10 Steps to Independence: How to Become an Independent Mortgage Broker
Today, working independently—striking out on your own—is fast becoming the path toward building a career, especially when it comes to mortgage brokers. According to Housingwire.com, "Independent mortgage brokers have secured 14.1 percent market share—the strongest presence in a single quarter in over a decade." That’s especially good news for real estate professionals who want to take the leap. The future is bright, but the challenge remains—how do you get started and grow?
Step 1. Your Business Name
Select a name for your business. Before you fall in love with the name, check with your state registry to see if it’s available. If it’s good to go, register it in the states where you’ll be conducting business. You want an online presence, so be sure the url is available for your website. Simply go to domains.google.com or GoDaddy.com. If the url isn’t available, check to see if other website suffixes are available, such as ".net" or ".org."
Step 2. Your Business Type
Do you want to be a Sole Proprietor, LLC or S Corp? Check with your CPA or Accountant to determine which type of business works best for you. He/she can also set up your business with the state. Or you can opt to use LegalZoom.com or contact your local Secretary of State. Keep in mind that it can take two to four weeks for your business to be set up with the state.
Step 3. Your Business Bank Account
Set up your business bank account and/or trust account.
Step 4. NMLS Licensing
Each state has its own licensing and insurance requirements, as well as licensing fees. Visit the NMLS Resource Center State Licensing page to learn what your state requires. Begin by creating a company account with NMLS, you will need a tax ID number in order to create this account. Once your company account has been approved, follow the state licensing requirements checklist to properly file the MU1, MU2, and MU3 (if applicable). Commonly requested items include: Surety Bond, Net Worth, Business Plan, Formation Documents, and Financials. Approval can take anywhere from three to six weeks. While you’re waiting, begin identifying the vendors you will use to conduct business (i.e. LOS, CRC, Compliance, Insurance, etc…)
Step 5. Mortgage Call Report (MCR)/Annual Reports
NMLS requires brokers to submit consumer loan data quarterly. Learn more about the Mortgage Call Report (MCR). Also do your homework on any annual reports required by your state.
Step 6. Your Wholesale Partners
Connect with at least three partners to start. Be sure they have fair business practices, and note that each lender has its own approval requirements—including perhaps minimum net worth, expected monthly loan volume or number of years of experience in the industry. Broker application approval typically begins once your company license is approved by the state.
Step 7. Your Support
Show your support for the mortgage brokerage community by connecting with like-minded individuals and groups:
- AIME - Association of Independent Mortgage Experts
- NAMB - National Association of Mortgage Brokers
Step 8. Credit Reporting Company/Loan Origination Software
Set up with a CRC that fits your pricing options and credit needs—such as Kroll Factual Data, CBC Innovis and Advantage Credit. Also install Loan Original Software (LOS) such as Calyx Point, Encompass and Byte Software, which have integrations with Fannie Mae, Freddie Mac and credit reporting agencies. Here’s a tip! Ask your LOS representative to help set up your loan disclosures, credit report integration and pipeline reporting for NMLS Mortgage Call Reports.
Step 9. Setting Up Compliance
Do your research on a compliance management system that includes written policies and procedures, employment agreements, and marketing your business legally and compliantly. Set this up within 60 days of the expected launch of your business.
Step 10. Insuring Your Business
Get in touch with your insurance agent about E&O insurance. You may also opt for a general liability business policy. Consult with your Agent about other options.
Once you have your license, get the word out! Start promoting—give out business cards, tell friends and family about your business, print up flyers and place them in local businesses—whatever it takes to market yourself, loud and clear. Before long, you’ll be getting your portion of the 14.1 market share as an independent mortgage broker owner.