Wednesday, June 29 2022

Becoming a mortgage broker in California can seem overwhelming at first. The state offers three different types of broker’s licenses, issued by different agencies and with different licensing requirements.

There is the Financial Lender’s License (CFL) and Residential Mortgage Lender’s License (CRML) both of which are issued by the California Department of Business Oversight (DBO). There is also the Real Estate Broker License, often referred to as a BRE license because it is issued by the Bureau of Real Estate which also allows you to work as a mortgage broker.

Different broker licenses have slightly different licensing requirements. Some must submit a bond as an additional layer of protection for homebuyers, while others must pass pre-licensing training and an exam. Read below for an overview of the different license types and what you need to do to get a license.

Types of Mortgage Broker License in California

Here are the three types of mortgage broker licenses issued in California that are required to obtain each of them.

â–ºFinancial Broker License: Anyone who grants and negotiates consumer and business loans in the state is required to obtain this type of surety (except those listed here). The limitation of this type of license is that these brokers are only allowed to trade loans with those who hold a financial lender license. They cannot do business with any other type of lender in the state, such as banks or credit unions.
â–ºResidential mortgage lender’s license: This type of license is required of those who issue or manage residential mortgages in California. While this allows them to make and manage loans, it also allows them to negotiate loans if they also have a mortgage originator license. RML licensees can negotiate with other RML lenders, as well as institutional lenders, such as state or federal chartered institutions.
â–ºReal estate broker‘s license: This license allows licensees to act as real estate brokers and mortgage brokers in California. Due to the combined nature of the license, the application requirements differ from the other two licenses and previous experience and exam is required.

How to get a license

The pre-license and application requirements for the different mortgage broker licenses vary slightly. Here is what each license applicant must complete and meet in order to obtain one of the above licenses.

To obtain a finance broker (and / or) lender license, you must apply through the National Mortgage Licensing System (NMLS) and submit a license request. The license request must include a business plan, answers to disclosure questions, certificate of authority, organizational chart and a number of additional documents. When applying, you will also need to:

â–ºHave a net worth of $ 50,000 if you are applying for a residential broker’s license only, a net worth of $ 250,000 if you are applying for a residential lender / broker’s license, and a net worth of $ 25,000 if you are applying for a non-licensed residential lender or broker license (these applicants apply directly through the DBO instead of the NMLS)
â–ºSubmit and maintain a bond of $ 25,000 for one of the above licenses.
â–ºSubmit criminal background checks for owners, officers, directors, managers and all others responsible for lending activities
â–ºPay a license and processing fee of $ 400 when applying to NMLS

Residential mortgage lender license requirements

To obtain an RML license, you must comply with the licensing requirements detailed below. Remember that in order to use your RML license for mortgage brokerage business, you must have a California Mortgage Originator License, which you can also apply for through the NMLS. RML licenses are also obtained through the NMLS. When applying, apart from fill out your request form, you will also need to:
â–ºBecome a licensed lender or manager for at least one of the following: Federal Housing Administration (FHA), Veterans Administration (VA), Farmers Home Administration (FmHA), Government National Mortgage Association (Ginnie Mae) , the Federal National Mortgage Association (Fannie Mae), or Federal Home Loan Mortgage Corporation (Freddie Mac)
â–ºSubmit audited financial statements that document a net worth of at least $ 250,000
â–ºSubmit a $ 50,000 bond
â–ºSubmit criminal background checks performed for all shareholders, key officers and directors
â–ºPay a license and processing fee of $ 1,100 through the NMLS

Requirements for a real estate broker’s license

To obtain a real estate broker’s license, you will need to apply through the California Office of Real Estate. In addition, in order to function as a mortgage broker, applicants must also obtain a endorsement by the author of the mortgage license of the NMLS. To become certified as a real estate broker, candidates will have to:
â–ºSubmit a broker review request (and pay a $ 95 review fee)
â–ºFill out or submit proof of completion of eight college courses In the real estate
â–ºProvide proof of at least two years of full-time experience as a licensed salesperson within the past five years
â–ºPass the broker exam
â–ºFill out and submit a broker license application (and pay a license fee of $ 300) and a live scanning service request

Unlike the permit types above, applicants for this permit are not required to post a bond. Once you have received your real estate broker’s license from the BRE, you can then apply for an MLO rider through the NMLS. This will require you to submit an application and depending on whether you are applying as a company or as an individual, you may also need to pass your studies and exams.

Bond Requirements

The requirement for finance brokers and residential mortgage lenders to obtain a bond may require explanation for new applicants. Bonds are binding agreements required by the state. They are put in place to ensure that licensees who are bonded will comply with state laws and regulations such as the California Residential Mortgage Lending Act or the California Finance Lenders Law.

The provisions of these obligations vary depending on the type of license. They are generally conditioned on ensuring that licensees will abide by all agreements they have with their customers and fulfill all obligations they have under the aforementioned laws. Bonds also ensure that licensees will not engage in dishonest business practices such as fraud or misrepresentation.

If the brokers are found to have violated any of the above conditions, a claim may be filed against their surety by anyone who has suffered prejudice as a result of such violations. In this case, the surety who guarantees the bond will grant the applicants compensation up to the total amount of the bond. Under the bond agreement, the bonded licensee must then reimburse the bond in full for any compensation it grants.
Vic Lance is the founder and president of Lance Surety Associates. He is a surety expert who helps mortgage professionals obtain a license and a surety bond. Vic’s phone number is (877) 514-5146 and his email is [email protected].


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