Bonding Requirements:
CFLL lender and/or broker licensees who originate residential mortgage loans are required to maintain a surety bond that covers the activities of the MLOs they employ. The bond amount will be based on the amount of origination activities conducted by the licensee in the preceding calendar year. See CFL bonding requirement (Surety Bond Requirements paragraph) .
CRMLA licensees who make and/or service residential mortgage loans will be required to maintain a surety bond that covers the activities of the MLOs they employ. The bond amount will be based on the amount of origination and/or servicing activities conducted by the licensee in the preceding calendar year (See CRMLA bonding requirement (Surety Bond Requirements paragraph).
Net worth requirement:
CFLL lenders that make residential mortgage loans must maintain a minimum net worth of $250,000. See CFL net worth requirement for more details (Net Worth Requirements paragraph) .
There is no change to the CRMLA tangible net worth requirement for CRMLA licensees. (See CRMLA tangible net worth requirement for more details( Net Worth Requirements paragraph).
MLO Change of Sponsorship fee:
This fee is incurred each time a company requests to sponsor a mortgage loan originator’s (MLO) license. This fee is a “per agency/per license” fee of $30.
How do I file in NMLS if I am a CFLL or CRMLA sole proprietor?
A sole proprietor will always have a dual role in NMLS and require two accounts in NMLS with two login names and passwords.
- NMLS treats sole proprietors as “companies” and requires the completion of a Form MU1. Thus, the sole proprietor will likely need access as an Account Administrator or a Company User to the “company’s” Form MU1.
- The sole proprietor will also be identified as a Control Person and requires the completion of a Form MU2. Therefore, the sole proprietor will need to create an Individual Account for themselves as an individual person.
If a sole proprietor is also required to hold an individual license (e.g. loan originator license), they do not need another NMLS account. Their individual record in NMLS can be used to make both Form MU2 and Form MU4 filings. Additional information can be found on the NMLS website.
May 22, 2008
I. Introduction
On June 1, 2008, amendments to the Maryland Mortgage Lender Law ("MMLL") that were enacted by the General Assembly and signed into law by the Governor go into effect. These amendments require applicants for new and renewal licenses to meet, and thereafter maintain, new minimum net worth ("MNW") requirements. As of January 1, 2009, an additional amendment to the MMLL goes into effect, which provides for a higher MNW requirement for certain licensees who act as lenders (as opposed to brokers and servicers that do not lend money). The MNW requirements are codified at Md. Code Ann., Fin. Reg. ("FI") � 11-508.1.
This advisory provides guidance as to the documentation that the Commissioner of Financial Regulation will accept from applicants and licensees in connection with meeting the MNW requirements and, thereafter, sets forth the new law.
(ADVISORY NOTE: The filing of any mortgage lender license application, including an original or renewal main office application or a branch application, will trigger the new MNW requirements. The MNW requirements apply to the licensee as a single business entity, regardless of how many offices the licensee operates. The MNW requirements are not imposed on a "per-office" basis.
The MNW requirements will not be initially triggered under any of the following circumstances:
- When an examination of a licensee is scheduled or conducted by the
Commissioner's Compliance Unit (However, after a licensee is subject to the MNW requirements, compliance with the MNW requirements will be incorporated into the licensee's examination.); or
- When a licensee files a notice with the Commissioner requesting a change of the place of a business for which a license is issued, a change in control of the licensee, or a change of the name of the licensee.)
II. Documentation Required to Satisfy the MNW Requirements
The Commissioner of Financial Regulation will accept the following documentation (as such documentation may be applicable) as proof that an applicant for a new or renewal license, or a licensee, complies with the MNW requirements:
- Certified Financial Statement. A financial statement setting forth the applicant or licensee's assets, liabilities, and net worth computed according to generally accepted accounting principles ("GAAP"). GAAP is a set of financial accounting
standards and reporting guidelines. Information on GAAP may found at the Financial Accounting Standards Board's website. Such financial statement must be signed by the licensee (if the licensee is a sole proprietorship) or an individual duly authorized by the licensee who has "control" of the licensee as that term is defined in FI � 11-513, and the financial statement must be notarized.
The individual signing the financial statement must affirm and certify, under the penalty of perjury, that based on the individual's knowledge, information and belief that:
(i) the individual has reviewed the financial statement submitted to show the net worth of the licensee and the financial statement does not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statement not misleading with respect to the period covered by the financial statement;
(ii) the financial statement setting forth the licensee's net worth was computed according to GAAP; and
(iii) the applicant or licensee meets the minimum net worth requirements set forth in FI � 11-508.1.
A sample form of certification, which would be acceptable to the Commissioner, is attached as Exhibit 1. Any financial statement submitted to the Commissioner for purposes of meeting the MNW requirements may be no more than twelve (12) months old and must be compiled, reviewed or audited by a certified public accountant or public accounting firm.
