Pre-Licensing Process (SML FAQ)

The Pre-Licensing Process

What factors determine whether or not I need a license to be in compliance with Texas mortgage lending laws?

Unless otherwise exempt from licensing in accordance with the Mortgage Broker License Act, Chapter 156.202, you are required to be licensed under the Mortgage Broker License Act if you

(1) take or receive a 1-4 family residential first lien mortgage loan application and perform any one of the following activities:

(a) advise a prospective borrower about the different type of loan products available, or how closing costs and monthly payments could vary under each product;

(b) consult or discuss with a prospective borrower about the maximum amount the borrower can afford in mortgage payments;

(d) determine the lender or investor that will potential fund the loan; or

(e) issues or signs a prequalification letter or pre-approval letter or

(2) you represent or hold yourself out as a “loan officer”, “mortgage consultant”, or “mortgage broker”, or in any way represent that you are engaging in or conducting the business of originating loans.

I am a real estate sales person. Am I exempt from the Mortgage Broker License Act?

NO. Real estate brokers and sales persons are NOT EXEMPT from the Act. If you are brokering first lien mortgage loans, you must apply for and establish that you meet all of the multiple criteria for a mortgage broker license. A real estate broker’s license qualifies for one of the criteria; the experience requirement. A real estate sales license does not meet the experience requirement for a mortgage broker license under the statute.

Furthermore, if you are not currently licensed as an active real estate broker in Texas (e.g., you are licensed in another state or, although licensed in Texas your license has lapsed), you would not meet the experience requirements for a mortgage broker license.

I work for a company that closes loans in its own name. Is it exempt?

Not necessarily. The Act exempts employees of a mortgage banker and defines a mortgage banker as a HUD-approved lender with direct endorsement authority, a FNMA or FHLMC seller/servicer, or a GNMA issuer. Whether a company closes loans in its own name it not an issue.

The Act also distinguishes persons who are employees from those who are independent contractors. Employees are persons who receive W-2s. Those who receive a 1099 are not employees but rather are independent contractors or other agents.

Finally, in order to be exempt from the Act, such W-2 employees must be acting for the benefit of their employers. So persons who moonlight and broker loans on the side to companies other than their primary employer would be required to obtain a mortgage broker license.

I am transferring from one sponsoring broker to a new one. What do I need to do?

Please ask your old broker to send in your original loan officer’s license along with a letter signed by your old broker stating that he/she will no longer be sponsoring you. Download and complete the following two forms from the TSML website at http://www.sml.state.tx.us/mortgage.html: 1) Loan Officer Change Form and 2) Loan Officer Sponsor Certification. Complete the forms following the instructions provided and send them in to us along with a $25 processing fee to the Texas Savings and Mortgage Lending Department. Upon receipt and processing, TSML will issue your new license to your new sponsoring broker.

I am a mortgage broker and a real estate agent wants to come and work for me as a loan officer. Can they be a loan officer and a real estate agent on the same transaction?

The law does not preclude a person from serving as a mortgage broker or loan officer and a real estate agent on the same transaction. However, the Mortgage Broker License Act requires that the mortgage broker or loan officer provide a written disclosure to the client, in advance and obtain the client's written consent. A form for making this disclosure can be found and downloaded from this web site.

I am an out-of-state lender or broker and I would like to make just one or two loans in Texas. Do I need a license? If I am licensed in my home state, does Texas have reciprocity?

Texas exempts an individual making an occasional loan out of his or her own pocket but does not exempt business or corporate lenders or brokers. Texas does not have reciprocity with other states. Therefore, to broker a Texas loan, you must be licensed in Texas. You should also understand that Texas law requires that you maintain a physical address in Texas to qualify for a mortgage broker or loan officer license.

I am an out-of-state Internet lending company and I want to be able to make loans in Texas. Do I need to be licensed?

Yes, if you do not qualify as a registered mortgage banker. The same rules that are discussed in the preceding question apply equally to Internet lending.

More General Licensing FAQ’s