The world of real estate goes far beyond buying and selling of property. Along with sellers, real estate agents, lenders, appraisers and inspectors, others, such as note brokers, also make money on the sale of a property. Typically, note brokers, also known as loan brokers in some states, buy and sell debt, or notes, such as liens, mortgages and other outstanding debts.
Because note brokering has had its share of scams and frauds, many states have turned to licensing to monitor note brokers and protect consumers. Many states give out licenses under through real estate licensing boards, as most note brokers work within real estate. Note brokers have started branching out into other notes as well, such as annuities and lump-sum payments, but licenses still come from real estate licensing boards. The exact requirements for licensing vary, depending on the state.
The licensing process starts with an application, in which the candidate shares biographical, professional and tax information. Many states utilize the Nationwide Mortgage Licensing System to process applications. A candidate does not have to have previous note broker experience to earn a license, but some states do require applicants to turn in a resume outlining previous professional experience. Other documentation needed for a note broker license includes letters of recommendation from professional colleagues.
Besides an application process, states often require note broker candidates for licensing to fulfill other requirements. Most states mandate that candidates take out a surety bond, which acts as insurance for the loan broker in case of defaults or other issues in which the note broker may lose a large amount of money. In Maine, for example, the surety bond must be in the amount of $25,000 or more, while Indiana requires a minimum of $50,000. Other requirements include undergoing a credit check and criminal background check.
Just like other licenses, a note broker must keep her license up-to-date by renewing every few years, typically every one to three years. Along with a renewal application and sometimes a renewal fee, several states require continuing education credits. CE credits come from a variety of sources, such as classes, seminars and workshops. States typically require a certain number of hours per year, with a portion of those hours coming from ethics classes relating to the mortgage industry. The State of Maine also requires that any CE courses include some type of examination that tests the students’ knowledge at the end of the course.
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