Federal law established by the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) now states that any individual who, for compensation or gain, takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan application, must be licensed or registered as a Mortgage Loan Originator (MLO). A key part of the law is the requirement for licensing of Mortgage Loan Originators through the Nationwide Mortgage Licensing System (NMLS).
The State of California distinguishes between two types of mortgage brokers that each go through a different process of licensing and work in accordance with different laws.
1) Individuals licensed under the California Department of Financial Protection and Innovation (CA-DFPI).
The first type registers with the California Department of Financial Protection and Innovation (DFPI) and falls under the regulations of the California Finance Lenders Law (CFL or CRMLA). This means that DFPI-licensed brokers can only work with loans issued by lenders who are also licensed by the same law.
2) Individuals licensed under the California Department of Real Estate (salesperson or broker).
The second type of mortgage broker license is issued by the California Department of Real Estate (DRE). Unlike DFPI brokers, DRE brokers may work with all kinds of financial institutions.
NOTE: Independent loan processors/underwriters must also comply with SAFE Act licensing requirements.
Real Estate Licensees Under DRE
Any individual who performs mortgage loan origination activities under the authority of a real estate license issued by the California Bureau of Real Estate may not continue to perform those activities on or after January 1, 2011 without obtaining a Mortgage Loan Originator (MLO) “License Endorsement” issued for their real estate license. Applicants for a License Endorsement must complete a 20 hour pre-license education requirement and successfully complete the SAFE MLO state examinations (both national and CA state components).
NOTE: A real estate license is needed in order to qualify for a MLO License Endorsement through DRE. Specific state approved courses will continue to be required to obtain a real estate license.