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Creating a mortgage bank

BY SUSAN HARRIGAN | susan.harrigan@newsday.com

November 18, 2007

The New York State banking department requires someone who wants to own or operate a mortgage bank in New York State to fulfill a number of requirements, including submitting fingerprints and filing an "investigative background report."

That report includes a person's credit history, civil, bankruptcy and criminal court record, and employment and regulatory history.

If the applicant is a company, each partner, executive officer, director and owner of 10 percent or more of the stock must submit fingerprints and the background report.

The department requires that an applicant have, and maintain, a minimum of $250,000 net worth and a line of credit from a bank or insurance company that is worth at least $1 million.

The person or company must post a surety bond of between $50,000 and $500,000, based on business volume and meant to ensure that the bank can meet its obligations to customers and regulators if it closes or loses its license.

Jacqueline McCormack, of the banking department, said the requirements were in force in 2004 when HTFC received its license as a mortgage bank. But she said the department has updated "internal processes" since then, and "may verify more of the information submitted" by applicants.

McCormack said the department doesn't review the collateral that was pledged as security for the required line of credit.