How to Form a Mortgage Company in Arkansas | Essential Steps

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Arkansas Mortgage Company

The mortgage industry plays a crucial role in the economy as it facilitates the dream of homeownership of Arkansas people. Forming a mortgage company can be a rewarding and profitable LLC in Arkansas. However, it requires a deep understanding of the industry, regulatory requirements, and the necessary steps to establish and run a successful mortgage company. This comprehensive guide will walk you through Forming a Mortgage Company in Arkansas and provide valuable insights to help you succeed in this competitive industry.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before forming your Arkansas mortgage company, all the steps in this article must guide you.

What is a Mortgage Company?

In Arkansas, a mortgage company is a business, often structured as a Limited Liability Company (LLC), that specializes in originating, funding, and servicing mortgage loans for homebuyers and property owners. These companies play a crucial role in the local housing market as they facilitate obtaining a mortgage loan for individuals looking to purchase, refinance, or invest in residential properties.

The Arkansas State Bank Department regulates mortgage companies in Arkansas and must obtain the appropriate licenses to operate legally. There are different types of mortgage companies, such as mortgage brokers, lenders, and loan originators, each with specific roles and responsibilities within the mortgage industry.

  • Mortgage brokers act as intermediaries between borrowers and mortgage lenders, assisting homebuyers in finding the Best Arkansas Small Business Loan product and terms to suit their needs.
  • Mortgage lenders are financial institutions that provide the funds for mortgage loans directly or through a network of mortgage brokers.
  • Mortgage loan originators are individuals employed by mortgage companies who work with borrowers to process and submit loan applications, negotiate loan terms, and complete the mortgage transaction.

Operating a mortgage company in Arkansas requires a deep understanding of the local housing market, industry regulations, and the various mortgage products available to borrowers. By providing valuable services and expertise to homebuyers and property owners, mortgage companies in Arkansas play a vital role in helping individuals achieve their homeownership dreams and supporting the state’s overall economy.

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How to Form a Mortgage Company in Arkansas

Forming a mortgage company in Arkansas can be complex, but the following step-by-step guide will help you navigate the requirements and regulations.

Step 1: Understanding the Mortgage Industry

The mortgage industry in Arkansas is governed by various state and federal laws and regulations designed to protect consumers and ensure a fair and stable market—the primary regulatory authority for mortgage companies in Arkansas State Bank Department. The Arkansas State Bank Department is responsible for licensing and regulating mortgage companies and their activities within the state.

Before starting a mortgage company in Arkansas, it is essential to understand the different types of mortgage licenses and activities regulated by the Arkansas State Bank Department. These include:

Mortgage BrokerA person or entity that, for compensation or gain, assists borrowers in obtaining mortgage loans from third-party lenders.
Mortgage LenderA person or entity that originates, funds, or services mortgage loans.
Mortgage Loan Originator (MLO)An individual who, for compensation or gain, takes mortgage loan applications or offers or negotiates terms of mortgage loans.

It is suggested that you speak with a legal professional before you begin setting up a mortgage company. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in Arkansas.

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Step 2: Forming a Legal Entity

Once you clearly understand the mortgage industry and the specific license type you want to pursue in Arkansas, the next step is to form a legal entity for your mortgage company. The most common types of legal entities for forming a mortgage company in Arkansas include:

Sole Proprietorship

This is the simplest form of business entity, where an individual operates the Arkansas mortgage company under their name or a trading name. There are no formal registration requirements, but the owner is responsible for all business debts and liabilities.

Partnership

A partnership is a business entity where two or more individuals come together to form a mortgage company. All partners are personally liable for the business’s debts and liabilities in a General Partnership. Limited Partnerships and Limited Liability Partnerships offer some protection for partners from personal liability.

Limited Liability Company (LLC)

An LLC is popular for forming a mortgage company, combining a corporation’s liability protection with a partnership’s tax flexibility. LLC owners, known as members, are not personally liable for the business’s debts and liabilities. 

Corporation 

A corporation is a legal entity separate from its owners, known as shareholders. Starting a corporation in Arkansas provides liability protection for its owners and is subject to corporate taxation. Forming a corporation involves more administrative requirements and fees than other business structures. There are different types of corporations, such as S and C corporations, each with tax implications and requirements.

To form a mortgage company in Arkansas, consult a Business Attorney in Arkansas to understand the state’s requirements for forming a legal entity and obtaining necessary licenses and permits.

Step 3: Developing a Business Plan

A well-crafted business plan is essential for the success of your Arkansas mortgage company. The business plan should outline your company’s mission, vision, objectives, target market, competitive analysis, marketing strategy, financial projections, and management structure.

Your business plan will serve as a roadmap for your company’s growth and help you secure financing or investment to start and grow your business.

