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
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
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.
Back to FHA Licensing Page
Back to Licensing Resources Page