
    The slimy mortgage brokers may just be waiting to be processed…like me. Or, your wishes could be answered and they did not pass the background check. This new law will only prevent some originators from being mortgage brokers…an unsavory lender could show up on the streets somewhere else.

    I’m glad you liked the post!

  3. I agree that; “…to see some sort of legislation to help raise the bar…” is a very good thing.
    The Seattle Times had an article last Sunday that pointed out some of the benefits for the consumer are that: “Before the law, state regulators examined mortgage-brokers’ practices only when there were indications of wrong-doing. Now they can examine them for compliance….For the consumer, there’s more diligence.”
    I am sure that all good mortgage-brokers are very glad that they worked for this legislation to pass and can’t wait to see some of their less professional have to leave the field…another point for the consumer!
    Thanks…”That’s Porter, Rhonda Porter” !

  4. Deborah,
    Thanks for the scoop on the Seattle Times..somehow I missed that article, which I’ll post here:

    What troubles me the most with this new law is “Exempt from the new law are loan officers working for banks, credit unions and savings and loans. Also exempt are those working for consumer-finance companies.”

    So, if a loan originator works for, hmmm….say… WaMu, Wells Fargo, Countrywide, Chase…etc., they are excluded from the state standards and regulations that mortgage brokers are now held to.

  5. Rhonda,

    Banks and credit unions are regulated in a far different way than mortgage brokers.

    Making a connection that loan originators at banks or credit unions are “less than” simply because they have not been fingerprinted, paid a fee, and had an FBI background check conducted would be jumping to a false conclusion.

    Recall, NO loan originators have yet passed the state competency test. We’ll see what happens to those numbers after testing commences.

    Institutions regulated by the banking industry already run background checks on their employees. Banks are required to have lots of capital before receiving their federal or state charter. Banks have way more $ resources available that are used for training & ongoing education, supervision, and compliance as compared to the average mortgage broker running a shop here in WA state.

    It use to be true that newer folks start out at a bank, but no so anymore. With the last refi boom, we have seen a massive influx of new loan originators into the broker community with little compliance training if any. Instead, the training is mostly sales-based and hence we ended up with the Ameriquest case being settled out of court. (Ameriquest was rewarding employees based on how much money they could make off of each transaction.) Please don’t take that personally because I know you have an advanced desigination and have gone through many hours of education.

    Under the new law, loan originators must take two classes (3hrs in length) per year. That’s not a whole lot of mandatory continuing ed. The bar has been raised, slightly. With that said, I am pleased to see mortgage brokers move in the direction of becoming an emerging profession.

    If you download the Excel licensee list, and sort by license TYPE, you will see that we have only licensed 2647 loan originators as of today’s list. DFI is likely backlogged by several thousand applications.

  6. Thanks for linking the article Rhonda, I did not know how!

    The fact that the consumer finance companies are being excluded from the new state law is troubling. It’s too bad that the consumer isn’t provided the same protections from “less than professional” conduct from them too.

  7. I’ve been waiting for you, Jillayne! 😉

    Yes, I know banks have regulations…can you give me a reason why a bank loan originator or a credit union originator should not be regulated by the same state standards as a mortgage broker? In my opinion, the consumer should not have to know all of our regulations and guidelines to know the difference between bankers and brokers. It should be the same standards across the board as far as background checks and educational requirements (licensing). Just because a bank has more money, does not mean they automatically apply it towards educating their loan originators.

    Example, one of my recent transactions, the Realtor was divuling information about the buyers credit. I asked her how she knew this information (it was before I had met with the client), she told me she received the credit report from the bank lender (her client was unhappy with this person and was looking for a new lender–me). She even offered to provide me a copy which I promptly refused. This client has no idea the bank lender handed over a copy of her credit report to the real estate agent! I start fuming when I think about this–this just happened a few months ago. And, this banker, who works for a MAJOR mortgage banking outfit, was putting this client in a alt-a loan, when she is pure a-paper…she just needed a little work cleaning up some old credit issues.

    You cannot assume that banks have more ethics or better practices. As I’ve stated before, it’s not the institution, it’s the individual. That’s why the law should apply to all individuals who originate loans REGARDLESS of what type of lending operation they work for.

    I can’t wait for the exam…that’s when the fun will begin! (I better pass with all my barking or I’ll have egg all over my face).

  8. Deborah,

    WA state regulates consumer finance companies under the WA State Consumer Loan Act. It is a choice companies make when originating mortgage loans: to be regulated under the Mortgage Broker Practices Act, or regulated under the Consumer Loan Act and WA State Usury Law. Some of the penalties and fines are harsher than the MBPA.