Step 4: Register Your Mortgage Company

You must register your Arkansas mortgage company. Here are the guidelines you must accomplish before obtaining the licenses and permits.

Choose a Business Name

Choosing a business name for your Arkansas mortgage company involves several steps. Here are some guidelines to help you choose an effective name:

  • Your business name should reflect the brand identity you want to convey to your potential clients. Consider your target audience, your company’s values, and the services you offer when choosing a name.
  • Including words related to the mortgage industry in your business name can help potential clients understand the nature of your business. Some keywords to consider are “mortgage,” “loan,” “home,” “finance,” or “lending.”
  • Including the name of Arkansas in your business name can help establish a sense of familiarity and trust with potential clients from the same state. For example, “Arkansas Mortgage Solutions” or “Arkansas Home Loan Experts.”
  • A shorter, easy-to-remember name can make it easier for potential clients to recall your business when they need mortgage services.

Remember to check the availability of your chosen business name with the Arkansas Secretary of State Business Entity Search to ensure that no one else has trademarked the name. There is a complete guide on Arkansas Business Name Search for you to have a mortgage company name. You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Arkansas DBA (doing business as)

Once you’ve settled on a unique name, you can proceed with choosing a Registered Agent down to obtaining any required licenses and permits.

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Choose a Registered Agent

A Registered Agent is a person or entity designated to receive important legal documents and correspondence for your business. In Arkansas, every business entity, such as an LLC or a corporation, must have a Registered Agent with a physical address within Arkansas. The Registered Agent’s primary role is to ensure that your business complies with state regulations and be available to receive any legal notices or official government correspondence.

In Arkansas, the cost of having a Registered Agent ranges from $50 – $150. However, suppose you are still wondering how to hire a Registered Agent. You can also serve as your Registered Agent, appoint a friend or family member, or hire a professional Arkansas Registered Agent Services.

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File for Certificate of Organization or Articles of Incorporation

If you form an LLC for your Arkansas mortgage company, you must file the Arkansas Certificate of Organization, which costs $50. However, you must file the Articles of Incorporation if you form a Corporation for your Arkansas mortgage company. 

Including accurate and comprehensive information on this page is essential since mistakes or inconsistencies may delay or dismiss your filing.

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Obtain an Employer Identification Number

You must first obtain an Employer identification number (EIN) in Arkansas if you will open a bank account or hire an employee for your Arkansas mortgage company. 

The application of an EIN in Arkansas can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone (International Applicants) – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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Step 5: Obtaining Licenses and Registrations

You must obtain a license from the Arkansas State Bank Department to operate a mortgage company in Arkansas. The licensing requirements vary depending on the mortgage activity you plan to engage in (e.g., mortgage broker, mortgage lender, or mortgage loan originator).

Here are the general steps to obtain a mortgage license in Arkansas:

nmls

  1. Complete a license application through the Nationwide Mortgage Licensing System (NMLS). The NMLS is a web-based system that allows mortgage companies and MLOs to apply for, update, and renew their licenses online.
  2. Complete pre-licensing education and pass the NMLS national and state-specific mortgage exams.
  3. Submit fingerprints for a criminal background check and authorize a credit report through the NMLS.
  4. Obtain a surety bond in an amount specified by the Arkansas State Bank Department. The bond amount will depend on the type of mortgage license you are applying for and the volume of your mortgage loan activity.
  5. Provide proof of financial responsibility, such as a minimum net worth or a fidelity bond, as required by the Arkansas State Bank Department.
  6. Pay the applicable licensing and application fee of $750.

In addition to the mortgage license, you may also need to obtain other licenses, permits, or registrations, depending on your business activities and local requirements. The business license fee in Arkansas ranges from $50 – $300.

Step 6: Setting Up Your Office and Infrastructure

A professional and well-equipped office is essential for the smooth operation of your Arkansas mortgage company. Choose a suitable location for your office, considering accessibility, visibility, and proximity to your target market. Ensure your office complies with the Americans with Disabilities Act (ADA) and other local building codes and regulations.

Step 7: Hiring and Training Staff

Your Arkansas mortgage company’s success will largely depend on your team’s quality and expertise. Hire qualified and experienced professionals, such as mortgage loan originators, processors, underwriters, and administrative staff. However, ensure that your team members meet the necessary licensing and education requirements before hiring an employee for your Arkansas mortgage company.

Step 8: Marketing and Growing The Company

A well-thought-out marketing strategy is crucial for attracting clients and growing your mortgage company. Some effective marketing tactics for your mortgage company include:

  • Build a professional website showcasing your services, expertise, and testimonials from satisfied clients.
  • Leverage social media platforms to create brand awareness and engage your target audience.
  • Networking with real estate agents, builders, and other industry professionals to build referral partnerships.
  • Participating in local community events and sponsoring charitable causes to create a positive brand image.
  • Offering educational content, such as blog articles, webinars, and seminars, to provide value to your clients and establish yourself as an expert in the mortgage industry.

