Alaska - A New Frontier in Mortgage Licensing and Suretyship

After years of debate, the State of Alaska has joined the ranks of most other states with legislation to regulate the Mortgage Broker and Mortgage Lender Industry. The Alaskan act is entitled the Alaska Mortgage Lending Regulation Act. This act has structured guidelines for licensing and registration of all lenders and brokers within the state. This underlying basis of this act will cause accountability of the brokers & lenders for their actions.

As a result, there will be many new licensing guidelines and requirements that will regulate the Mortgage Industry in Alaska. All new applicants applying for the license after July, 1 2008 must adhere to new the new requirements, while any Mortgage Brokers or Mortgage Lenders that are currently operating in the state must be compliant with the new licensing laws no later than March 1, 2009. After March 2009, one may not operate in the state as a Mortgage Broker, Lender, or Originator unless licensed.

Some of the new requirements that will be put in place are as followed:

The new laws will affect all Mortgage Broker or Mortgage Lender & in all capacities. These new regulations will also regulate brokers or lenders that are running their business via the internet or by providing services from a remote location either within the state or outside of the state, via some sort of mail service, or by phone.

Initially, the applicants will be required to submit to a full Background Investigation and the application must pass this phase. This investigation will be done through the submission of fingerprints to the Department of Public Safety in Alaska. Next, the applicants will need to take a Competency Test. This test must be passed with the desired score, prior to being allowed to service any residents of Alaska. The test is free the first time for applicants. If the test is not passed the first time, the retesting will be made available for a fee.

The Surety Bond that will be required for Alaska will need to be in the amount of $25,000. The bond must be in the favor of the state of Alaska. The bond insures that Mortgage broker and/or Lender will operate their business ethically and under the new guidelines set forth under the Alaska Mortgage Lending Regulation Act. These mortgage bonds must be established as a bond of a continuous nature with effective for the duration of a valid license.

For more details about the new requirements, it is recommended that you visit the Alaska State website or the Alaska Department of Commerce, Community, and Economic Development Division of Banking and Securities.

You can find all state requirements in our mortgage broker guide on “How To Become A Mortgage Broker“.

Top 10 Tips To Increase Your Contract Bond Line

In today’s unstable economy and tight market, it has been increasingly harder for some contractors to obtain bid and performance bonds. For small business owners and larger companies alike, it has been more and more difficult both during the current time and over the past couple of years to obtain contract bonds. Even though the market and economy may look dim right now, there are specific steps that contractors can take to ensure that they are doing all they can to make this process easier and more obtainable. Here are ten informative tips to help improve a contractors’ surety program:

1. Find a CPA Who Specializes in and is Knowledgeable about Contract Bonding
Finding the perfect CPA is where to start. CPAs must know about the percentage of completion or completed contract methods of accounting in order to provide the surety agency with all the necessary information that they require, as well as being able to provide the required financial planning and tax advice to the contractor. A knowledgeable and thorough CPA will present the contractor’s financials in a professional way that makes the best presentation to surety companies and agencies alike. Also, it will balance the strong desire to reduce tax liability.

2. Work With a Bank that is Familiar with Contractors
A contractor’s cash flow may be very different than other industries. In fact, they even differ among different varieties of contractors. It’s crucial that a bank’s loan committee and board of directors understand construction and the various lending risks that are associated with general contractors and subcontractors. It would be a good idea for the contractor to meet the decision-makers at the bank and establish a relationship. Account managers are known to come and go, so it is imperative that the contractor maintains close contact with the bank.

3. Establish a Web Site
It’s a new millennium! Some contractors do not have a website, but many are realizing that establishing a web site is crucial for the success of their business. Owners, developers, and clients expect to be able to learn about a potential business partner with a click of a button. Nowadays, a construction company that does not have a website can be viewed as old-fashioned, out of date, and lacking innovation. Companies who do not advertise online have a tough time competing with new and innovative contractors who are able to develop an informative website. Once the website is established, it is important that the website is accurate and updated regularly if any changes are made. A site that is well-developed and regularly maintained can potentially become a portal of communication for contractor’s staff/employees, vendors, clients, and subs.

4. Collection
A contractor MUST pay very close attention to open receivables. The most successful companies make very clear what the payment schedule will be prior to the start of work and enforce their collection rules and guidelines. They can also pre-qualify their clients and confirm what available financing is open to cover the estimated amount of the contract as well as contingencies. This is so important because in today’s construction economy, after getting a job, the most difficult aspect is collecting payment for it.

5. Understand the Law
It is also important that a successful contractor understands their rights, as well as the rights of other individuals involved in a project. This includes all subcontractors, the general contractor, and the owner. Contractors must be aware that lien and stop-notice laws vary from state to state, and they are changed nearly every year. One mistake can cost one of these parties to lose their rights, and possibly thousands of dollars! A general contractor will most likely be held responsible for the payment of wages due to all workers on the project, regardless of who the employer is. State agencies can and will enforce minimum or prevailing wages in many cases and the general contractor will likely be held accountable. It is also very important to know the law and have a knowledgeable attorney review contracts regularly to keep them current with law changes. Due to the fact that this is a payment issue covered by the payment bond, the surety company must be aware that systems are in place to protect the contractor for paying for labor more than once.

6. Meet the Home Office Underwriters
Truth be told, a contractor should have and maintain a very close relationship with their broker and may have the same relationship with the local branch underwriters. Although the branch underwriter can be a strong advocate for the contractor, the ultimate decision maker is at the surety company’s home office. The better the surety company knows the contractor, the more likely they are to make better decisions for the contractor.

7. Hire a Strong Financial Staff
Successful construction company executives view the accounting department as the profit center, not the cost center! A highly-skilled CFO will be an incredible asset to the contractor. Adequate staffing will make paperwork to be processed efficiently and correctly, thus speeding collections.

