Can You Become A Loan Officer With Bad Credit And Get Licensed

This Article Is About Can You Become A Loan Officer With Bad Credit And Get Licensed

A career as a mortgage loan officer can be extremely rewarding. However, there are steps in becoming a licensed loan officer. Once you have accomplished those steps, you will have great career opportunities as a loan officer with the many great mortgage companies that are in major need of loan officers. We will cover the necessary steps in becoming a mortgage loan officer Especially the mortgage licensing requirements.

One of the most asked questions by many mortgage loan originator recruits is ” Can You Become A Loan Officer With Bad Credit”. I will cover this topic in-depth and will tell you about my personal experience when I went through the mortgage licensing process with bad credit.

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How To Become Licensed As Loan Officer

Becoming a licensed mortgage loan originator is different than becoming a licensed professional in any other field. This is because every mortgage loan originator applicant goes through an intensive credit background check. Attorneys, real estate agents, stockbrokers, financial planners, accountants, doctors, dentists, nurses, teachers, and other professionals do not go through credit background investigations by federal and state regulators like licensed mortgage loan officers.

Mortgage Regulations

I cannot think of any other profession where federal and state regulators require credit background investigations:

Every state regulator a candidate wants to apply for a license will review the licensee’s credit report, credit payment history, and credit scores other than a licensed mortgage loan originator
The main reason that mortgage loan originators go through a credit background check is that the government decided that a loan officer’s credit is important in determining whether they warrant financial responsibility
A candidates credit is deemed whether a mortgage loan originator has financial responsibility
By reviewing candidates credit and credit payment history, regulators determine whether or not they are fit to be a licensed loan office

Many disagree with this.

Getting NMLS License Due To Derogatory Credit Tradelines

This is because hard-working people, in general, can go through a period of tough times such as the following:

periods of unemployment
loss of business
divorce
periods of health problems
or other extenuating circumstances where their income stream is halted or disrupted where it affects their abilities to pay their bills on time

Can You Become A Loan Officer With Bad Credit After The 2008 Real Estate And Mortgage Meltdown

The Great Recession of 2008 has affected millions of Americans. Countless hard-working Americans have lost their businesses, lost their jobs, and whole industries got eliminated. Real estate professionals were the single largest group of professionals who got affected by the real estate and mortgage meltdown of 2008, especially mortgage loan officers. Entire mortgage lending sectors were completely eliminated. Subprime mortgage lending was one of the largest mortgage lending sectors in the mortgage banking industry.

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The Demise Of Subprime Lending

All subprime lenders like Countrywide and Washington Mutual literally went bankrupt overnight:

With the shutdown of these giant corporations, were losses of millions of jobs
Mortgage professionals in these industries were jobless
To top it off, the whole mortgage industry went through a major overhaul where all mortgage loan originators needed to get licensed and go through intensive federal and state background investigations and take the NMLS Examination
The NMLS was created and implemented
Its purpose was to be a central informational center where it is a consolidation of all states and their regulators and its function was to centralize the licensing and information system of all mortgage companies as well as all mortgage loan originators
All mortgage loan originators had to take NMLS certified 20-hour pre-licensing course
They needed at least 75% of the questions correct on the NMLS examination
All mortgage loan originators also needed to apply for each individual state that they wanted to get licensed in and pass the state exams as well as go through the state’s licensing requirements
Each state has its own licensing requirements which include its own separate credit requirements

Some states are much more strict when it comes to bad credit than others.

Can You Become A Loan Officer With Bad Credit And Case Scenario Of My Own Experience

I used to own and manage 7 apartment complexes, just under 3,000 residential units:

Due to the 2008 Real Estate And Mortgage Meltdown, lost all of my properties and went through a financial meltdown back in 2010
Had to restart my life over again
I was in my mid 40’s at that time
Getting an entry-level job in a different field was out of the question
Due to my extensive real estate investment experience and my knowledge in both commercial and residential lending, I decided that a career as a mortgage loan officer would be ideal
I found out at the time that part of the licensing process was going through a credit background check
My credit was always perfect until 2010
It plummeted to the low 500’s

I had over 55 derogatory credit items.

