The Unique Finance Blog

We list some of the initial steps you should consider before opening your own Mortgage Company as a Mortgage Broker. Please consider the below.

Set up your Corporation

Before you setup your mortgage company, you will need to decide upon the type of entity through which you will operate your business. Will you set up as a corporation, limited liability company, partnership or sole proprietorship?

There are advantages and disadvantages to each type of businesses. Most mortgage lenders or brokers go the corporate route because it is the most prevalent form used when setting up a mortgage company.

Corporations are also great vehicles for conducting business as corporations shield you from personal liability and allow you to protect your personal assets. If you decide to set up a corporation, you will need to file Articles of Incorporation with the Secretary of State.

Setting up a corporation is really not that difficult, just file Articles of Incorporation and pay any required fees. However, corporate reports must be filed including filing a statement of officers where required and maintaining corporate minutes. After the corporation is set up, organizational minutes should be drafted and executed. These minutes are kept in a Minute Book and should be maintained on an ongoing basis, at least annually.

Directors of the corporation are to be elected by the stockholders. The Directors then elect officers who will be in charge of operating the corporation. We recommend that you seek the assistance and guidance of a competent attorney in your state with the setting up of your corporation. Remember, if it is worth doing, it is worth doing right!

Corporations and limited liability company can provide limits on your personal liability relating to operating your mortgage company. Consult your attorney and your secretary of state regarding appropriate forms and rules.

Become a Net Branch

The operator of a Net Branch can manage his own mortgage business without the hassle and expense of the typical operations of a mortgage company. For example, the branch operator, in most cases, does not incur the expenses of mortgage licensing, fidelity bonds and other necessary insurance policies. Rather, the net branch operates under the name of the lender company and uses that company licensing and investor relations to originate loans. In some cases, the lender company retains a small administrative fee per loan and provides the remainder of all commissions earned to the branch operator. In other cases, commissions are split on a percentage basis with the branch operator receiving 70 to 80% of the commission and the lender company retaining 20 to 30% of the commissions. Recently, over the last few years,branching has become more competitive with more lenders entering the branch partnering arena. Typically, any originator who has a minimum of at least one years experience originating mortgage loans can become a branch operator. The level of experience required will vary by the requirements of the lender company.

Mortgage Mail -Advertising Ads - Learn to Advertise Option Arm Mortgages

There are a lot of special rules that you need to follow when creating mortgage advertisements. You should become familiar with your state’s law concerning advertising mortgage loans. You should also learn the federal rules that apply, especially the Truth Lending Act and Regulation Z advertising requirements. There are also special rules that apply to the marketing of option ARM loans and Interest Only loans. These rules are known as the Guidance on Non-traditional Mortgage Products.

If you want to learn more about mortgage advertising, you should review the How To Advertise Mortgage Loans guide which is available for purchase at www.advertiseyourloans.com

Apply for Your Mortgage License

Planning ahead before opening a mortgage company is necessary since you cannot legally make or broker mortgage loans without first obtaining a license or qualifying for a certain “exemption” from licensing. An exemption from licensing means that you are excused from the licensing requirements, but typically only because you are regulated by some other

Exemptions from licensing are typically only available to banks, subsidiaries of banks, attorneys not actively engaged in the mortgage business, real estate brokers, or sellers of property when carrying back seller financing. There are a few states that also provide you an exemption from licensing if you are approved as a lender with the U.S. Department of Housing and Urban Development

The best course of action is to apply for your mortgage company license at least ninety days before you plan to open your business. Remember that most states will allow you to maintain a mortgage license to operate in the specific state whether you make any loans there or not. The general rule is that you cannot originate any loans in the state until you receive your mortgage license. Also, on average it takes at least ninety days to receive your license. Therefore it makes great sense to apply early for this license so that you will not need to wait for the license once you have done everything else to be ready to originate your first mortgage.

There are several things that must be considered while you are waiting for your mortgage license to be approved. Here is a short list of tasks for you to consider completing:

Find an office location / can you license your home?

Decide whether in your initial plan you will be hiring loan officer

Set up bank accounts in the name of your mortgage company

Create employment applications if you will be hiring employees

Create your broker agreement (agreement between you and the borrower)

Purchase your Loan Origination Software

Find a credit report provider

Find an insurance provider with good customer service

Locate competent real estate appraisers

Get approved with mortgage wholesalers (companies you can broker your loans to)

Meet with your insurance broker to consider what insurance and mortgage surety bonds you will need

Meet with your CPA. You will likely need an initial financial statement showing the net worth of your company.

Meet with your attorney if you need to draft any agreements, corporate minutes, etc.

Set up your payroll system if you will be paying employees

During the licensing process, continuous planning regarding your advertising and marketing efforts is essential.

You could have the best software, forms, and systems in place, but if no one is making your phone ring or applying for loans from you, then all of this effort will be pointless.

To learn more about setting up your own mortgage company, please visit www.www-becomeamortgagebroker.com
Kenneth Block is an attorney at law who has extensive experience in counseling companies in the consumer lending industry regarding compliance with state and federal licensing and consumer protection laws. Mr. Block is a member of the California State Bar and received his juris doctorate degree from Loyola Law School, Los Angeles, California in 1993. Mr. Block has counseled various companies in connection with compliance with state and federal laws that affect the day-to-day business dealings of consumer lending companies. In recent years, Mr. Block has specialized his practice to the marketing practices of consumer lending companies engaged in both traditional, internet, and e-commerce marketing of its financial products.