To “Make a Loan” or Not “Make a Loan”: That is the Question

Yesterday I attended the Mortgage Broker’s Commission Meeting at Bellevue City Hall.  It was more tame than the one I was at the previous week which focused on the new issues facing Correspondent Lenders becoming licensed under the CLA…I think that’s partly because we were under-represented and that many mortgage brokers with warehouse credit lines attended last week’s meeting.  Jillayne Schlicke of CE Forward did a great job taking live notes and you can read them here.  This legislation is all based on defining if a mortgage company is "making a loan": mortgage brokers are not–lenders with a credit line are.  DFI and WAMB are working on a more precise definition.

From WAMB President, Dave Erickson:

On April 24 at 11:00 AM, a curve ball was thrown at our industry in the form of an explanation of a change to licensing requirements resulting from the recently-passed Senate Bill 6471.

But unlike most pitches from the mound, where you can study the pitcher and watch the ball as it comes at you, this curve ball came from left field. 

We never saw the windup, because there wasn’t one. We never got to swing the bat.  Due to no fault of our own, we took the pitch and Strike One was called.

There will not be a Strike Two.

As of June 14, 2008, Senate Bill 6471 requires that any company who is deemed to be "making loans" in the State of Washington become licensed under the Consumer Loan Act (CLA).

Due to the way the Bill was written, many mortgage brokers are finding themselves falling under the definition of "making loans." The implication of this Bill is that these mortgage brokers and loan originators now licensed under the Mortgage Broker Practices Act must now become licensed under the Consumer Loan Act (CLA)….

Upon receipt of DFI’s notification, WAMB scheduled a meeting with DFI officials to explain our concerns and demonstrate how this legislation will harm our industry and consumers.  We explained the implications on mortgage brokers and loan originators and came out of the meeting with several items of agreement:

  • WAMB needs a definition on what constitutes "making a loan" for the purpose of keeping as many mortgage brokers and loan originators as possible under the regulatory purview of the Mortgage Broker Practices Act.
  • WAMB will work with DFI via the rules process to create or clarify rules about how businesses are regulated under the Consumer Loan Act with the intention of lessening the onerous compliance requirements of the Act.
  • WAMB will work with DFI via the rules process to discuss issues including:  bond requirements, annual fee assessments, clarification of fees charged to consumers that may or may not be allowed under the CLA, revisiting the examination component of the CLA which differs from the Mortgage Broker Practices Act and attempt to lessen the burden of compliance to the detriment of our industry and the consumers we serve.

DFI has committed to providing a Policy Statement by Friday, May 16th regarding the definition of "making a loan" for the purpose of clarifying who must comply with the new law by the June 12 deadline. 

DFI’s Policy Statement will also provide guidance regarding which aspects of licensing must be completed by June 12 and what areas may be pushed out until the rules process is completed.

DFI has conveyed to WAMB that they wish to move as quickly as possible via the rules process.  DFI seeks to complete the rules process by November 4 which would provide ample time to formulate a legislative response for the start of the next legislative session, should one be necessary….

Stay tuned. 


  1. That’s wild. Legislation WILL change the mortgage industry quickly. It will be interesting to see how that pans out for you in Washington.

    Remind me.. are you a mortgage broker or banker? Does this directly effect you Rhonda?

  2. Yep, Tyler. We are a true Correspondent Lender by every definition: we have fund 90% of our loans in our credit line and have in-house underwriting. We are direct endorsed by HUD and Fannie/Freddie. It’s great to be a correspondent lender.

    Yesterday, Deb Boitner commented that she wished she had understood the different types of mortgage lenders/brokers prior to this legislation passing…she said “the law of unintended consequences is still the law”.

  3. DFI’s update provides no new info:

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