Why is a mortgage loan originator (“MLO”) license required?
In 2008, the Federal government passed the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) that mandated that states begin licensing mortgage loan originators. The SAFE Act set the minimum licensing requirements that states must comply with in their licensing programs.
When is a MLO license required?
A mortgage loan originator license is required to take an application for a residential mortgage loan or for offering or negotiating the terms of a residential mortgage loan. There are very few exceptions to the requirement.
Are there a maximum number of transactions I can do before I have to get a mortgage loan originator license?
There is no de minimus transaction exception. If a mortgage loan originator license is required, even one transaction requires a license.
Can I just get a temporary license?
No, there is no temporary license available.
Does the license requirement apply to a manufactured home?
Yes, the definition of “dwelling” used in the SAFE Act includes manufactured homes whether or not they are attached to real property. Thus, financing to purchase a manufactured home in a park setting would still be subject to the licensing requirements.
If I have a manufactured structures dealer license, do I also need a MLO license to offer financing on homes in my park?
Yes. The manufactured structure dealer license does not exempt the holder from the mortgage loan originator licensing requirement. You would need to have a mortgage loan originator license to take an application for financing or to negotiate the terms of the financing with the purchaser.
Does an employee of a licensed manufactured structure dealer have to have an MLO license when the mobile home park wants to sell abandoned or surrender structures and provide financing for the transaction?
Yes. There is no MLO license required to sell the home, but a MLO license would be required to take the application and negotiate financing for the transaction.
If a manufactured home park owner does a rent-to-own transaction, is the owner required to have an MLO license to handle it?
No. Rent-to-own contracts that do not contain financing terms do not fall within the scope of MLO licensing requirements to have a mortgage loan originator negotiate the terms.
I’m selling my residence and the buyer wants me to provide the financing. Do I need a license? No. ORS 86A.203(2)(c) provides an exception from the MLO license requirements for an individual providing financing as part of the sale of the individual’s residence. Therefore, no MLO license would be required.
I am selling my investment property and I have been told that I need a MLO license to tell the borrower my terms for financing the sale. Where does the SAFE Act state that I need a MLO license?
You will not find a statute that that expressly states you must tell the borrower your terms for financing the sale. The MLO licensing requirements apply expressly and by implication to loan origination activities. It is the absence of an exception that requires the seller to obtain the license to provide financing for an investment property. Specifically, ORS 86A.200(4) defines a loan originator as a person who, for compensation or gain, takes an application or negotiates terms of the loan. It does not provide an exception to the definition for those providing seller carry financing. In addition, ORS 86A.203 requires that loan originators obtain license. While there is an exception to the license requirement for a seller providing seller-carry financing, that exception is limited to financing on a property that was the seller’s residence. Because there is no exception that covers investment property, the license requirement applies to those transactions.
I am a licensed mortgage loan originator, and I communicated the seller’s original terms to the buyer, who declined them. Can the seller and buyer then negotiate from that point on by themselves?
Only a licensed mortgage loan originator can negotiate or discuss the terms with the buyer in a seller-carry transaction that is not the seller's residence. This means that the licensed mortgage loan originator would have to negotiate the transaction until the negotiations are complete.
I want to offer a rent-to-own contract in which I agree to give the renter a credit toward the down payment. Do I need a MLO license?
If the contract does not provide terms for financing the purchase of the home, then a MLO license is not required. If the renter needs a loan to buy the home, and the seller made that loan, then a licensed mortgage loan originator would be needed to facilitate the transaction if the property was not previously the seller’s residence.
I want to make a private money loan with my own funds for my own investment. In the past I did not need a MLO license, do I need a license now?
There are two different license requirements that must be analyzed: a mortgage broker/banker (company) license and a mortgage loan originator (individual) license. ORS 86A.100(3)(b)(C) and (5)(b)(F) continue to provide a limited exemption from the requirement to obtain a company license. Without obtaining a company license, an individual can make up to 10 loans a year using his own money for his own investment purposes as long as he does not hold himself to be “in the business” of making loans. Thus, the individual may not have a commercial business location for making loans, may not advertise that he makes loans and must make the loan in his own name. Although a company license is not required for an individual investor to make a limited number of loans, there is no corresponding exemption for a MLO license. An individual must have a MLO license to make these loans or use a licensed loan originator to facilitate the loan.
As an investor making a private money loan, can I have multiple loan originators originate the loans for me or do I always have to use the same loan originator?
An investor may work with different loan originators and different mortgage companies in making private money loans. If the loan is secured by the borrower’s residence but the loan is for a business purpose, is a mortgage loan originator license required?
A MLO license is required for a business loan secured by the borrower’s residence because licensing is based upon the type of property. The purpose of the funds is irrelevant. Thus, a mortgage loan originator license is required even if the loan is a business loan.
Is either the company or the MLO license required to lend on any type of property?
A company or MLO license is not required for all types of all types of property; the licensing requirements are tied to residential mortgage loans, which are loans secured by residential one to four family property, or land upon which it is planned to build residential one to four family property. The licensing requirements apply to bare land and construction loans if the property is to have a one to four family home built on it. For instance, a loan to a person buying a lot to build their home on would a loan be a covered transaction and would require a license. Commercial or multi-family properties in excess of four family units do not require either the company or mortgage loan originator license.
How do I apply for a MLO license?
The application must be submitted through the Nationwide Mortgage Licensing System (NMLS). You can find additional information at http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx and our frequently asked licensing questions at http://www.oregondfcs.org/ml/faq.html.
What is the potential fine for unlicensed activity?
The potential fine for unlicensed loan originator activity would be the same $5,000 per occurrence that applies for all other violations of Chapter 86 of the Oregon Revised Statutes.
When did the licensing requirements go into effect?
The requirements went into effect August 1, 2010.
Does this have to be a “full doc” transaction?
We do not require the file to be a full doc file in the conventional sense of that term; however, we require that the file comply with the private money investor requirements of OAR 441-870-0050 and OAR 441-870-0060 as well as OAR 441-865-0060.
Does Oregon law require analysis of the borrower’s ability to repay the loan?
Oregon law requires an analysis of a borrower’s ability to repay the loan if the loan contains provisions for negative amortization. Oregon also enforces certain federal laws, including the Truth in Lending Act (TILA). TILA contains an ability–to-repay test for high-cost mortgage loans and higher-priced mortgage loans. Thus, Oregon will require an analysis of ability to repay for any loan that is subject to TILA and that Act’s requirements to determine ability to repay.
Can a licensed mortgage originator collect the fee for originating a private money loan, or does the fee need to be paid to the company sponsoring that mortgage loan originator?
The mortgage loan originator is only authorized to do loans through the company that sponsors the MLO’s license; therefore, the transaction is really done in the company's name. The company is required to supervise the MLO and is responsible for the transaction. Although Oregon law is fairly silent on the issue of collecting the fee, it is anticipated that the companies will collect the fee due to the supervision requirements.
Are there any limits on the fees that can be charged for facilitating a private money transaction?
There are no specified limits in Oregon law on the fees that can be charged.
Provided by the State of Oregon Mortgage Lending & Manufactured Stuctures Dealers Programs