Frequently Asked Questions from NCCOB Website
|
|
| Frequently Asked Questions from NCCOB Website
|
Q: I have poor credit history how does that affect my loan officer license to be approved?
A:
The NC Banking Commission will look at your credit history as part of the approval process to become a licensed loan officer. They are looking for applicants to exemplify financial responsibility because loan officers are dealing with one of the biggest investments people will make in their lifetime, a home.
If your application is declined because of something in your credit history, you are given a chance to appeal and explain your situation. If you have extenuating circumstances, such as divorce, medical problems, etc...they will listen to an explanation. Unfortunately, they won't give you a decision prior to your application. However, if you need to discuss your specific situation further, please call the NCCOB and they will give you as much direction as possible. |
Q: Who must have a Loan Officer license?
A: The Loan Officer licensing process, including the application, education and examination components, is designed to ensure that only honest, knowledgeable employees have contact with consumers concerning specific terms of actual or potential loans. A person must therefore be licensed as a loan officer if by any oral or written means (directly or through an agent, such as a loan broker) he or she communicates to consumer information regarding a pending or potential application. Such communications include, but are not limited to: (I) explanations or recommendations regarding specific terms, conditions or benefits of any loan available from or through his or her employer, whether or not the consumer has made or later makes an application, (ii) explanations of any term or aspect of any disclosure or agreement given at or after an application is received, (iii) offers to make or solicitations to take a loan on terms or conditions different from those for which the consumer applied. Persons whose communications with consumers are solely for the purpose of obtaining or collecting information needed to complete or process an application need not be licensed. Marketing or promotional communications limited to general information regarding the licensee or its loan products are also not covered. |
|
Q: What is the Mortgage Lending Act (the “Act”)? And, what date does it take effect?
A: The Act (S.L. 2001-393; SB 904) is found in Chapter 53, Article 19A of the North Carolina General Statutes. It requires all persons and companies who make or broker loans secured by mortgages/deeds of trust on residential properties located in North Carolina to be licensed by the Commissioner of Banks unless exempted. Also, all employees of the licensee who accept or offer to accept applications on the licensee's behalf must be licensed as “Loan Officers”. This Act is effective July 1, 2002. |
Q: As a licensed Loan Officer, will I have to take continuing education classes in order to keep my license?
A: Yes you will. Each licensed Loan Officer must complete eight (8) hours of continuing education each year, except for the year he/she is initially licensed under the initial licensing procedure. In other words, an individual receiving a Loan Officer license under the "grandfather provisions' will have to satisfy the continuing education requirements for renewal of his/her license on July 1, 2003. A Loan Officer license is valid from the date of issuance until June 30th. On or before July 1st of each year, a Loan Officer must file to renew the license for the upcoming fiscal year. |
Q: Where can I find out about the approved continuing education providers?
A: A list of approved education providers will be made available on the OCOB web site.
|
Q: Who is exempt?
A: Generally, those entities that are regulated by another agency or government organization are exempt from the requirement to be licensed to make or broker loans in North Carolina. For example, banks, savings banks, savings and loans, credit unions, certain non profits organized to further home ownership are exempt. For further information, see NCGS §53-243.01(8). Since they are depository institutions, they are exempt from licensing and should file a claim of exemption form. Persons employed as Loan Officers by exempt entities do not need to be licensed nor do they need to file individually to claim exempt status.
|
Q: Must I have a physical office in North Carolina?
A: A Mortgage Lender licensee is not required to have a principal office in North Carolina nor does its Managing Principal have to be physically located in the State. The Act does require a Mortgage Broker to maintain a "principal place of business" within North Carolina.
|
Q: How long is a license valid?
A: A license is valid from date of issue through the next June 30. License fees will not be prorated for licenses issued or renewed after July 1.
|
Q: Must a Managing Principal or Branch Manager have a Loan Officer license?
A: A Managing Principal will need a Loan Officer license if he/she has customer contact. A Branch Manager who effectively manages his/her branch will of necessity have at least some periodic communications with consumers and therefore must be licensed as a Loan Officer.
|
Q: I wish to start my own mortgage brokerage business. What do I have to do?