Every State Has Its Own Rules With Derogatory Credit Tradelines

My derogatory credit included outstanding unpaid collection accounts, multiple judgments, charge off accounts, and multiple foreclosures as well as other derogatory credit items:

I contacted the regulators for the state of Illinois and the state of Florida
The two states I wanted to get licensed in but the regulators told me that they cannot give me an answer whether or not that they will approve me with the credit I had at the time
I told them that I did not want to waste my time and money in preparing for the NMLS test and go through the licensing process to find out later that I did not qualify for my poor credit
The answer that I got was that I needed to go through the process

I was told after I have submitted my application along with the proper fees, that they will then give me an answer.

The Key To Passing The 125 Question NMLS Exam

Paying the fee was not the issue here. The NMLS exam was a very tough exam and was extremely time-consuming. This was a very difficult time of my life where I had no source of income and to take a month or two off to study and prepare for the NMLS exam was a major commitment. To go through the 20-hour pre-licensing course to later find out that I do not qualify to get a mortgage loan originator’s license would be more than devastating and two months wasted. I must have contacted both the state of Florida and the state of Illinois examiners dozens of times hoping to get someone there to give me a straight answer.

If someone there would have told me NO that I do not qualify due to my poor credit and outstanding collection accounts and judgments, that would have made me happy so I can pursue other career opportunities. But they did not give me a NO nor a YES or even a MAYBE.

Taking A Gamble Without An Answer

This was January 2012 and I decided to just take the gamble and take the 20-hour pre-licensing NMLS Course with Real Estate Institute in Niles, Illinois. It was a three full-day course. The instructor who taught the course was a gentleman by the name of Peter Citera. Peter Citera was an extremely knowledgeable instructor at the Real Estate Institute in Niles, Illinois but also a practicing licensed mortgage loan originator. As soon as I met him, my first question to him was ” Can You Become A Loan Officer With Bad Credit?” Peter Citera, like mortgage regulators, did not have a definitive answer to my question.

You see, I did not just have bad credit, I had really bad credit. My background was that I owned, operated, and managed 7 apartment complexes which consisted of just under 3,000 units and had over 150 employees. I will explain on a separate blog how I lost $100 million of my net worth in less than a year due to the lies and unscrupulous practices of Citibank (It will be an interesting story on how commercial banks are not regulated and borderline criminal). My credit report was dozens of pages of bad credit. Consisted of outstanding unpaid collection accounts, judgments, charge-offs, late payments, and any other derogatory credit that you can think of.

I was still ready to call it quits and not pursue my NMLS license if someone told me that I will not get a mortgage loan originator’s license due to my bad credit. This was because I did not want to go through the stress of studying and preparing for my NMLS Test and go through the licensing process to get told that I do not qualify for my mortgage license due to my very poor credit.

Uncertainty Of Getting My NMLS License Approved

Here I was, studying for the national NMLS exam for the next four weeks, investing more than 10 hours per day, 7 days a week with the uncertainty of not knowing whether I will ever get my license. I Googled search every day on the internet looking for answers on whether you can become a loan officer with bad credit and got conflicting answers. I must have contacted over three dozen states. I talked to their mortgage licensing division and got the same answer that they could not give me the answer to my question. The only thing that I can do is just pass the NMLS exam and apply for my mortgage loan originator’s license and that is the only way that I can find out.

Applying For My Mortgage Loan Originator’s Licenses

It was now February 2012 and after going over 1,000 practice exam questions and spending hundreds of hours of studying for the NMLS exam, I was ready to take the national NMLS Test.

