Time is Ticking for Lenders to Meet the New Licensing Requirements

June 14, 2010


Lenders Must Pass Exams

Lenders Must Pass Exams

It should be no surprise that the collapse of the housing market drew the attention of regulators to professionalize the lending industry. Let me go on record as saying that this is not a bad thing for the consumer. Like Wyatt Earp cleaning up the streets of Tombstone, the government has created new requirements to ensure that the lender you choose is qualified and to force out lenders who were incompetent, dishonest or both.

New Requirements

The new requirements entail education, testing and criminal background checks that must be completed by the end of June and each loan officer will have an individual number that will follow them throughout their career. This will be monitored by the National Mortgage Licensing System and will allow for tracking of complaints, defaulted loans and other important statistics. Those loan originators that do not adhere to the law can have their licenses revoked.

Requirements for Larger Financial Institutions

Large financial institutions, such as banks, and their loan officers are exempt from the requirement. This exemption can be good and bad at the same time. The loan officers from these institutions do fall under the larger regulatory umbrella of the bank and the institution is responsible for ensuring that their originators receive the ethics, loan and compliance training, as well that their employees are of the moral fiber necessary to do their job. This should give some solace to you, as these entities need to meet banking compliance requirements of which mortgages are subset.  But without seeing the NMLS number, however, you have no guarantees as to the specific training or as to the background of the individual with whom you are dealing.

Look for the NMLS Number

I bring this to your attention now, because you should be vigilant to make sure that your lender is qualified to service you and your needs. As of the time I am writing this post, the overall pass rate for existing mortgage loan originators was roughly 67%, so you can see how important this is to make sure yours lender is qualified. If you decide to go with a bank, you have the good faith of the institution that all of their employees are compliant. If you go with a mortgage banker or broker, you need to look for their NMLS number. It is required on all advertising and official correspondence with you.  For example, I put mine in my signature block to make it easy for my clients to see. If you do not see it or your lender dodges your questions regarding their licensing, I recommend looking for a different lender.

Thank you to [j]t’s for the photo, which he graciously offered via the Creative Commons License.
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About Doug Katz

As the Senior Mortgage Banker and Sales Manager for Chicago Bancorp, Doug not only originates loans for his personal business, but also oversees affiliations with banks and other financial institutions that depend on Chicago Bancorp to meet their client’s lending needs. In this role, Doug directs the day-to-day mortgage sales operations of over 25 branches in a multitude of Chicagoland’s diverse communities. He brings to these relationships a wealth of industry experience and a dedication to an exceptional client experience that has established Chicago Bancorp as Chicago’s pre-eminent mortgage solution providers. Prior to joining Chicago Bancorp, Doug attended and graduated from West Point. Upon graduation, he was commissioned as an officer in the United States Army Artillery, where served 5 years in numerous roles and in various deployments include service in Kuwait. In addition to his Bachelor’s Degree from West Point, Doug holds an M.B.A. from Loyola University Chicago, where he was also inducted into the Beta Gamma Sigma Honor Society. He also served as President for the West Point Society of Chicago from 2003 to 2005 and still serves on the Board of Directors. When not working, he spends his time with his wife and three children in their hometown of Oak Park, as well as pursuing his passions for fitness, cooking and the banjo. Doug can be reached by phone at 312.738.6079, by email at doug@chicagobancorp.com, on his own blogs, BankerDoug.com and Vet Money Matters. He's also on LinkedIn.

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2 Responses to “Time is Ticking for Lenders to Meet the New Licensing Requirements”

  1. John Burroughs Says:


    I’m John Burroughs. Thank you for your advice on finding a lender. I recently got out of the Navy and my last assignment was at the Naval Academy. I still own a home in Annapolis and I’m trying to refinance to take advantage of the good rate. I think I may have found someone to give me a better rate (5.375 30 year), but I’m not sure yet whether or not I’m going to take it (I want to do more research). Here’s the cliff notes of my situation: I own a single family home that I closed in 2006. I currently rent it out. Most banks that I go to consider me an investment property owner, which means I need to put money down to refi. I don’t want to do that. This is the only home I own and I may move back there someday. I don’t want to sell it and take a loss, as I’m single and I’m willing to take the risk right now. Do you think any banks will be open to my situation in the near future (in time enough to take advantage of the rates)? Also, I didn’t take a VA loan yet. Would that be available to me (at no money down)? I currently owe $340,000.

    Your help would be appreciated. Thanks again!

    John Burroughs

  2. Doug Katz Says:

    The big question is whether or not the rent for the property is reflected on your 1040. Because you will need to supply this for the loan application, the underwriter will look at all of the sources of income. Rental income is typically reflected on Schedule E. If it shows up there, it will be an investment property. The only way it would not be an investment property is if you were relocating back to Annapolis in the near future and could document the reason for doing so. In this case, it would make logical sense that you are recategorizing the property as your primary residence and you would be able to refinance accordingly.