8. Communicate
Contractors spend a great deal of money on outside services and they should utilize those services to their advantage. The contractor must have strong legal, accounting, financing, risk management, and surety support. These mentioned advisors must be kept informed of any changes in the contractor’s operations and on operating results on a regular basis. These professionals can help keep the percentage of mistakes to a minimum.

9. Reputation
For any contractor to be successful, they must have a good reputation to help them attract potential clients, but what about subs, supplier, engineers, etc? All of these groups communicate with each other. A contractor can’t burn too many clients before word spreads. Nowadays, communication is faster and more efficient than ever and the Internet provides a great deal of information about anything, even contractors.

10. The Surety Broker
And finally one of the most important keys to a successful surety program is the surety broker. They can match the contractor with the proper surety company. In today’s tough surety market, a knowledgeable broker will be advised of all levels of operations and tell the contractor how decisions will affect surety credit. The broker must maintain an excellent relationship with the surety on behalf of the contractor. The number of active sureties in the market continues to dwindle, so there are fewer options and when bond line capacity becomes an obstacle, it is crucial to have all possible options available. “Burning bridges” is never a smart move, but it is more important now than ever to keep all doors open. A skilled surety broker should have the ability to coordinate each issue discussed in this article to maximize a contractor’s surety program.

What is A Mortgage Broker?

A Mortgage Broker is defined by Wikipedia as “a person or company that acts as an intermediary who sells mortgage loans on behalf of individuals or businesses�.

Years ago, banks and other lenders had sold mortgages on their own thus controlling the now competitive market. Today, the mortgage business has evolved into a very competitive market and the role of a Broker has gained popularity. The role of a Broker has also surpassed the role of banks and other lenders to become the largest sellers of mortgages. These roles are regulated by each individual state and the Broker must be licensed to sell in their state.

There are numerous tasks of the Mortgage Broker and the proper management of these responsibilities typically put themselves and their company’s reputation on the line both financially and ethically. They handle all of the marketing and share a large part in the advertising that will attract a client to their firm. They also handle some of the more tedious work like background and credit history of a perspective client. This is a function that saves the actual mortgage company valuable time and effort. This would include income verifications of the client to make sure they even qualify for the programs available. By handling these verifications & history checks, the Broker can assess exactly what program will fit the needs of his client. The Broker also assists the client in the pre-approval process which will allow their client to shop for a home at their leisure with a more competitive edge.

When it comes time for the mortgage to be signed, the Broker does the legwork of gathering paystubs, insurance documentation, and bank statements that will prove to the mortgage company they can handle repayment of the loan. They will also handle the lender application forms which insure that they are completed correctly and in their entirety. The most beneficial function that the Broker handles at the signing of the mortgage is the explaining of the legal documents the client is signing and making sure they are signed and completed correctly.

According to a study conducted in 2004 by the Wholesale Access Mortgage Research & Consulting, Inc., there are approximately 53,000 Broker companies which employ approximately 418,000 employees which account for 68% of the residential loans in the United States. It is estimated that number increased to roughly 80% in the year 2007. At this point with the economy in a struggle, the smaller Brokers are struggling to survive.

Today, Mortgage Brokers that have survived are more competitive due mainly to their access to pricing discounts and capital markets. The Broker typically has much lower overhead costs compared to the large banks and lending institutions. They also have the advantage of lowering rates instantly to compete for their clients. This is allowing them to control 60% to 70% of the market. So, the next time you are looking for a mortgage check out your local Mortgage Broker and compare the rates and services — you may be surprised.

Close Call For California Motor Vehicle Dealers

A bill was introduced earlier this year in February that, had it passed, would have made it more difficult for California auto dealers to get bonded or remain bonded.

Assembly Bill 1939 was originally written to increase the cap on the document processing charge for leased vehicles by $20 to $65 and for purchased vehicles by $10 to $65. Opponents to this bill expressed concerns on behalf of the consumers, who have faced many rising costs lately in other areas, and that this increase would be unjustified. Opponents also expressed that an increase in fees, if necessary, should be in some way linked to furthering consumer protection.

In response to opposition, the author of AB 1939 amended the bill in June. First changing the increase for the document processing charge for leased vehicles by $10 to $55 and dropping the increase for purchased vehicles.

The amendment also included a change in the surety bond requirement for dealers and remanufacturers. Currently, dealers and remanufacturers must file a $50,000 bond with their license. If the bill were to pass, the surety bond requirement would be increased to $100,000. The Surety Bond of Motorcycle Dealer, Motorcycle Lessor-Retailer, All-Terrain Vehicle Dealer, or Wholesale-Only Dealer (Less than 25 Vehicles per Year) would remain at $10,000.

These amendments failed to appease the original opponents of the bill and brought on additional opponents because of the increase in the surety bond requirement. Among these opponents, The Surety & Fidelity Association of America (SFAA) raised concerns that the increased bond amount would make it even more difficult for dealers to obtain or maintain their bonding requirements. Others expressed concerns that the increased bond amount would serve as another barrier to dealers just getting started, especially used car dealers.

Fortunately, thanks to the efforts of the SFAA, AIA, and other local surety associations, the bill died in Senate after the hearing was cancelled by the author of the bill.

This topic reinforces the importance of keeping yourself informed of the latest activities of your state legislation. There may be other bills introduced in the future that could be unfavorable to your industry. It is essential that they hear your opinions, so that decisions can be made in the best interests of everyone involved.

Helpful Links

Here you search for information about a bill using keywords or the bill number at:

http://www.leginfo.ca.gov/bilinfo.html

Submit comments to the Assembly on pending legislation

They also offer an index that list bills introduced in both the Assembly and the Senate.