A: If you intended to operate as a sole proprietor of your own business and you will be the owner and operator, then you would need to obtain the Mortgage Lender/Broker Application Form from our web site and complete it. The instructions that accompany the form provide most of the information you would need as to the requirements. Generally, you would have to:
(i) Obtain a Loan Officer license (See question 17),
(ii) Document that you have three years of mortgage lending experience,
(iii) Obtain a surety bond in the required amount,
(iv) Have an office physically located in North Carolina where you could meet with potential loan applicants and maintain the records regarding the applications taken and processed, and
(v)Demonstrate to the OCOB that you have an acceptable business/employment history, credit history, and are honest, ethical and sufficiently knowledgeable of lending practices to be able to act as a responsible Mortgage Broker/Lender. |
Q: What is a "Managing Principal?"
A: A Managing Principal is an individual designated by the licensed Mortgage Lender or Broker as the person who has primary responsibility for the operations of the licensed company. Although the Managing Principal is the person that the OCOB will contact in the event of a consumer complaint or other problem, he/she is not required to be physically located in North Carolina nor in every case must he/she hold a Loan Officer license. This individual must have at least three years of experience in the mortgage lending business and will be expected to have at least as much knowledge regarding the lending operations as any licensed Loan Officer. The Managing Principal, if licensed as a Loan Officer, may also serve as the Branch Manager for no more than one Branch Office. |
Q: My company operates several offices. Which of these must be licensed as branches?
A: Any location (other than the designated principal office and whether or not in North Carolina) operated by the licensee which is open to the public and through which the licensee makes or brokers loans in North Carolina must be licensed as a branch and must have a branch manager.
|
Q: Is it lawful for two mortgage brokers to work with a borrower to place a loan with a mortgage lender and for each to receive compensation by sharing or splitting the fee charged for brokering the loan? Under what circumstances is this permissible?
A: Two mortgage brokers may share or split the fee for brokering a loan secured by residential real estate in North Carolina, provided that each is licensed (or is listed as exempt from licensure) in North Carolina under the Mortgage Lending Act (MLA). And both parties must actually provide some reasonable amount of work in connection with the extension of the loan, as it is illegal to pay a referral fee in connection with the making of a loan under RESPA. See 12 USC 2607 - Prohibition against kickbacks and unearned fees:
"(b) Splitting charges
No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."
Persons or brokers not licensed by the North Carolina Office of Commissioner of Banks (or exempt) under the MLA may not receive a fee or anything of value, directly or indirectly, in connection with a loan secured by residential real estate located in North Carolina. Engaging in the business of lending for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly is "acting as a broker" as that term is defined in the MLA. Doing so without benefit of a license will subject both of the brokers and the lender to potential civil money penalties and a felony charge. See N.C. Gen. Stat. §§ 53-243.01(1) and (2), 53-243.02 and 53-243.14.
It is unlawful for a mortgage lender not licensed (or listed as exempt from licensure) in North Carolina to make a loan secured by residential real estate in North Carolina. It would also be unlawful for an unlicensed or nonexempt lender to broker a loan secured by residential property in North Carolina. |
Q: Our Mortgage Company wants to encourage Real Estate Agents to direct potential borrowers to our company. Can we agree to pay a specified amount of dollars to the Real Estate Agent's favorite charity for every loan he sends us?
A: The act prohibits any unlicensed, non-exempt person from brokering a loan with "... the expectation of compensation or gain, either directly or indirectly ..." The contribution to the real estate agent's favorite charity is a thing of value indirectly benefiting the real estate agent and is prohibited unless the real estate agent is also licensed as a Mortgage Broker. You should also consider the applicability of federal law, especially the Real Estate Settlement Procedures Act. (RESPA). |
|
Q: I notice that the Act prohibits brokering of loans of under $150,000 that contain a prepayment penalty. May I as a Mortgage Lender make such loans?
A: For loans made directly (not through a broker), you should consult qualified legal counsel for guidance as to whether you as a lender are subject to North Carolina laws limiting prepayment penalties. The brokering of such loans is a "prohibited activity" under the Act. Any Mortgage Lender licensee or exempt Lender which knowingly deals with a Broker whom it knows is engaged in prohibited activities may itself be subject to discipline. |
Q: Do I need to be licensed as a Mortgage Broker or Lender in order to broker the sale or purchase of closed mortgage loans? If I purchase such a portfolio, must I be licensed to service the loans?
A: No license would be required for either activity, provided the sale is an arms-length, bona fide transaction and not merely a sham designed to avoid the application of the Act. |
Q: Temporary rule Section .0302 (d) seems to require all mortgage loan files to be maintained within an office in the State of North Carolina. Is that a requirement?
