becoming a mortgage broker??

20 Replies

hey guys,

I am thinking of becoming a mortgage broker or mortgage originator? I think they are the same thing. my college is offering the 20 mandatory hours to apply for the state and national test.

my question is after I pass both national and state tests. how do brokers get loans for the clients exactly?

would I have to apply to all the banks? how would I go about getting loans from all the banks so I can pick the best loan for my client? do all banks work with mortgage brokers?

Thanks Ned,

King, Big difference between a Mortgage Broker (MB) and a Mortgage Originator (MO).

First, take the class! Even if you don't follow through and go into lending it will be a good introduction to mortgage originations. As with any class the experience of the instructor determines what you get out of it. Anyone who is active as an investor would benefit from the class, IMO.

I say that and I have not taken the class, LOL. I went to a practice test for the national exam and got 94 of the 100 questions, the 6 I missed had to do with new disclosures that are now required, so by taking the test I can see what the class basically covers. A good instructor could provide additional information of their liking as in any class that wouldn't be on the test. The degree of difficulty is very similar to a real estate license for agents, but doesn't cover RE aspects in detail.

What you get will be the regulations pertaining to residential loans, Reg Z, TILA, RESPA and disclosure requirements. Types of loan products and loan processing aspects will be part. You'll learn the interactions between lenders and appraisers, settlement agents and others as to restraints from influencing or steering aspects or ethical aspects.

Having a RMLO doesn't mean you can just hit the streets doing business, you must have a sponsoring entity or brokerage, similar to RE agents working under a RE broker. RMLOs will have bonding requirements, rather low and be insurable under the sponsor's insurance coverage. State requirements vary and all require a background required under federal requirements.

The RMLO license sets you up as much to being a MO as an agent's license allows a RE agent to be hired by a real estate brokerage, but you'll be an employee of a lender in most situations. Basically, this means you could be hired by a bank to meet loan applicants and take their application legally. As with any job, your employer will have their own training on their products and expectations of how business will be conducted. Depending on the MO, they will be supervising your work for a few months, at least in a bank, a broker may "cut you lose" when the feel comfortable with your abilities.

In a bank, MOs are in the residential loan department and I've seen the majority of these officers stay in that job for years. Most banks will want a college degree but for MOs often it's not a requirement. Your pay will be based on production, a salary and commission is common. You can make average income, many factors and variables, but you won't be driving a new Caddy unless you live in it :) guessing, 25 to 35K starting off, banks don't pay much at this level. You can advance in some banks and get to high 5 figures, possibly 6 figures in a management role.

While I say banks, you could be with a credit union or a mortgage banker or broker too. I paid my loan originators .375% starting off and on a sliding scale to production to .75%, that was generous and with the exception of two, all were past loan officers with years of experience in banks.

So, being a MO is a good job, I wouldn't say you'll get rich but with years of experience, managerial abilities you can make a very good living.

MBs are another matter. An MO may work for a sponsoring MB.

State requirements to open an office as a MB will vary. Generally, you'll have net worth requirements, some require cash or closely follow the qualifying assets of a qualified investor under SEC but at lower amounts, meaning you home an car and other assets may be excluded, they want cash or securities. Many states will allow you to post a bond to cover asset requirements and many will require a bond. The only state I found, as of last month, that didn't have requirements was Kansas.

That's just the first hurdle, you'll need an office, a toll free number, posted office hours and you may have other hard business type requirements. Again, while state requirements vary you'll then move into reality.

In order to get hooked up with a mortgage banker or institutional lender you'll need to meet their requirements, in other words who really controls you going into business will be the secondary market bankers.

Any MB originating secondary market loans will need experience in the business before they get on with a mortgage banker. They are interested in your production levels and the quality of business. After you're in the business, some mortgage bankers will pick up a MB that meets state requirements and fog a mirror, that's usually not the case with the first company that picks you up. When I started, I had no experience originating. I began by hiring two others, a loan officer and a loan processor both with a few years of experience. No, that's still not enough as there were concerns of management. I gave my resume and was quickly approved because I had been a bank examiner for FDIC that exceeded their expectations for management and I was in the business.

