In This Chapter

The mortgage broker industry is regulated by federal laws, federal enforcement agencies, and laws or licensing boards in over 45 states. Working as mortgage broker takes both study and experience. While a college degree in finance, economics, or business is certainly helpful, there are no college degree requirements in order to become a successful mortgage broker. On average, the earnings of mortgage professionals with graduate degrees or professional certification were approximately 10 to 15 percent higher than those without. The minimum age requirement varies from state to state.

I’d tell any job applicant that a college degree is always a plus, but to be a success, a mortgage broker needs street smarts, too. You have to be able to think on your feet, size up a situation, and read people. If you’ve always been intuitive, with good mental reflexes and the ability to adapt to a changing situation, then you’ve already got many of the skills you’ll need to succeed.

In this chapter, we’ll review the legal requirements to be a mortgage broker, testing strategies to ace licensing exams, and the advantages and disadvantages of a multi-state practice.

Only two states, Alaska and Colorado, do not require mortgage brokers to be licensed. The license requirements vary from state to state (see Appendix B).

Job titles and their attendant responsibilities may differ from state to state, so be sure to check carefully which license you will need. Let’s look at Ohio’s licensing requirements, as they are typical of most states. As defined by Ohio statute a loan officer is “an employee of a registered mortgage broker who originates mortgage loans for a fee. Loan officer also includes an employee who solicits financial and mortgage information from the public for sale to another mortgage broker.” A loan officer in Ohio must pass an exam and be licensed in order to practice. A mortgage broker operations manager is a more senior position. In Ohio, mortgage broker refers to the company “that assists a buyer in obtaining a mortgage and receives compensation for providing this assistance. Each registered mortgage broker must designate an operations manager with at least three years experience in the mortgage-lending field.” A mortgage broker operations manager must pass a knowledge test and apply for a license.

Here are some of the common regulations:

Other states, for example Delaware, don’t require a physical office in the state, have no exam, no audited financials, and no fingerprint cards, but do require both a $25,000 bond and three references from businesses currently doing business with the applicant.

Some states require a certain number of hours of coursework, as well as passing a licensing exam in order to work as a mortgage broker. Check your state’s requirements.

The National Association of Mortgage Brokers (www.namb.org) offers online courses and self-study courses, as well as lists links to classes offered in various states. There are also commercial business schools that offer mortgage broker training. Check your state’s licensing bureau to determine if a program is an “approved provider.”

Sources for continuing education programs include:

The licensing exams will test your knowledge of both federal regulations and state regulations. The passing grade varies from state to state. All permit you to retake the test, but again each state makes its own rules for how often you can sit for the exam until you pass.

Here’s an overview of the topics you’ll need to know, using the Study Guide for the Oklahoma Mortgage Broker/Loan Officer Exam as an example:

To get a broader overview of testing and the subject material covered, let’s look at how Ohio regulates mortgage professionals.

To get licensed, contact the Ohio Department of Commerce, Division of Financial Institutions for application forms and information (see Appendix B for contact information). The application costs $100, and the examination company (Experior Assessments in the case of Ohio) verifies your eligibility and then allows you to register for the test. After registration you’re given 90 days during which you can take the test as many times as necessary to pass.

The two-hour exam consists of 75 multiple-choice questions. There are nine questions on mortgage loan programs, 18 questions on mortgage loan processes, 18 questions on Federal mortgage lending regulations, 18 questions specific to Ohio’s regulations, and 12 questions on terminology. Each state has its own requirements and tests, so the best way to find out what applies to you is to contact the appropriate state regulatory agency (see Appendix B).

Here are ten tips that will help you ace the exam:

If you study the material, are motivated to succeed, and follow these suggestions, you should be able to ace the exam.

You may decide to get your mortgage broker license after you’ve been working in the field or a related field. For example, starting as a loan processor is a good way to become familiar with the terms and paperwork (refer to Chapter 3 for more on jobs as a loan processor). Some companies provide training or you can enroll in a class that teaches loan processing and takes students through the workflow from origination to closing.

I worked in a variety of related fields—insurance, real estate agent, appraiser—before settling in as a mortgage broker. All those work experiences made me a more knowledgeable broker. Others make the move from work in the real estate field (and vice versa). By working in real estate, you’ll have a basic familiarity with the terms and regulations.

Being a salesperson, regardless of the product, certainly gives you the experience you’ll need in selling yourself and the product—although you’ll clearly have to learn the details of the mortgage broker industry.

Training or experience in banking (as a loan officer, or even a teller or customer representative) is helpful.

As you get more experienced, you may want to get licensed in more than one state. It certainly makes sense to get licensed in the states contiguous to your primary place of business. For example, my company is in New York, so I also got licensed to practice in Connecticut. I would have gotten a New Jersey license, but that state requires that mortgage brokers maintain a physical office in the state. I had to calculate whether the cost of maintaining an office would be offset sufficiently by the profits from making deals in New Jersey. At this time, not enough of my clients were moving across the state lines that way, so I decided against it.

In contrast, I went out of my way to get a Florida mortgage broker’s license. Florida requires license applicants to take a 40-hour in-state education class and pass an exam. It meant leaving my family for a week and going back to school, but it was well worth it. I wanted to be able to serve my local clients who made the decision to either retire in Florida or buy a vacation home there. Plus Florida is a booming state with tons of building activity. The investment of time and money in getting a Florida license has paid off handsomely.

Since so much of the work in this industry is done electronically, and you don’t have to be at the closings (although it’s often reassuring to new buyers), a physical presence in the state to conduct mortgage broker business isn’t necessary.

My basic rule of thumb is that if the requirements, financially and logistically, aren’t too burdensome, it’s an advantage to be licensed in multiple states.

What follows is a list of the states that license mortgage brokers without requiring a physical office in the state. You can serve clients via phone, fax, and e-mail. They are as follows:

The Least You Need to Know