BATTLECALL GUEST EXPERT: Eric Smith, AM Licensing

If you are looking into getting your own mortgage license whether as a broker or as a direct lender, it is helpful to understand a few terms. Here are some of the most common you will encounter as you navigate the mortgage licensing maze.

Articles Of Incorporation:

If your company is an LLC or partnership, this may be called your Articles of Organization or Partnership agreement. Basically, these are the documents you will file and receive back from the Secretary of State where you have formed your company.

Brick & Mortar:

This means that a state requires you to have a physical office in their state before getting licensed. Now, the requirements for that office vary widely, but generally, it must be an actual office with an employee who works in the office. Some states do allow home offices, but they typically still need an employee who works in that office.

By-Laws:

If you are a LLC, this might also be called your operating agreement. This document should have been drafted when you formed your company, but often it isn't. This, basically, is a detailed description of how your company will run (who is on the board, who owns shares, etc). If you don't currently have these, your best bet is to contact a local attorney to discuss, but you might also try running a Google search for "By-laws" to find a template.

Certificate Of Authority:

The full name for this item is a "Certificate of Authority to do business as a foreign corporation (or llc)." This document must be obtained from the Secretary of State in the state where you are wanting to obtain your mortgage license. The process differs from state to state, but the basic requirements are that you must have a registered agent in the state, your name must be available, and you must pay a fee to the Secretary of State. The reason for this document is threefold: 1) You must register so that state can tax you 2) You must register so that you can make sure your company name isn't already being used by another company and 3) You must register so that, if necessary, the state can serve papers on you without having to extradite you to that state. We typically recommend you use a third party company to obtain this document, but you can do it on your own.

D/B/A:

This is an abbreviation for "doing business as." If the name of your company is fairly common and you are looking to start doing business in another state, you may find that there is already a company of the same name in that state. If that is the case, then you will be required to register a DBA in that state that you will do business under. This is to make sure that borrowers of that state aren't confused with 2 companies having the same name.

Financial Statements:

With the exception of a few states, you aren't going to need to have your company financials audited by a CPA in order to get licensed. You will, however, generally need to show at least $25k in company net worth via a company balance sheet and income statement. This statement will need to be signed by an officer of your company and dated within 90 days of the date of application. (This requirement varies state-to-state which will be discussed in later posts)

Surety Bond:

A surety bond is essentially a line of credit issued to you by an insurance company that the state retains on file should something every go wrong with your company or your loans. It is not an insurance policy, but rather an extension of credit. Surety bonds are state specific, so it isn't possible to obtain one large bond to cover each states requirements. The cost of the Surety bond will depend on your credit history, but generally runs in the range of 1%-15% of the bond amount. The average bond for a mortgage broker is $25,000. So, if you have decent credit, you can expect to pay $250-$500 in yearly bond premiums per $25,000 surety bond.