MBs gain affiliate lending relationships under contract with as many mortgage bankers or institutions as possible or as the market requires to offer a product line.

In reality, experience matters getting affiliate relationships, a bad egg can present huge liability issues for a lender, you'll find too that many banks won't allow third party originations outside their organization. Large banks, such as Wells Fargo have brokerage programs but that is different from the bank down the street, actually you may be competing with them.

There are MBs that don't originate secondary market loans, few and far between that may deal in residential lending. An example of these guys might be a private investor funding new home construction loans, these loan may be originated in portfolio and sold off to a variety of mortgage buyers, smaller banks might be involved in buying loans but these arrangements may be heavily anchored in the business relationship of the investor(s) and/or the builder. I'd guess compensation would be lower with this type of operation.

So, the RMLO designation won't set you out on the street as a lender. It's a beginning position in residential lending. You are not a loan underwriter as that requires experience in assessing risks, apply prudent lending practices which is not really covered in that 20+ hour class. The lending business is much like any other profession a junior attorney must pay his dues and gain experience before they are promoted to bigger bucks. The RMLO is like getting a pilot's license for a single engine aircraft, before you fly a 777 you'll need experience, hours and training.

It's a good carrier, I made very good money as a broker in a rather small metro area. Residential leads to commercial and into other business arrangements as well as note brokering that can be fantastic!

Now, due to the Dodd-Frank Act there is an opportunity for someone with a RMLO to do originations for seller financed obligations. I know there are newish RMLOs doing this. If they can get a sponsor or meet the state requirements as a lender that is pretty much all they need to operate legally. Seller financing is actually more difficult to underwrite than a secondary market loan if done properly. A newish originator will know the regulations but may not (usually in any case) not have a clue as to the ramifications of what they might do, they may take off on pure guts and be entrepreneurial generating business, but they really are not qualified as to experience, as there are many other lending issues that may apply that aren't touched on in the basic education they received. If you go this route I really suggest you get with another experienced lender to review your work and not get into creative operations until you have experience. There are many in the industry that will assist you, really, while you may have competition you develop friendly relationships and you may pass business around as someone may have a product or service that better suits the client.

That's it! You got my morning book for the day! :)

@Bill Gulley Holy smokes man, that was a good one. I can't really add much to what Bill just said, but I'll say that I'm a mortgage broker in california and I started out working for a direct lender in a call center environment. It was the best thing for my career because I learned how to read guidelines, how lenders work, spoke directly with underwriters, learned how the secondary market affects origination, basically everything there is to know about doing loans. I was also taught how to sell loans which is a whole added issue if you've never done it before. Another benefit to working for the direct lender is that they did A LOT of radio advertising, and as a result I was able to speak with as many as 10 new potential clients each day and I became a top producer and performed a career's worth of loans in the span of a few years.

Originally posted by @Antonio Chasten:

@Bill Gulley  is the man. Nuff said.


@Bill Gulley   What is your outlook for this profession for the short, mid & long term with all the new rules, etc? My brother is tired of inputting numbers in tax forms as a CPA and is looking for a change. I was thinking about recommending that he become an MLO. 

@Matt M.  That's a hard question to answer, there's a lot there to address.  The business is very satisfying and extremely frustrating at the same time.  Regulations are in any business, especially one dealing with people's money and also the fact that it was partly to blame for the great recession.   You just need to be able to adapt and adjust as they make new rules.  Having said that, you can make a lot of money, provide for your family, help people plan financially, and meet a lot of cool people.  It takes a lot of hard work to be successful, but you'll get a lot out of it dependent upon the work you put in.  

@Matt M.  One other thing, I'm happy to talk to your brother if he's interested in a little more info specific to his situation. PM me and i'll get you my number.

My concern would be that the rules become too costly for the little guy and the big banks take over completely. 

