Are There Different Types of Mortgage Licenses?
The mortgage industry is made up of many different occupations that stretch beyond the mortgage loan originator. Depending on the capacity in which someone works, they may or may not need to be licensed to perform their duties. While the SAFE Act may not necessarily require you to get a license in your particular role at a financial institution, there are licensing requirements to be aware of, especially as you start to think about growing your career. Let’s take a look at some of the more common licenses that are needed across the industry.
Mortgage Loan Originator License
This is the mortgage license that most people are familiar with. As a part of the SAFE Act, those who wish to pursue a career as an MLO must register with the Nationwide Mortgage Licensing System (aka, NMLS) at the beginning of their new career. Obtaining a license will entail at least 20 hours of pre-licensing education, state-specific requirements, a federal background check, and a passing score on the SAFE MLO exam.
This type of license allows you to carry out origination functions for residential mortgages including taking applications, collecting information used to determine creditworthiness, analyzing information regarding creditworthiness, and other origination activities.
Mortgage Banker License
A mortgage banker is an organization or individual that originates and funds mortgages. Occasionally, mortgage bankers will also service mortgage loans. Borrowers who go through mortgage bankers for loans do so from the beginning to the end. Not only do mortgage bankers originate and fund loans, but they may also sell the loans to investors.
In some states, whether they’re a sole proprietor or a larger entity, mortgage bankers are required to have a license and/or registration to operate. In addition to being licensed as an MLO, the requirements often include a financial audit, minimum net worth standards, and a surety bond.
Mortgage Broker License
A mortgage broker differs from a mortgage banker in the way that they originate loans. Mortgage brokers:
- Bring borrowers and banks together and can work with hundreds of lenders
- Neither underwrite nor fund the loans
- Close loans in their own name and with their own funds
- Facilitate the closing, but the lender closes and funds the loan
- Cannot approve or decline a loan and are paid a yield spread premium by the lender
In some jurisdictions, mortgage brokers are required to obtain a license. Just like with an MLO license, mortgage brokers must register through the NMLS, submit background and credit checks, and pay application fees. The cost for a mortgage broker license is often more than that of an MLO’s and, in most states, you must have one to three years of current experience in the mortgage industry directly related to making loans, or as a branch manager for another broker. Provided you have already obtained your MLO license, you’ll need to set up your business entity with the IRS (unless you are a sole proprietor) before applying for your mortgage broker license. In some states, you will need to get a surety bond.
Mortgage Lender License
The mortgage lender is the financial institution that borrowers work with directly. Many people use this method when applying for a home loan instead of going through a broker.
In states that require a mortgage lender license, net worth, substantial mortgage industry experience, and a relatively high surety bond (typically around $100,000 minimum) are required. There may also be a “brick and mortar” provision that means that the lender must have a physical office. In addition, applicants must have gone through the NMLS process of obtaining a standard MLO license prior to applying for a mortgage lender license.
The Takeaway
If you plan to grow your career, a standard MLO license is a great foundation for many of the mortgage industry licenses you may want to pursue down the road. Although there are federal regulations that govern licensing, you’ll still want to check out the NMLS website to see which licenses are required in your state.
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