A: Yes. However, Mortgage Lender and Mortgage Broker licensees may request approval to keep records outside the State, conditioned on the licensee's agreement to produce the records upon request at its own expense. The OCOB will generally approve requests by Mortgage Lender licensees who do not maintain an office in the State. Other requests will be considered on a case-by-case basis. The OCOB also does not object to the temporary removal of a file outside the State to handle a collection, bankruptcy, estate, collateral security or other similar issue, although removal from the State to thwart the OCOB's effort to examine a file would be considered a violation of the rule. |
Q: I am an education provider. How do I get approved with your office?
A: The forms you must complete and submit in order to be approved as an education provider and to obtain approval for the course you intend to offer can be found on the OCOB web site. |
Q: It's time for me to renew my Loan Officer license and I have fewer than the minimum required hours of continuing education. What can I do?
A: All licensed loan officers must complete annually all required continuing education hours by June 1. The OCOB will consider written requests for extensions of time (to no later than June 30) for good cause. If by June 30th you have not completed your required eight hours, you will not be eligible to renew your license. After June 30th in order to renew your license, you must obtain eight hours of mortgage lending education, sign and send the license renewal form, and pay the annual renewal fee of $50, plus a late re-instatement fee of $250 or a total of $300. If your license is not re-instated prior to September 30th, it can not be re-instated or renewed. |
Q: My Loan Officer license has expired. What are my options?
A: If you are within the ninety days following the expiration of your license and you have completed your eight hours of continuing education, one option is to pay a $250 re-instatement fee and the $50 annual license fee. Another option would be to simply re-apply for licensure, but if you do so you will be subject to satisfying all the requirements for obtaining a new license, including completing the fundamentals course and passing the test. Additionally, this office may take 45 days to complete the processing of your application during which time it will be unlawful for you to act as a Loan Officer. |
Q: I've never been licensed as a Loan Officer. How do I get a Loan Officer License?
A: The "Application for Loan Officer License" on this web site and the instructions tell you what information you will need to submit in order to obtain a license. Generally, you will need to complete the fundamentals of mortgage lending course from one of the approved providers (also listed on this site), pass a test, file an application, including a credit report, and pay the initial application filing fee of $96. The OCOB will process your application and, if approved, you will be granted a license. |
Q: My company is licensed under the Act as a Mortgage Lender; can I also broker with this license? Must I have an office in North Carolina and/or a separate broker surety bond?
A: A separate license as a Mortgage Broker will not be required if you are already licensed as a Mortgage Lender. However, you should be aware that when acting as a broker, you should comply with the provisions of the Act applicable to Mortgage Brokers, though you need not have an office in North Carolina or separate surety bond. |
Q: What are the requirements for being a Branch Manager?
A: Under the Act, each Branch Office must have a person designated as "Branch Manager." The Managing Principal of a licensed Mortgage Broker or Lender must designate an individual to be a Branch Manager for each authorized Branch Office. This individual must have a Loan Officer License and, by July 1, 2003, at least three years of experience in the mortgage lending business. Upon designation as Branch Manager by the Managing Principal, the Branch Manager will have primary responsibility for the operations and employees of that Branch Office. |
Q: I currently run a "net branch" for a registered mortgage company. How will the Act affect me?
A: If you solicit loans secured by residential real estate in North Carolina, you will need a Loan Officer license and at least three years of experience in the mortgage lending business in order to continue to manage a Branch Office. The licensee for whom you operate the Branch must obtain a Mortgage Lender or Mortgage Broker license and a license for the Branch. You must either be a Loan Officer employee of the licensee or you must obtain a sole proprietor Mortgage Lender or Broker license.
Unless you are a sole proprietor lender or broker licensee, you should also review the Commissioner of Banks' Declaratory Ruling 2003-1 regarding "net branching" to be certain the arrangement you have with the lender or broker licensee satisfies the Mortgage Lending Act's requirements as interpreted in that Ruling. The text of the Ruling is available online at www.nccob.org.
|
Q: I am sole proprietor, registered as a Mortgage Broker. Will I also need a Loan Officer's license?
A: Yes you will. In order for a sole proprietor to be licensed as a Mortgage Broker, he/she must also be a licensed Loan Officer. You will need to file under the "grandfather provisions" for your company and attach an "Application for Loan Officer License under Grandfather Provisions" for yourself. Additionally, since you will also be the Managing Principal of the Company, you will be required to have at least three years of experience in the mortgage lending business by July 1, 2003. |
Q: I am currently the Branch Manager of a registered (or HUD exempt) mortgage company. I have been in the mortgage business for less than three years. How will The Act affect me?
