Under California law, a mortgage loan originator is any individual who offers or negotiates terms of a residential mortgage loan for the expectation of compensation or gain. Any person who provides services as a mortgage loan originator under the California Residential Mortgage Lending Act (CRMLA) or the California Finance Lenders Law (CFLL) must be employed by and sponsored by a Department of Business Oversight (DBO) licensee under the CRMLA or CFLL. Perhaps more importantly, a mortgage loan originator must herself be licensed to operate in California. What are the reasons an applicant may be denied a license under the CRMLA or CFLL?
Decisions on license applications must be issued by the Commissioner within 60 days of the receipt of a complete application. For applications that are incomplete or insufficient, the applicant must respond to the Commissioner’s notice of application deficiencies within 90 days. If the applicant fails to respond, the Commissioner will consider the application to be withdrawn (Cal. Fin. Code §§22109(b), (c); 50126(b), (c)).
The Commissioner of the California DBO may deny a Finance Lenders Law license application or a Residential Mortgage Lending Act license application for any of the following reasons:
- A false statement of material fact has been made in the application;
- In relation to the person’s duties, an officer, director, general partner, or person with a 10% or greater interest in the company has, within the last ten years: or been convicted of, or pled no contest to, a crime, or committed an act of fraud, dishonesty, or deceit;
- The applicant or an officer, director, general partner, or person with a 10% or greater interest in the company has violated any provisions of California law or regulations;
- The applicant employs a mortgage loan originator who is not licensed unless the mortgage loan originator is exempt. (Cal. Fin. Code §§22109; 50126)
Also, the application for a residential mortgage lender or servicer license may be denied if any of the following apply:
- The applicant is not in material compliance with a provision of the Residential Mortgage Lending Act, or an order or rule of the Commissioner;
- The Commissioner cannot determine that the applicant or a partner, member, principal officer, or director has shown adequate financial and ethical responsibility, experience, character, and general fitness;
- A material requirement for licensure has not been met. (Cal. Fin. Code §50125)
Noteworthy is that an application may be denied if the applicant employs an unlicensed mortgage loan originator. Also, apparently the Commissioner has the discretion to determine whether an applicant has sufficiently demonstrated qualities of character and fitness.
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