Legal Bulletins

Chapter 590 of the 2005 Laws of Maryland (introduced as HB 1040) establishes a new licensing regime for mortgage loan originators who work for some Maryland-licensed mortgage brokers and lenders. For convenience of discussion, this new regime will be called "registration." Registration will be handled by the Maryland the Commissioner of Financial Regulation. The law became effective October 1, 2005. Mortgage loan originators must be licensed for the first time by January 1, 2007. The law may be found at MD Code Ann., Com. Law II §§ 11-601 et seq.

With limited exceptions, the law defines a "mortgage loan originator" who must be registered as an individual who:

1. Is an employee of a Maryland Mortgage Lender Licensee that either acts as a mortgage broker or operates a net branch for another person;


2. Directly contacts prospective borrowers for the purpose of negotiating with or advising the prospective borrowers regarding mortgage loan terms and availability;


3. Is compensated as described in the law (basically, on commission or as a percentage of business the individual produces); and


4. Is authorized to take loan applications on behalf of the Maryland-licensed employer.

There are a few exceptions as to who is a mortgage loan originator (e.g., a 25% or more owner of a Mortgage Lender Licensee is not deemed a mortgage loan originator) but basically the statutory definition results in the need for registration by all loan officers of mortgage brokers in Maryland.

Note: Even if the Mortgage Lender Licensee employer primarily acts as a lender, if it brokers any mortgage loans, those loan officers who are authorized to broker loans are subject to registration.

Over the remainder of year 2006, the Maryland Commissioner's office will implementing this new licensing process. We anticipate the process will be similar to the process of applying for a Maryland Mortgage Lender License. It will cost $400. Fingerprinting will be required. The registration will be effective for 2 years (and then will need to be renewed).

Notably, a registrant may only be employed by one licensee at a time. If a registrant wants to change who s/he works for, s/he will need to notify the Commissioner's office in advance.

As is true currently for certain employees of Mortgage Lender Licensees, there are education requirements for mortgage loan originators. Those individuals who have 3 years or more of experience in the mortgage business will need to prove they have 20 hours of continuing education (or 6 hours for those individuals who have been in the business 10 years or more) in order to become registered and in order to renew a registration. Those individuals who do not have 3 years or more of experience will have to complete 40 hours of in-person classroom continuing education and pass a written test before registration will be permitted. Regulations describing the continuing education requirements were made final effective March 13, 2006.