While nearly every state requires a license to act as a mortgage servicer, the requirements differ greatly. In some states, the license is a stand-alone mortgage servicer license. In others, a general mortgage license covers the activity. Further still, mortgage servicers trigger some state (and even city) collection agency licensing laws. And mortgage servicer licensing is not limited to residential mortgage loans; some companies that service commercial mortgage loans may need a number of these licenses as well.
What you need
And yet, with all of the differences, there are some standard items that are typically required in connection with a mortgage servicer license application, such as:
- General company information (for example, contact person information, books and records information, and operating and trust account information)
- Financial statements
- Incorporation/formation documents
- Foreign qualification documents
- Disclosure question responses
- Policies and procedures
- Surety bond
- Qualifying individual meeting minimum experience, education, and oversight requirements
- General personal information and documents from officers, directors, qualifying individuals, certain natural person owners, and branch managers
Having the right documents is simply the first step. Processing times range from one month to over a year, and vary based on a number of factors, including the time of year that the application is submitted (expect longer timeframes during the renewal and holiday seasons) and whether the applicant is requesting a waiver of any requirements.
Purchase and hold MSRs? You may need a license too
More and more states now require companies that purchase and hold the servicing rights to mortgage loans to be licensed (North Carolina and Ohio are notable recent additions). In many cases, this holds true even if the company engages an appropriately-licensed third party to service the loans on its behalf. Regulators are easily able to target unlicensed activity here by asking licensees that operate as third-party servicers to identify the companies for whom they service. This is commonly done in the reporting and examination contexts.
Constant change for companies that purchase and hold MSRs
Regulators will often abruptly introduce or change guidance on whether a license is required to purchase and hold the servicing rights to mortgage loans. For this reason, it’s crucial for companies engaged in such activity to monitor continuously for such guidance and to be prepared to respond promptly. Also, the license application process is often more tedious for these companies because they do not operate as traditional mortgage servicers. (For example, to obtain a Mississippi mortgage lender license, a company must have at least one employee licensed as Mississippi mortgage loan originator at a licensed location of the company. This is no easy feat for a company that doesn’t employ originators, not to mention for a company that may not have employees at all.) And so, these companies must be prepared to adjust their personnel, systems, procedures, as well as their expecations, to accommodate licensing requirements.
Between the murky regulations and constantly shifting guidance for mortgage servicer licensing, what should be a straightforward process is anything but. Attorneys from Buckley’s licensing practice can can work with you to determine whether your company needs to be licensed and APPROVED has the resources to help with the application preparation and submission process. Contact us today with any questions or to get started.