Who Needs a License

Any individual who has been convicted of a crime involving dishonesty, breach of trust, or money laundering, may not serve as a mortgage originator as that term is defined in the statute, without the prior written consent of the commissioner. This restriction is contained in Section 58.125 of the Minnesota Statutes and additional information is contained on the application pursuant to Section 58.125 which is available on this website. The application to serve would be filed by the licensee that proposes to employ the individual. The criteria for deciding applications under Section 58.125 are set forth on the third page of the 58.125 application. With respect to convictions for other crimes, all felonies, gross misdemeanors and misdemeanors (except traffic violations) must be disclosed on the application. Applications which disclose criminal violations are reviewed and decided based on individual circumstances.

Minnesota Statute §58.06, subd. 3 permits the commissioner, for good cause shown, to waive any requirement with respect to an initial license application or to permit an applicant to submit substitute information in an application. This authority will likely be used sparingly.

A “person” (broadly defined) that is not in the business of making or servicing residential mortgage loans and makes no more than three such loans, with its own funds, during any 12-month period, is exempt. All of the criteria must be satisfied in order to be exempt.

State banks are exempt from the licensing requirements of Minnesota Statute §58 and a state bank's employees would be exempt from the education requirements of Chapter 58. With respect to independent contractors, if they were subject to the same level of control and supervision as bank employees (employed by only one bank, subject to the same background check requirements as bank employees, subject to compliance with the provisions of 12 USC 1829(a) which is very similar to the requirements of Section 58.125, subject to bank policies concerning conflicts of interest, etc.) it is possible that a bank's independent contractor(s) could be exempt from the mandatory education requirements. These determinations would be made by the Department on a case-by-case basis and the individual bank would have to request such a determination in writing and provide all relevant information.

You must obtain a Real Estate Broker or Salesperson license if you are acting “for another and for a fee.” A Limited Broker license is required if you are acting as “principal.”

The mortgage originator license allows a licensee to make any type of residential real estate loans. The authority to charge high rates on junior lien loans is an issue, however, because Minnesota Statute §58.136 requires all lenders to comply with Minnesota usury laws. An out-of-state lender is not permitted to “import” interest rates into Minnesota. Currently, licensed mortgage originators may use the indexed rate authority of Minnesota Statute §47.20, Subd. 4a. That rate applies to loans with a principal amount of less than $100,000. If a lender seeks to charge higher rates on junior lien loans, an Industrial Loan and Thrift Company license (Chapter 53) would be required.

No. However, a licensee must notify the Commissioner of Commerce of any material changes to the information submitted in the most recent application within ten (10) days of the change.

No. The mortgage originator that employs you must maintain that information in their office. The employer would have to affirm that you have completed the mandatory 20 hours of initial education (4 hours of which must be state laws concerning residential mortgage lending) and 8 hours of continuing education. The roster of individuals employed as residential mortgage originators, including the dates that mandatory education was completed, would need to be made available, on demand, within three business days of the commissioner’s request.

A licensee or exempt person must keep and maintain for 60 months the business records regarding residential mortgage loans applied for, originated, or serviced in the course of its business. Records may be electronically maintained and stored records must meet the minimum standards found in Minnesota Statutes 46.04, Subd. 3.

A licensee or exempt person must deposit into a trust account any funds received from a borrower that are held in a fiduciary capacity for later distribution. A trust account, which may be a segregated checking account, is required for funds received in advance for later distribution. Examples of trust funds are appraisal fees, credit report fees, taxes or insurance premiums. Trust funds include commitment, lock, extended lock and advance fees. If advance fees are collected the trust account must be controlled by an unaffiliated accountant, attorney, or bank, in a Minnesota financial institution.

As with other licenses issued by the Commerce Department, the Department may deny, suspend or revoke a license. A licensee may also be censured or a civil penalty imposed for violations.

The statute does not limit a mortgage originator’s ability to rely on criteria other than the borrower’s income and financial resources to establish the borrower’s reasonable ability to repay. The law permits a mortgage originator to consider the following items, if verified: (1) the borrower’s current and expected income; (2) current and expected cash flow; (3) net worth and other financial resources other than the consumer’s equity in the dwelling that secures the loan; (4) current financial obligations; (5) property taxes and insurance; (6) assessments on the property; (7) employment status; (8) credit history; (9) debt-to-income ratio; (10) credit scores; (11) tax returns; (12) pension statements; and (13) employment records. A mortgage originator cannot disregard facts and circumstances that indicate that the financial or other information submitted by the consumer is inaccurate or incomplete. Also, sole reliance on any single item listed is not sufficient to establish income or resources when verifying the reasonable ability to pay.

A mortgage originator or exempt person may rely on criteria established by the U.S. Department of Veterans Affairs or the U.S. Department of Housing and Urban Development for interest rate reduction refinancing loans or streamline loans; or criteria authorized or promulgated by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.

State and federally chartered banks and credit unions are not covered by the standards of conduct in Minnesota Statute §58.13. Banks and credit unions can make these loans however, guidance from various federal depository institution regulatory agencies may discourage or prohibit these types of loans.

No. The language in Minnesota Statute §58 is broad and does not permit a licensee to “make, provide or arrange” for a residential mortgage loan without verifying the borrower’s reasonable ability to pay the scheduled payments.