Originally posted by @Matt M.:

My concern would be that the rules become too costly for the little guy and the big banks take over completely. 

Why do you think I sold out years ago and never opened another shop? Yes, I made enough, yes I got burned out eating, breathing and sleeping RE financing, yes I got a great offer, but no one makes too much money, I could open another office today with a short start up period, but I'm not going to. Compliance is the main reason I would not, anyone who says they can operate the business, market the products, make the loans and keep up with compliance themselves is delusional. I'm more familiar with compliance issues than most brokers I'm sure, which is why I wouldn't beat my head against that wall.

As I said, you can't really start out as a broker, go the RMLO route and let the company address compliance. Having been a CPA will certainly be helpful in meeting the needs of the public, accounting is a plus but it's a different world and the secondary folks want specialized experience. While he has experience in reading compliance issues, and he may catch on quicker, it's not that relevant to lending.  Specializing in seller financed notes and buying and selling notes could be a good route for a newish broker, but they still need experience in the field, it can't be learned in a few weeks on the job or from books or classes.   :)

@Bill Gulley

Hi guys. Thanks for your extremely helpful posts. 

I'm an investor and I enjoy the underwriting and financial analysis involved in investing. I've thought I might enjoy the field of Commercial Mortgage Brokering. (Not residential)

I'm not thinking of becoming a broker initially but I'd like to work as an "agent" for a broker, helping to find clients and working to get the loans ready. 

From what I've read, it's possible to do that without a license and earn commissions off of the loans you help to process for the commercial mortgage broker. 

Do either of you have insights into this field of lending?

Do you have advice on how one might get started?

And in this a job, in your opinion, that can be done remotely (ie. You live in CA but work to process loans in different states)?

that is a good way to begin, by birddogging loans. Your state may have a registration requirement, most do, but being a "loan officer" under a broker may get you past that even on the commercial side. Registration is usually easy, they just want to know who the heck is out there doing what! A broker in your area can tell you what you need to do in that position. You will need a good finance and accounting background, at least the formal education side of these areas......sounds like you have that.

Good luck :)

i am a loan officer who restarted in the field by doing what your speaking of under a commercial Real Estate Broker. I personally love working the commercial end because there is less restrictions ( you can work for more then one Commercial lender). To answer your second question YES its is doable to do in out of state locations ( I have lived in both NC and NY and have not closed commercial loans in those states while living in them. I have however closed in states like PA,FL,TX,extra). The key is that the bank or lender that you will be processing the loan through is licensed in that state. The one tip I would give is to try to find someone (think broker) that has multiple states covered within their one umbrella. 

@Bill Gulley

Thanks so much for the insight. I hope you don't mind but I'm going to PM you to ask a few more questions. I really appreciate it. 

Daniel, I realize you want to do commercial, but most brokers will be in residential as well and having an RMLO license would really add to your versatility in finding a home. I started all my loan officers on the residential side, except 1 who came directly from the commercial  side at a bank.

I'd think if you talked to some brokers they would be happy to teach you enough on the processing and packaging side to let you work on a commission basis, that's free labor for them, you're a sharp guy so they will likely try you out. Just approach some and see what they say! Good luck :)

@Daniel Ryu

  IN most states commercial loans are just that commercial and no license is needed to broker them fund them etc.

RMLO licenses are needed for 1 to 4 unit.. in some states like Oregon its needed whether the property is for investment purposes or not.. its the property that is the driver.

In other states its the purpose of the loan that is the driver.. so you can have a SFR but if its a loan to an LLC for business purposes no license required.

@Bill Gulley

Good info.. It's great to be able to hear from investors with so much experience!

It definitely is a confidence boost.

Thanks again BP!

@Daniel Ryu

  to reiterate any activity related to origination of a loan for expected profit that involves an owner occupant borrower on 1 to 4 unit properties.. an NMLS license then the subsequent state license is required. this is a federal law and All states have implemented it.

@Jay Hinrichs

Thank you for re-emphasizing that. I may just end up getting the RMLO.

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