There are 1000s of mortgage processors functioning on an agreement basis in the United States. The SAFE Mortgage License Act that passed in July 2008 requires contract mortgage processors to be licensed by July 2010. How can the newest law affect contract mortgage processors? Obtaining mortgage loan originator (MLO) licenses in multiple states can be very costly. Exactly what do an agreement mortgage processor do to comply and not break the lender?
Let's first look at the definition of an agreement mortgage processor underneath the SAFE Mortgage Licensing Act. The Act defines a mortgage processor as an individual that gathers documents from borrowers and submits the documents to a lender, but doesn't take residential loan applications. The Act then continues to state that a mortgage processor is exempt from mortgage loan originator licensing provided that they are a w-2 employee of only one mortgage company. Thus a mortgage processor that is 1099 and/or processes loans for more than one mortgage company must be licensed as a mortgage loan originator (MLO) and is known as an agreement mortgage processor. If you're defined as an agreement processor, then what are your alternatives for obtaining a license in each state you process loans?
You are able to choose to become pay way processors a w-2 employee of only one mortgage company and process mortgage loans for only any particular one company. This is probably not the perfect situation for most contract mortgage processors, nonetheless it may be the only choice for some. The cost of licensing may be expensive and a license is needed in each state you process loans. Also, as we will discuss shortly, you might need to acquire a mortgage company license too. This really is even more expensive than obtaining just the mortgage loan originator license.
The down side to this to this approach is obvious. You can't continue to process mortgage loans for the other customers. Also, it may be hard to locate a company that'll hire you on a full-time w-2 basis. Most smaller companies just do not need the resources to steadfastly keep up a full-time processor on staff.
You are able to choose to acquire a mortgage loan originator (MLO) license in each state you want to process loans in. Then you'll have much of your customer sponsor those mortgage loan originator licenses. To obtain a mortgage loan originator license, you will need to complete 20 hours of education, two tests, fingerprinting, credit check, and pay a software fee between $100 and $400 per state. Then you'll have much of your customer sponsor your mortgage loan originator license. This enables you to process loans for much of your customer on a 1099 contract basis. The thing is that when you want to have other customers, you would need to put up your contract between your sponsoring primary employer and one other customers. So when you need to get paid by your other customers, one other customers would need to pay much of your customer and then your primary customer could pay you. This obviously poses an enormous problem for most contract processors since it's very unlikely you may find a principal customer that will be willing to sign processing contracts together with your other customers. However, this is one way the states are saying it must be done. Some states might be implementing this slightly differently, so I would suggest contacting the state or even a licensing service to determine how the state is interpreting these requirements.
You are able to choose to acquire a mortgage company license and a mortgage loan originator (MLO) license in each state you want to process loans in. Here is the ideal situation, because then you do not need to be limited by only one employer as in option 1 and you do not have to have a primary customer sponsor you and pay you for the other customers work as in option 2. However, here is the most costly option. It usually costs about $1,000 to $3,000 to use for a mortgage company license per state. And some states have net worth requirements, experience requirements, and bonding requirements which can be difficult barriers to overcome.
In the event that you can go this approach, you will actually manage to avoid the mortgage loan originator licensing in many of the states by paying yourself as a w-2 employee of one's contract processing company, but the costs it's still much higher. If you're considering going in this way, you would want to get licensed only in states you plan on processing ten or more loans in each month. Actually, most individuals who go this route may benefit from having a couple of contract processors use them to offset the costs.
If there is an industry that attracts greed it's credit card processing. I suppose that's what goes on within an industry that processes significantly more than $2 trillion dollars in volume annually - everyone wants a piece of the pie. Well the greed has gotten beyond control, and unfortunately oahu is the merchant who usually eventually ends up paying for it. This information exposes 5 deceitful tactics credit card processors use to line their pockets at their merchants expense.
Tactic #1: The "Rate Game"...
Sales telemarketers love to call business owners and promise to offer them a "lower rate", and to "save them money" if they will switch processors.
Question: How can they possibly know they'll manage to save money before they've even viewed a statement and seen that which you are currently paying?
The clear answer is - they can't!
But here's the dirty little secret: they don't care what your statement says because typically they don't want to save money anyway. It's amazing how many merchants say they'd switched processors for a lesser rate - only to locate they ended up paying about the same total costs as before when it was all said and done.
The reason why this can happen is because there are so many variables to a processors rate structure, that discount rates can very quickly be manipulated to supply savings in one single area, while creating for this in an alternative area altogether.
A typical example of this is supplying a lower discount rate, and then creating for this in transaction fees, statement fees, annual fees, PCI fees, or'most of the above '.
The perfect solution is? Demand your processing rep explains VISA and MC's Interchange Rates (which may be downloaded from each of their respective websites), and can justify what they want to charge your account fully for, in relation to published interchange rate charts.
Tactic #2: The Binding Contract...
Another trick processors use would be to lock you right into a 2,3, or even 5 year contract - without verbally letting you know they'd done so. Sure, you could have found it somewhere in the details of one's processing agreement, but it's rare for anyone to read page after page of small print "legalese" when jumping through all the hoops of filling out an agreement and hearing a well skilled, friendly salesperson.
Similarly, at the end of the first contract term, another devious trick is to incorporate a clause somewhere in the contract stating that unless the processor is notified in writing at the least 30 days prior to the expiration of the first processing agreement, the contract will automatically renew for an amount of 1 year.