Your Guide to Becoming a Mortgage Broker in California
With more positive signs about the economic conditions in the country these days, it is no wonder that the mortgage business is picking up as well. Do you want to join the new wave of mortgage brokers in California?
If the answer is yes, then you need to learn the nitty-gritty details of how to become a mortgage broker in California. It also means checking whether you are ready for immersing in the trade, as it requires a lot of dedication and resourcefulness.
On the administrative side of the coin, as in any business startup, entering the mortgage brokering arena means undergoing a licensing process with the State of California. If you’re prepared with a bit of thorough research and accurate information, the process will be smoother and easier. What better news for a budding mortgage broker?
Taking the decision
While it may seem as a natural choice to move in the mortgage brokering business, it’s always a good idea to check your motivation. Working as a mortgage broker requires a high level of resourcefulness and passion for this field, combined with specific knowledge and skills. You should also truly want to help people in their efforts to get a mortgage, explaining them complicated financial topics.
Some of the most important skills you need to have to succeed as a broker include excellent social and writing skills. You need some level of knowledge in the fields of sales, marketing and banking, as well as a good understanding of lending institutions with their rules and rates. Most of all, you should definitely be good with mathematics.
Next, you should decide the entity of your business. You can get a license as an individual, corporation, partnership or LLC. Licensing costs vary for the different entity options.
Once you’ve settled on the idea of becoming a mortgage broker and you’ve chosen the format of your company, let’s dig into the licensing options and details.
The starting point for any mortgage broker licensing application is submitting the application form and required documents to the Nationwide Mortgage Licensing System (NMLS). The system covers the entire country, so mortgage brokers from all states apply there.
The requirements for licensing in California are available on there, as well. They include 20+ hours of federal law and ethics education for mortgage brokers: 3 hours each for federal law, ethics and non-traditional mortgage lending and 12+ hours for electives. You also need at least eight hours of continuing education in courses approved by the NMLS.
After attending the classes, you will also need to pass the NMLS SAFE test, another strict requirement for getting licensed.
Passing the NMLS exam
The licensing exam may sound as a solid obstacle along the licensing path, but if you get enough details about it beforehand, you will be well-prepared to overcome it. You can even take a preparatory course that will help you with the actual format and questions. The exam includes a federal and a state test. You should get a score of more than 75% to pass them.
The test itself takes a whole day starting at 8 am, with a 30-minute lunch break. You will often take the test with many people in the room. Bring all you need such as a pencil and a calculator, as well as all needed documents and your driver’s license.
You can expect the results from the exam within one to two weeks by email and by post.
Choose your licensing body
If you want to originate mortgage loans, you can get your mortgage broker license from one of two main authorities. There’s a different application process with each one.
Option 1: California Bureau of Real Estate
The first option for licensing is The California Bureau of Real Estate (BRE). If you license under the BRE, you get a California Real Estate Broker License, as there is no separate mortgage broker license. With this license, you are entitled to perform negotiating and brokering with banks, credit unions, thrift and loans, and savings and loans.
As for the licensing costs under the BRE, the fees range between $200 and $399. The licensing fee for a company Real Estate Broker License is $200. The fee for a Real Estate Broker License (for an individual) and for a Real Estate Salesperson License is $399.
The requirements for a BRE license vary based on the three options above. In most cases, they include pre-licensure education and testing, a criminal background check, a credit check, proof of citizenship, fingerprints, professional work history, insurance and a $25,000 surety bond.
California Department of Corporations
The other option is to get licensed by the California Department of Business Oversight (DBO). In this case, your operations as a mortgage broker will be guided by the California Finance Lenders Law (CFL). If you get licensed in this manner, you will have a Negotiator License and will be able to negotiate loans only with lenders who are also licensed under the California Finance Lenders Law.
You need to complete the California Mortgage Loan Originator License form to apply. The licensing fee under the CFL is $169, but there are also other applicable fees. The total cost of licensing should come to about $330.
Mortgage brokers and mortgage lenders apply with the same application form. The requirements for a CFL mortgage broker license are pretty much the same as for a BRE license and include pre-licensure education and testing, a criminal background check, a credit check, proof of citizenship, fingerprints, professional work history, insurance and a $25,000 surety bond.
How to get your mortgage broker bond
In addition to getting insurance for your business, obtaining a mortgage broker bond is another indispensable requirement in the licensing process.
The difference between insurance and a surety bond is that the former is a protection for you, while the latter is a tool to protect your clients and the state. A surety bond is a guarantee that you will abide by the laws of the State of California in your function as a mortgage broker. The bond is a form of credit provided by the surety company, as they are providing a guarantee for your compliance.
The costs of the bonding can be estimated in advance and are actually a percentage of the surety bond. You can get bonded through a surety bond agency.
After getting acquainted with the licensing options and requirements, you can safely proceed with the actual licensing process. If you have any questions regarding any part of the process, please leave a comment below.
Good luck with your California mortgage broker business!