- Where Cash is Used. Where cash is used toward satisfying the minimum net worth requirements under subsection (a)(2) of FI � 11-508.1 (applicable to applicants and licensees that lend money), the applicant or licensee shall submit to the Commissioner a bank letter verifying:
(i) The account balance;
(ii) The type of account in which the funds are held: and
(iii) That the funds are not encumbered or hypothecated in any way.
- Where a Line of Credit is Used. If a line of credit is used towards satisfying any part of the minimum net worth requirements under subsection (a)(2) of FI � 11-508.1 (applicable to applicants and licensees that lend money), the applicant or licensee shall submit to the Commissioner a copy of the line of credit agreement and/or promissory note.
(ADVISORY NOTE: Only assets of the applicant or the licensee may be used to satisfy the MNW requirements. Hence, when the applicant or licensee is an entity such as a corporation, assets of the individual owners of that entity (not owned by the entity itself) are not included in the MNW calculation.)
III. The New MNW Requirements
- MNW Requirements Effective June 1, 2008
FI � 11-508.1 (Effective June 1, 2008)(a) An applicant for a new license or the renewal of a license shall satisfy the Commissioner that the applicant or licensee has, and at all times will maintain, a minimum net worth computed according to generally accepted accounting principles:
(1) In the case of an applicant or licensee that does not lend money secured by residential real property, in the amount of $25,000; and
(ADVISORY NOTE: A licensee that acts solely as a broker or a servicer (i.e., one that does not engage in any lending activity, including table funding where the licensee appears in the loan documents as the lender) is subject to only the $25,000 MNW requirement. Such licensees may not satisfy any portion of the MNW requirement using a line of credit.)
(2) In the case of an applicant or licensee that lends money secured by residential real property, in the amount of
(i) $25,000, if the applicant or licensee, in the 12 months prior to the license application or the renewal application, lent in the aggregate not more than $1,000,000 secured by residential real property;
(ii) $50,000, if the applicant or licensee, in the 12 months prior to the license application or the renewal application, lent in the aggregate more than $1,000,000 but not more than $5,000,000 secured by residential real property; and
(iii) $100,000, if the applicant or licensee, in the 12 months prior to the license application or the renewal application, lent in the aggregate more than $5,000,000 secured by residential real property;(ADVISORY NOTE: The calculation of the aggregate principal amounts of originated mortgage loans required under subsection (a)(2) applies only to loans originated by the licensee acting as a lender (including where the licensee table funds loans and its name appears in the loan documents as the lender) and does not include principal amounts of transactions in which the licensee acted as a broker.)
(b) (1) Subject to paragraphs (2) and (3) of this subsection, the minimum net worth requirements under subsection (a)(2) of this section may be satisfied by the applicant or licensee having:
(i) Cash on deposit with a bank or depository institution;
(ii) A line of credit from a bank or depository institution;
(iii) Other assets; or
(iv) A combination of cash, a line of credit, or other assets.(2) If cash is used toward satisfying the minimum net worth requirements under subsection (a)(2) of this section, the applicant or licensee shall submit to the Commissioner a bank letter verifying:
(i) The account balance;
(ii) The type of account in which the funds are held: and
(iii) That the funds are not encumbered or hypothecated in any way.(3) (i) If a line of credit is used towards satisfying the minimum net worth requirements under subsection (a)(2) of this section, the applicant or licensee shall submit to the Commissioner a copy of the line of credit agreement and promissory note.
(ii) A line of credit may not be used toward satisfying more than 75% of the minimum net worth requirements under subsection (a)(2) of this section.
(ADVISORY NOTE: A line of credit must be issued in the name of the licensee, but may be guaranteed by principals or other parties. Under GAAP, a line of credit will not be considered an asset of the licensee. Therefore, to determine the MNW for a licensee for purposes of FI � 11-508.1, the Commissioner will add together (i) the licensee's net worth computed by GAAP as set forth in the licensee's certified financial statement, and (ii) the dollar amount of the licensee's available (unused) portion of its line of credit, if any. A licensee that acts as a servicer or broker but that also lends money, is subject to the MNW requirements under FI � 11-508.1(a)(2)).
- MNW Requirements Effective January 1, 2009
FI � 11-508.1 (Effective January 1, 2009)
As of January 1, 2009, Subsection (a)(2)(iii) is modified, and a new subsection (a)(2)(iv) is added, as follows:
(a) (2) (iii) $100,000, if the applicant or licensee, in the 12 months prior to the license application or the renewal application, lent in the aggregate more than $5,000,000, but not more than $10,000,000 secured by residential real property;
(iv) $250,000, if the applicant or licensee, in the 12 months prior to the license application or the renewal application, lent in the aggregate more than $10,000,000 secured by residential real property.
EXHIBIT 1 - SAMPLE FORM OF CERTIFICATION 5/22/2008