Mortgage Brokers’ Step-by-Step Guide to Compliance

Costly. Time-consuming. Confusing.

Those are just a few of the opinions you’ll hear when you ask a mortgage professional about compliance.

For some, mortgage broker compliance is expensive, frustrating, and the inspiration for long-winded rants. For the vast majority — honest brokers who do right by their clients, partners, and government —compliance is the detail-oriented editor friend who catches small mistakes before they become big ones.

If you’re planning on operating a mortgage business, you’re going to have to deal with compliance. It’s a non-negotiable part of the process. Whether your experience with compliance is positive or negative is up to you, and highly dependent on how you execute.   

Mortgage Broker Compliance: What are Brokers Responsible For?

The first step to nailing compliance is understanding what’s expected of you as a broker. With a clear vision of your responsibilities, you can establish a workflow that makes the process simple.

Marketing and Advertising

We live in a social media age. For better or worse, it’s arguably the most effective tool you have to get yourself and your services in front of clients. When you’re using this medium, you have to make sure you’re doing it the right way. If you’re writing a social post to advertise your mortgage company and your services, you’ll need to include your NMLS number on all advertising. In some states, there are additional requirements so it’s best to consult individual state guidelines.

Or, if you have access to super low rates for the day (of course you do, you’re a wholesale broker) and you want to tell your client, the email you send to inform them has to include an APR% or it won’t be compliant.

Origination

If you’ve done some effective (and compliant) marketing for your broker business, you’ll soon need to originate loans for your newly earned clients. The key compliance step here is to ensure you have the state and federal disclosures needed for the type of loan you’re processing. This is where your loan origination software (LOS) proves its worth as most modern platforms come with features like disclosure templates. You can also hire third-party compliance specialists who can ensure you have what is required for your state.

Record Keeping

You have to maintain the records for at least three years, but there are state-specific requirements to consider as well. You want to make sure you retain documentation that tells the complete story of each mortgage transaction. However, your wholesale lender can be a great help here as most make documents easily accessible and downloadable via PDF.

Don’t overthink this folks; audits are no sweat if you keep your records in check.

Licensing

Mortgage professionals help facilitate one of the biggest transactions a person will make in their lifetime. It should come as no surprise that you’ll need to secure a license to conduct your broker business. The type of licensing you’ll need may vary based on which state(s) you plan to operate in, and how you’ve structured your business, so connecting with veteran wholesale brokers may be beneficial here.

Pro tip: Don’t wait until the last minute to renew your licenses. You’ll receive emails from NMLS that walk you through the renewal process. Depending on the state you’re licensed in, missing your renewal deadline may mean starting the process from the beginning.

Employment and Compensation

The more you understand compensation and the rules that govern it, the better you’ll be at developing a pay structure that attracts top talent. Reading up on the Loan Originator Compensation Requirements is a great place to start, and a bit of competitive research can go a long way as well. If you haven’t reached out to a wholesale veteran before this point, it’d be beneficial to do it now. Leaning on their experience can help you tailor a comp plan that grows your business.

Solidify Your Process and Execute Mortgage Broker Compliance

Now that you understand what compliance steps you’ll need to take as a mortgage broker, it’s time to put your plan into action. If you can develop a process to complete these steps consistently (or outsource it to a mortgage broker compliance service), you can focus on originating more loans and delivering your borrowers an excellent experience.

Are you ready to jump-start your career in the mortgage industry? Our team at BeAMortgageBroker.com is here to help you every step of the way.