A: The Act requires all Branch Managers to have at least three years of experience in residential mortgage lending; however, the OCOB will permit an individual with less than three years experience who is currently managing a Branch Office to continue to do so until June 30, 2003. Effective July 1, 2003, no individual with less than three years experience may be designated as a Manager of a Branch Office. You will need a North Carolina Loan Officer License. You may obtain one under the "grandfather provisions." |
Q: My company is registered with the OCOB. It has an Irrevocable Letter of Credit on file with your office. What do I do in order to comply with the Act?
A: The Irrevocable Letter of Credit is no longer accepted in lieu of a surety bond under the Act. Only a surety bond on the new bond form, or an appropriate deposit of cash will be accepted. The lone exception is for HUD-approved lenders, which may submit an audited financial statement showing a net worth of $250,000 or more in acceptable assets in lieu of a surety bond.
|
Q: My mortgage company is registered and has a surety bond on file with your office. Will you accept an endorsement rider to its bond increasing the amount in order to comply with the Act?
A: No. Every licensee that is required to maintain a surety bond must submit a new bond on the new form. |
|
Q: I am a "freelance" Loan Officer who solicits loans for (but is not an employee of) one or more lenders. Will I need a Mortgage Broker License?
A: Yes to both questions. Since you are self-employed, you are not an "employee" under the Act and you may legally solicit applications only if you are licensed as a sole proprietor Mortgage Broker. (See question 11) You must also obtain a Loan officer license. You are not eligible for licensure under the "grandfather" provisions and must meet all the requirements for an initial license, including the mortgage lending education, testing and experience requirements. |
|
Q: My company is a registered Mortgage Broker and Table Funding Mortgage Banker. How will the Act affect me?
A: The Table Funding Mortgage Banker designation has been eliminated, but the holder of a Mortgage Broker license may engage in table funding under that license. Table Funding Mortgage Bankers registered as of July 1, 2002 will be issued a license as a Mortgage Broker under the Act's "grandfather" provisions. (See question 5) Note also that the assignment and sale of any loan closed by a Mortgage Broker licensee in its own name must be consummated within one business day. Any Mortgage Broker who is uncertain if the sale of loans will be accomplished within one business day should apply for a Mortgage Lender license. |
|
Q: My company is currently exempt from registration as a "HUD-approved, non-supervised" lender. How will the Act affect me?
A: The Act eliminates the current exemption for non-supervised HUD-approved lenders; however, they may obtain a Mortgage Lender license under the "grandfather" provisions of the Act, provided they do so by October 1. A lender classified as a "Loan Correspondent" under the HUD approval rules will not be "grandfathered" and must apply for a Mortgage Lender (or Broker) License. Additionally, all individuals acting as Loan Officers for such entity will need to obtain a Loan Officer license. (See question 17) Supervised depository institutions are exempt from licensing and should file a claim of exemption form. (See question 2) |
|
Q: My company is a registered Mortgage Banker. How will the Act affect me?
A: Every Mortgage Banker, who, as of July 1, 2002, is engaged in the business of making mortgage loans and is registered under former Article 19, is entitled to be issued a license as a Mortgage Lender under the Act's "grandfather provisions". At the option of the company, a Mortgage Lender or Mortgage Broker license will be issued after the company verifies its information on file with the OCOB, and pays the annual license fee of $500, plus $100 for each Branch Office it operates that makes or brokers loans secured by residential real property in North Carolina. The license is valid from date of issue through June 30, 2003. |
|
Q: Will employees who act as Loan Officers of "grandfathered" companies be issued "grandfathered" Loan Officer licenses just like the companies?
A: Yes, provided they complete and file with the OCOB before October 1, 2002 an "Application for Loan Officer License under Grandfather Provisions". These are persons employed as Loan Officers on July 1, 2002 by either (i) a registrant under former Article 19 or (ii) a supervised HUD-approved lender. These individuals will not be required to satisfy the initial minimum mortgage lending education or testing requirements under the Act. At renewal in the following year, all Loan Officers will be required to demonstrate that they have satisfied the Act's continuing education requirements. (See Section 5. (b) of SB 904) |
