In all likelihood, California has the most complex licensing system for mortgage professionals in the United States. Rules and regulations regarding licensing are set forth in two different state laws: the California Finance Lenders Law, now called, “California Financing Law” effective October 4, 2017 (CFL) and the California Residential Mortgage Lending Act (CRMLA).
Both pieces of legislation were enacted by the California State Legislature in 1994. The CRMLA applies to non-depository lenders and loan servicers, as well as their employees who act as mortgage loan originators. The CFL regulates the lending activities of finance lenders and brokers and applies to all who make commercial loans and consumer loans.
The CFL covers licensing requirements and exemptions thereto; provisions concerning license revocation or suspension; and penalties for violations of both consumer and commercial lending requirements. The California Financing Law lists the following as its purposes:
- To simplify, clarify, and modernize the law governing loans made by finance lenders;
- To ensure an adequate supply of credit to borrowers in the state of California;
- To protect borrowers against unfair practices;
- To foster competition among finance lenders;
- To permit and encourage the development of fair and economically-sound lending practices; and
- To encourage and foster a sound economic climate in the state of California.
Some of the relevant definitions found in the CFL illustrating its coverage and applicability include broker, finance lender, mortgage loan originator, finance company, and residential mortgage loan. Relevant definitions found in the CRMLA illustrating its coverage and applicability include annual audit, institutional investor, lender, loan processor or originator, mortgage loan originator, registered mortgage loan originator, and mortgage servicer. Understanding how both of the laws operate in tandem is truly challenging and complicated.
The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services, and advice for clients in all aspects of commercial compliance, business litigation, and transactional law. Call us at (818) 888-2220, send an email inquiry to [email protected] or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.