MLO Mentor is an ongoing series covering compliance best practices for mortgage loan originators (MLOs). This article series walks you through reporting under the California Financing Law (CFL) — find Part I of MLO Mentor: California Financing Law here.

Place of business

As part of complying with the CFL, licensees need to post their license and the licenses of all employed MLOs at the place of business indicated in its CFL license application. [Fin C §22151]

Further, each CFL licensee may only have one single place of business. To practice in more than one location, the CFL licensee needs to apply for, obtain and maintain a separate CFL branch license for each additional location from which it will conduct business. [Fin C §§22152, 22102]

A change of main business address is to be filed at least ten days before the CFL licensee moves. Failure to file a change of address with the Department of Financial Protection and Innovation (DFPI) subjects the CFL licensee to a $500 civil penalty. [Fin C §22153]

If a second business operates from the same location as the CFL licensee, the DFPI needs to be notified of the second business, and give written approval of the CFL licensee’s shared business location. This rule is in place to prevent an unlawful circumvention of the CFL licensing scheme. [Fin C §22154]

All CFL licensee activities need to take place on the business premises listed in the application. The two exceptions to this rule are:

  • a CFL licensee may agree to meet to initiate a residential mortgage at a separate location at the borrower’s request; and
  • a CFL licensee may transact business through its website. [Fin C §22155]


CFL licensees need to keep records of their residential mortgage loan transactions for at least three years. [Fin C §22157]

All books, records and accounts are to be kept at the CFL licensee’s business address. Additionally, the following documents for each transaction are to be maintained at the CFL licensee’s business address:

  • the statement of loan disclosure;
  • the security agreement of wage assignment;
  • the promissory note;
  • the loan application;
  • the payment record; and
  • the escrow closing statement. [10 CCR §1425]

Annual Report and assessment

CFL licensees are required to file an annual report with the DFPI by March 15 of each calendar year. The annual report data is used in the DFPI’s annual report of all CFL licensee activity.

The DFPI also uses each CFL licensee’s annual report to:

  • confirm the CFL’s minimum net worth requirement is met; and
  • assess the CFL licensee’s annual fee.

The minimum annual assessment fee is $250 per licensed location. Notices of annual assessments are distributed by the DFPI on or before September 30th of each year. [Fin C §22107]

The DFPI releases a Microsoft Excel report template specific to each calendar year, which need to be completed and uploaded using DFPI’s portal by the annual deadline. In the annual report, the CFL licensee provides:

  • general information about the CFL licensee’s business;
  • a balance sheet;
  • an analysis of loans and receivables outstanding;
  • a statement of income and expenses;
  • a report on income received from CFL lenders and brokers;
  • a list of all other business and sources;
  • a schedule of brokered loans;
  • loan statistics;
  • sales of loan to institutional investors and loans serviced;
  • a directory of directors and officers;
  • a report on their non-traditional mortgage activity;
  • additional information;
  • loan activity; and
  • information about default rates on types of loans.

All information but the default rates on types of loans is subject to public inspection, upon request. Non-public companies and sole proprietorships may file a request to keep the balance sheet confidential, as well.

Filing is mandatory for every CFL licensee, even if no business was conducted for the reported year. Failure to file the report is grounds for license revocation. A CFL licensee who has had their license revoked for failure to file the annual report needs to wait at least one year before reapplying for a CFL license. [Fin C §22159; Calif. Government Code §11522]

CFL licensees who make or broker residential mortgage loans are also subject to National Multistate Licensing System (NMLS) Mortgage Call reporting. [Fin C §22159(c)-(d)]

A finance lender who does not timely file an annual report or other report required by the DFPI is subject to penalties of:

  • no more than $100 per day for the first five business days the report is overdue; or
  • $500 each business day after the first five.

The entire penalty is not to exceed $25,000.

A licensee may file a written request for a hearing to challenge the penalty within 30 days of receiving notice of the penalty. If the licensee does not file a request for a hearing within 30 days, the penalty will be final, and the licensee will have five days to pay it. In the event of a hearing, if the licensee is ordered to pay the penalty, they will have five days to do so.

The penalties do not apply when:

  • the new requirements impact the annual report, was not required the prior year and the DFPI notifies the licensee of the new information required less than 90 days before the annual report’s due date; or
  • the new requirement impact reports other than the annual report and the DFPI notifies the licensee of any other reporting requirement less than 90 days before the impacted report’s due date. [Fin C §22715]