What Certifications & Licenses are Required for Reverse Mortgage Companies?
When shopping around for a reverse mortgage, it’s very important that consumers research the companies they contact and make sure they hold the necessary licensing for their state.
How do I know if a reverse mortgage lender is properly licensed to do business in my state?
The difficult part of researching the validity of a reverse mortgage lender’s credentials lies in the fact that most ordinary, everyday people are not familiar with the certification and licensing that is required by their state government. Researching this information can be tough as well, since every state has different requirements in order for a mortgage lender to legally make reverse mortgages.
“The uniqueness of the mortgage licensing laws of each state is expressed in the diversity of the laws, rules, regulations that each state adopts. The states differ on whether a Mortgage Broker even needs a mortgage license, whether the Mortgage Broker can loan on both 1st and 2nd mortgages, or whether a physical office in the state is required.” – Mortgage News Daily
Just to give an idea of possible reverse mortgage licensing requirements, we’ll use North Carolina as an example.
In the state of North Carolina, the North Carolina Commissioner of Banks regulates all aspects of the Mortgage Lending Act (MLA).
This Act repealed portions of earlier laws regarding the registering of Mortgage Brokers. Under this Act, those who are licensed as a Mortgage Lender in North Carolina do not have to also obtain a Mortgage Broker license in order to perform Mortgage Broker activities.
HOWEVER…Not all mortgage lenders can produce reverse mortgage loans. ONLY licensed or approved mortgage lenders are allowed to make reverse mortgage loans.
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The general requirements for a reverse mortgage lender’s license in North Carolina are as follows**:
An applicant/licensee must…
- Be licensed as a lender under the NC SAFE Act (Article 19B) unless Exempt*
- Have and maintain a $500,000 net worth
- Obtain and maintain a $100,000 surety bond
- Submit form RM56 with the initial application fee of $750
- Be in good standing (No outstanding complaints and no unsatisfactory examination rating)
*An Exempt entity should submit forms MLA04 and RM57 (e.g. banks, credit unions, savings institutions).
** Subject to change. Please visit the North Carolina Commissioner of Banking’s website for the most up-to-date -requirements.
Another way to research licensing requirements in your state is to take a look at the National Mortgage Licensing System (NMLS) website. Any mortgage lender you work with should have an NMLS (or NMLSR) number that is displayed somewhere on their website or physical documents. You can view specific state licensing requirements through the NMLS site here: http://mortgage.nationwidelicensingsystem.org/slr/Pages/default.aspx
Do reverse mortgage lenders have to have higher education?
While it is not necessarily required that reverse mortgage lenders have specific educational criteria, most will have some form of professional training in the finance, real estate, or mortgage field. Many reverse mortgage lenders begin their careers in other lending positions, so having that professional experience is yet another feather in their cap. Furthermore, because rules and guidelines for mortgage financing is ever-changing, reverse mortgage lenders who stay up to date on these changes through seminars and workshops will likely have an edge over the competition.
Are there other ways to ensure a reverse mortgage lender is legitimate?
In addition to providing an NMLS/NMLSR number, look for distinctions and membership status to various accredited groups and organizations in the industry. Website icons that say “Member FDIC,” “Equal Housing Lender,” “NRMLA Member” and “BBB Accredited Business” are a few key indicators that you’re likely working with a legitimate reverse mortgage lender in good standing.
You can also test the validity of the lender’s claims by cross checking their supposed membership with the various organizations they claim to belong to. For instance, you can do a search for their name on the Better Business Bureau’s website here: http://www.bbb.org/