Mortgage Concepts is a recurring video series covering best practices and compliance education for California mortgage loan originators. This video discusses the licensing laws MLOs must abide by in California. For course credit toward renewing your NMLS license, visit

Editor’s Note — The Department of Business Oversight (DBO), as is mentioned in this video, is now called the Department of Financial Protection and Innovation (DFPI). We have corrected this in the script provided below.

In California, two state agencies regulate MLOs:

  • the California Department of Real Estate (DRE) [Calif. Business and Professions Code §10166.02(b)]; and
  • the California Department of Financial Protection and Innovation (DFPI). [Calif. Financial Code §§22100(a), 50120]

The laws which DRE and DFPI administer control the mortgage loan origination and lending activities of all state-licensed MLOs in California. While all are able to originate residential mortgage loans, the other activities that can be performed with each license varies.

The DRE issues two licenses under the Real Estate Law: a broker license and a salesperson license.

Brokers are able to sell, offer to sell and solicit listings for the sale or lease of real property. Salespersons may perform the same activities, but only under the employment and supervision of a DRE-licensed broker. [Bus & P C §10131]

However, to engage in MLO activities, a DRE-licensed broker must:

  • obtain and maintain an individual broker DRE MLO endorsement; and
  • obtain and maintain a company or corporation MLO endorsement.

For a DRE-licensed salesperson to engage in MLO activities, they must:

  • obtain and maintain a salesperson MLO endorsement; and
  • work under the employment and supervision of a DRE-licensed broker who is able to perform MLO activities.

Like the DRE scheme, the DFPI issues company and individual MLO licenses under the CRMLA and the CFL.

Under the DFPI, an individual has to obtain an individual MLO license and work for an MLO company licensed under one of two laws:

  • the California Residential Mortgage Lending Act (CRMLA) [Fin C §§50000 et seq.]; and
  • the California Financing Law (CFL). [Fin C §§22000 et seq.]

CRMLA and CFL MLO companies are only able to make or broker residential mortgages through licensed individual MLOs. [Fin C §§22100(d), 50002.5(c)]

Why choose to work under one law instead of the other?

CRMLA companies are able to service loans for third parties. They are also able to broker mortgages, but only to other CRMLA lenders, and state and federally chartered institutions.

Additionally, a California business address is not required to obtain a CRMLA company license. [Fin C §§50000 et seq.]

Under the CFL, MLOs may make, broker or service residential mortgages, but only to/for other CFL lenders. [Fin C §22004]

Further, a CFL company making a loan must loan its own funds. It may not fund a mortgage through a warehouse line of credit. [10 CCR §1460]

However, CFL companies and their employees may make both secured and unsecured consumer and commercial loans.

The DRE and DFPI schemes overlap a bit. An active, DRE-licensed MLO can originate mortgages and work under a CRMLA or CFL broker without obtaining an individual MLO license under the DFPI. [Fin C §§22057, 50002(c)(9)]

However, the reverse is not true. A DFPI-licensed MLO may not originate mortgages under a DRE-licensed MLO broker without an active DRE license and MLO endorsement.

Let’s take a look at a few scenarios to see if we can determine which type of license is required.

Pablo wants to work for their relative, who is a CFL-licensed broker. He’s also interested in selling real estate. What license does Pablo need?

To accomplish both his goals, Pablo can obtain a DRE salesperson license and MLO endorsement, and find a DRE-licensed broker with an MLO endorsement to work under. As long as he remains an active salesperson, he may work under his CFL-licensed relative without also obtaining an individual MLO license.

Alternatively, he can obtain both a DFPI-controlled individual MLO license to work with his CFL-licensed relative, and a separate DRE salesperson license and find a DRE broker to work under to sell real estate.

Kayla holds an individual MLO license, and works for a CFL-licensed company originating residential mortgages. Later, her company closes, and she goes looking for new employment.

She receives an offer from a CRMLA company to originate residential mortgages, and an offer from a DRE-licensed real estate broker to start up a residential mortgage lending arm. Which offer can Kayla take without obtaining a new license?

Since Kayla already has an MLO license under the DFPI, she may accept the CRMLA company’s offer without obtaining a different license. In contrast, the DRE-licensed broker’s offer would require both the DRE broker and her to obtain the necessary licenses and endorsements.

Tom is a sole proprietor, and holds a CFL license to make personal loans. His business is successful, and he wants to branch out into brokering residential mortgage loans. Since he already holds a CFL license, does he need to obtain any other license to begin his residential mortgage loan brokering business?

Yes! He has to obtain both a company CFL MLO license, and, if he wants to continue operating as a sole proprietor, he must also obtain an individual MLO license.