  9. Deborah,

    WA state regulates consumer finance companies under the WA State Consumer Loan Act. It is a choice companies make when originating mortgage loans: to be regulated under the Mortgage Broker Practices Act, or regulated under the Consumer Loan Act and WA State Usury Law. Some of the penalties and fines are harsher than the MBPA.

  10. PS: Wouldn’t Ameriquest fall under a bank and not a mortgage broker? I’m not quite sure… and, don’t worry…I don’t take your comments personally. There are a lot of awful loan originators who work for mortgage brokers, banks, credit unions and thrifts.

  11. Rhonda, I have a feeling that you will pass the exam! LOL. The reason why is because you’re already well-educated.

    The structural reason why the new law only applies to mortgage brokers is because the banking lobbyists have way more money than the broker lobbyists. 🙂

    Maybe someday we’ll see the law applied to all originators and maybe someday motorists in Seattle will learn how to drive in the snow. I support your passionate effort to make that point.

  12. Ameriquest is licensed as a consumer lender and not a mortgage broker. Many brokers in the industry saw the Ameriquest settlement as a benchmark for how to restructure their own training and incentive programs.

  13. So Ameriquest would fall into the same category as the banks, credit unions and thrifts and would not have to abide by today’s mortgage brokers rules.

    No more towels at the Mariners games? 😉

  14. Not being completely familiar with Washington law, I will keep my comments general.

    Rhonda, state licensing of loan originators is done under the guise of consumer protection and confidence; it actually does neither.

    Holding the FUNDER of the loan (ie lender, correspondent or not) responsible for compliance to loan standards under the TILA makes much more sense. If the ultimate funder of the loan is on the hook, the origination will be performed effectively.

    The real solution for licensing originators is a NASD system with competency tests and background chacks. Huge fines for failure to supervise will flush out the bad apples in the industry.l

    State licensing neither protects nor inspires confidence ; it’s just a revenue source. That being said, congratulations on your temporary license. Sometimes, it just is what it is.

  15. Hi Rhonda,

    That’s not entirely correct. Consumer lenders still comply with federal lending laws.


    Consumer lenders are audited periodically. Our state uses a different word, “exams” instead of the word “audit.” See section 208-620-580

    WA DFI just recently nailed a bunch of payday lenders. Here is the story:

    Brian, WA State’s Chuck Cross, who I blogged about on RCG is going to Washington DC to work with the group who’s taking on nat’l licensing of orignators.

    I like your blog, Brian!

  16. Rhonda:

    I’m so glad you’re writing on RCG. I love Ardell’s challenging ideas and Dustin’s online marketing advice but have wanted to read a loan originator on my second favorite weblog (sorry, I author at Bloodhound).

    You round out a great team of authors. It’s nice to see one of “my team” on RCG.

  17. Happy to hear that this is in effect and how the state is requiring the licensing for mortgage brokers. You mention that they don’t require agents to put these details on our business, cards, etc, but we are required to have our licenses on file and/or posted for display in our broker’s offices. I also carry my current personal card sized WA State real estate license info with me in case anyone ever wants to ask me for it in a meeting.

  18. I’m happy about it too. I would much rather have my license on file and carry a ID card on me than to have a series of numbers following my name on everything. I’m having a hard time picturing my new business cards…can the numbers go after my designation, etc.

  19. Pingback: Quick Update on Loan Originator Licensing | Rain City Guide | A Seattle Real Estate Blog...

  20. Rhonda, I am new to the industry. I have been offered an LO position in Reverse Mortgages with a local firm. I set out to learn a bit about the company, it’s people, format and approach.

    Perhaps the best thing to happen so far is finding your article. Scuttlebutt abounds, Legalese pervades and clarity is a rarity. Thanks!

    Yes, I am interested in performing mortgage services. Yes, I will do it right or not at all.

    Will you share any words of wisdom, navigational guides or specific directions to aid and abet a soul of some potential? While a mentor/employer-trainer may be too much to ask for, I’ll bring it up anyway. Can’t hurt to ask.

  21. Hi Ed, Thanks so much! I’m sure some readers might find my post “too simple” for their liking…however, this is my style and, I’m glad you appreciate it. Reverse mortgages are very specialized, and I would recommend doing just that, specialize in it. There are a couple firms who do locally (I’m not sure who you’re considering). Does the firm offer training? Jillayne’s company, I know offers training for LO’s too. I don’t know if it targets reverse mortgages. I would also recommend getting to know estate planners, attorneys and financial planners.

    Best of luck to you! What made you decide on reverse mortgages?

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