The test was a three-hour examination given at a test center
I was done with the exam in less than 90 minutes
I passed the national NMLS Test with a score of 84%
I was happy but still the thought of me not being able to get my mortgage license still was stressing me out
The next step was for me to take the Illinois State NMLS Exam which I studied for it and passed the following week
Now I was ready to apply for my Illinois mortgage loan originator’s license
I applied for my Illinois mortgage loan originator’s license through the NMLS and paid the proper fees
Within two weeks, I got the great news that Illinois has approved my mortgage loan originator’s license and I was ready for business

I could not be happier and it was one of the happiest moments of my life when I got my Illinois mortgage loan originator’s license and the many weeks of stress and worrying finally came to an end.

Applying To Various States

The next state I applied for was the state of Florida. Florida, again, approved my Florida mortgage loan originator’s license with bad credit. My credit scores at the time I applied for my Illinois and Florida state licenses were under 500 FICO. Both state regulators wanted to see a letter of explanation with regards to my poor credit, open outstanding unpaid collection accounts, judgments, and other derogatory credit information.

I have also not filed my personal and corporate income taxes since 2008 because of financial constraints. My accountant wanted over $100,000 for him to do my corporate and personal tax returns due to having to file 7 corporate returns due to the 7 Limited Liability Corporations I had to do and the complexity of it. The IRS eventually helped me complete all of my returns (I will write about how the IRS and special agent John Hedin, who turned out to be a great friend of mine, helped me with being compliant with my corporate and individual taxes and do my tax returns on a later blog).

So, Can You Become A Loan Officer With Bad Credit? The answer is YES and NO. Here I was now very confident that I can now become a mortgage loan originator in any state with bad credit, however, that is not the case.

States Where You Can Get Denied For MLO License Due To Bad Credit

I live in Kenosha County, Wisconsin which is the border of Wisconsin and Illinois and my branch office is in Illinois, which is about an hour from where I live. Since I live in Wisconsin, I applied for my Wisconsin mortgage loan originator’s license in April 2013. I figured it would be no big deal in getting my Wisconsin mortgage loan originator’s license approved. I just assumed it would be a cakewalk because I had no issues with the state of Illinois and the state of Florida.

Unfortunately, two weeks after I have submitted my Wisconsin mortgage loan originator’s license application, I get an email from a Wisconsin mortgage regulations investigator telling me that I cannot qualify for a Wisconsin mortgage loan originator’s license.

Can You Become A Loan Officer With Bad Credit And Outstanding Judgments

The reason I do not qualify is that I have multiple outstanding judgments which are recorded on Kenosha County public records:

I told her that the judgments were due to my commercial properties being foreclosed on any of my $14 million dollar mansion that was foreclosed on in Barrington Hills, Illinois. Also that the lenders who were the judgment creditors were leaving me alone. The mortgage licensing investigator told me that the unsatisfied judgment needs to have a written payment agreement. That cannot be ignored if I wanted my Wisconsin NMLS license. I told her then that I will enter into a $50 to $100 per month payment agreement and will that be okay. She told me NO. One of the judgments was $6,000,000.

I needed to enter into a written payment agreement with the judgment creditor for at least 5% of the unpaid judgment amount or a payment plan for $30,000 per month. I told her that I could not do that. How can I come up with $30,000 per month. I spoke with the supervisor and it was like talking to a brick wall. Long story short, the state of Wisconsin was going to deny my Wisconsin mortgage loan originator’s license due to my prior judgments and prior bad credit. I ended up withdrawing my Wisconsin mortgage loan originator’s license

Can You Become A Loan Officer With Bad Credit: Depends On The State

The good news is that I now am licensed in the states of California, Ohio, Alabama, New Jersey, Virginia, Illinois, Florida, and Kansas. Can You Become A Loan Officer With Bad Credit? Yes, you can become a loan officer with bad credit depending on the state you apply to. If you have any questions about getting your mortgage loan originator’s licenses with bad credit or are interested in joining my team as a mortgage loan officer, please contact me via email at gcho@gustancho.com. I am available 7 days a week, evenings, weekends, and holidays to take your phone calls and answer all of your questions.

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