Effective January 1, 2010, any Mortgage Loan Broker (MLB) who makes, arranges or services residential or commercial mortgage loan secured by real estate in California must report to the Department of Real Estate (DRE) prior to January 31, 2010. This report must be done online at the DRE’s website (www.dre.ca.gov) using Form RE 866, Mortgage Loan Activity Notification. Additionally, future periodic business activity disclosures are required as in the past.

Failure to submit the Mortgage Loan Activity Notification prior to January 31, 2010 will result in a fine of $50 per day for the first 30 days the report is not filed.

Any licensees making, arranging or servicing consumer loans secured by one-to-four unit residential property, called Real Estate Settlement Procedures Act (RESPA) loans, must obtain a Mortgage Loan Origination (MLO) endorsement on their real estate license prior to January 1, 2011.

In addition to the endorsement required on the real estate license for making or arranging consumer loans secured by one to four unit residential property – RESPA loans, not business loans – the MLB must:

  • register on the Nationwide Mortgage Licensing System and Registry. Each broker, branch, mortgage loan lender and MLO will be assigned a single license record in the Registry. No fee will be charged to create the initial record;
  • comply with all federal requirements for MLO licensure. These include new qualification assessments, federal and state exams and background checks. No exceptions or exemptions will be given to existing licensees; and
  • be issued an MLO endorsement on his real estate license by January 1, 2011. For an endorsement to be issued by January 1, 2011, an application for endorsement must be submitted by September 15, 2010. The initial endorsement will expire on December 31, 2011, and must be renewed annually. The endorsement will carry a unique identifier assigned by the Registry. The MLB’s California real estate license number will not change.

Any MLB who deals with consumer loans secured by one-to-four unit residential property (RESPA loans) and fails to obtain the MLO endorsement by the January 1, 2011 deadline will incur a fine of $100 per day, to a maximum of $10,000.

[For more information on Senate Bill 36, see the January 2010 first tuesday article,

What CA loan brokers and agents need to know: the ramifications of recent mortgage loan legislation]

first tuesday take: SB 36 states that all MLBs who make any kind of loan on one-to-four unit residential property must register with the DRE. With form RE 866, the DRE is requiring all MLBs who originate any type of real estate loan, residential or business, to register or face a fine.

We at first tuesday see no legislative justification granting the DRE to make such a broad registration requirement, but MLBs who make loans on properties with more than four units should nonetheless take ten minutes to complete the painless registration process. Brokers have nothing to lose by staying on good terms with the DRE and, in any event, they are already reporting to the DRE if they are in compliance with MLB rules for periodic reporting.