It is important for companies involved in the mortgage and
generation business to be aware that their solicitation activities
may trigger the need to be licensed under state mortgage and finance licensing laws.
These companies should take measures to ensure that they are in compliance
with state and federal lending and licensing laws.
In order to determine whether or not a state license is required for
lead generators, a two-step analysis is required. First, it is
necessary to carefully read state licensing statutes and
regulations. Most states define the activities of a mortgage broker, mortgage banker,
or consumer finance company very broadly, using many all-encompassing action
verbs (e.g. soliciting, processing, placing, negotiating, assisting, etc.).
“Soliciting” or "assisting" customers triggers the license
Second, it is then necessary to contact each state regulator and
request a written opinion as to licensing requirements based upon the
specific business model of the lead generator. Every lead generator
conducts its business differently, requiring that a new analysis be required
for each mortgage lead generator. Alternatively, the advice and
opinion of a regulatory compliance attorney should be obtained.
Should a mortgage license or finance license be required, lead generators will be
subject to the same laws, requirements and restrictions as companies that
originate such loans.
After a licensing determination has been made, it is then necessary to
determine which state and federal lending laws are applicable to the
proposed lead generation activity.
Because of the large downside risks associated with conducting an unlicensed
lead generation business, and with not being in compliance with
state and federal lending and licensing laws, it is critical that each
mortgage and finance lead generator seek the advice of finance industry counsel prior
to engaging in mortgage lead generation or consumer finance lead generation activity in any state.
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