FHA Mortgage Licensing Exemptions

THE MYTH: Exemptions in 20 states with an FHA License

Recently, we’ve received a lot of telephone calls from clients telling us they’ve heard that an FHA approval will completely exempt them from licensing in 20 states, and asking if this is true.

Unfortunately, it is not.

The truth about FHA mortgage license exemptions

FHA exemptions from state licensing used to be far more common than they are today. Most states have done away with exemptions from state mortgage licensure based upon an FHA approval. Of the few states that still do have an FHA exemption of one type or another – each exemption is totally different. Failure to do your research will most certainly lead to enforcement actions taken against your company.

It is extremely important to note that only a couple of states have a blanket exemption from state licensing for all mortgage activity based upon an FHA exemption. The rest of the states have very limited exemptions that only apply to the FHA loans that you do in that state (you are still required to obtain your state license to do any non-FHA loans in the state). In most cases, your mortgage company must already have authority to handle FHA loans in a particular state prior to applying for that state's FHA exemption from mortgage licensure.

It is also critical to note that FHA exemptions from mortgage licensure in most states are only available for certain FHA approval types: FHA loan correspondents, FHA non-supervised lenders, FHA non-supervised lenders with direct endorsement authority, etc. Exemptions are typically based upon your FHA approval type.

Finally, it is critical to note that in some states the FHA exemption applies only to mortgage lenders, while in other states it applies only to mortgage brokers.

Mandatory research is required

We’ve seen FHA exemptions disappear quite rapidly over the years. We’ve also seen mortgage licensing laws change at an even faster rate. Given this, it is mandatory that mortgage companies frequently review the latest state licensing statutes and regulations, and that they verify a potential FHA exemption with applicable state regulators prior to, and after, acting on the exemption.

What is written in state licensing laws, and how the state regulators interpret those laws can be two totally different things. When relying on any kind of licensing exemption, it is mandatory that you frequently re-verify your research to confirm that your exemption remains valid.

Remember, mortgage companies ALWAYS have the burden to prove that they are legally operating under exemptions from licensure.

FHA exemptions are not always automatic

The biggest mistake most mortgage companies make is assuming that FHA exemptions (or any other types of exemptions) from state licensure are automatic. In most states, exemptions from licensure are NOT automatic. You must still apply to the state for the exemption.

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