FAQs

What is the process for forming a mortgage company in Arkansas?
The process for forming a mortgage company in Arkansas involves registering with the appropriate state agencies, obtaining a license, and meeting various requirements related to financial security and business operations.
What agency should I register my mortgage company with in Arkansas?
In Arkansas, mortgage companies must register with the Arkansas Securities Department.
What is the fee for registering a mortgage company in Arkansas?
The registration fee for mortgage companies in Arkansas is $500.
How long does it take to form a mortgage company in Arkansas?
The timeline for forming a mortgage company in Arkansas depends on various factors, such as the completeness of your application, but it generally takes several weeks to a few months.
What are the requirements for obtaining a mortgage license in Arkansas?
In Arkansas, mortgage companies must meet various requirements related to experience, education, financial security, and criminal background checks to obtain a mortgage license.
What is the bond requirement for a mortgage company in Arkansas?
The bond requirement for a mortgage company in Arkansas is $50,000.
What is the net worth requirement for a mortgage company in Arkansas?
The net worth requirement for a mortgage company in Arkansas is $250,000.
What are the ongoing compliance requirements for a mortgage company in Arkansas?
In Arkansas, mortgage companies must follow various rules and regulations related to licensing, business practices, advertising, and consumer protection.
What is the renewal process for a mortgage license in Arkansas?
In Arkansas, mortgage licenses must be renewed annually by December 31st.
What is the annual fee for a mortgage license in Arkansas?
The annual fee for a mortgage license in Arkansas is $1,000.
What training requirements are there for employees of a mortgage company in Arkansas?
In Arkansas, mortgage company employees must complete certain training courses related to state and federal regulations.
Are there any exemptions to mortgage company licensing in Arkansas?
Some mortgage companies may be exempt from licensing in Arkansas if they meet certain requirements, such as being a subsidiary of a federally chartered bank.
How can I find more information about forming a mortgage company in Arkansas?
You can find more information about forming a mortgage company in Arkansas on the website of the Arkansas Securities Department or by consulting with an attorney or business advisor.
Is there a minimum credit score requirement for obtaining a mortgage license in Arkansas?
There is no specific minimum credit score requirement for obtaining a mortgage license in Arkansas, but a good credit history is generally considered necessary for financial security and credibility.
Can I operate a mortgage company in Arkansas with a felony conviction?
It may be more difficult to obtain a mortgage license in Arkansas with a felony conviction, but it is possible if you can demonstrate rehabilitation and good character.
How can I demonstrate financial security for a mortgage company license in Arkansas?
You can demonstrate financial security for a mortgage company license in Arkansas by submitting financial statements, surety bonds, or other documentation of assets and liabilities.
Are mortgage companies in Arkansas subject to federal regulations?
Yes, mortgage companies in Arkansas are subject to various federal regulations related to lending, such as the Truth in Lending Act and the Real Estate Settlement Procedures Act.
Can I offer online mortgage services as a licensed company in Arkansas?
Yes, mortgage companies in Arkansas can offer online mortgage services, but they must comply with state and federal rules related to electronic signatures, disclosures, and privacy.
What is the maximum interest rate I can charge for a mortgage in Arkansas?
Arkansas law limits the interest rate that mortgage companies can charge on residential loans to 5% above the Federal Reserve discount rate.
Are there any caps on closing costs for mortgage loans in Arkansas?
No, there are no specific caps on closing costs for mortgage loans in Arkansas, but mortgage companies must comply with various disclosure requirements related to fees and charges.
What is the minimum down payment required for a mortgage loan in Arkansas?
There is no specific minimum down payment required for a mortgage loan in Arkansas, but mortgage companies may have their own requirements based on risk and affordability.
Can a licensed mortgage company in Arkansas charge prepayment penalties?
Yes, licensed mortgage companies in Arkansas can charge prepayment penalties, but they must comply with state and federal rules related to disclosure and reasonableness.
How can I advertise my mortgage company in Arkansas?
Mortgage companies in Arkansas can advertise their services through various channels, such as print, online, social media, and referrals, but they must comply with state and federal rules related to accuracy, transparency, and fair lending.
What is the maximum commission that mortgage brokers can charge in Arkansas?
Arkansas law limits the commission that mortgage brokers can charge to 5% of the loan amount.
Can mortgage brokers also be loan originators in Arkansas?
Yes, mortgage brokers in Arkansas can also be loan originators, but they must meet additional requirements related to education and licensing.
How can I file a complaint against a mortgage company in Arkansas?
You can file a complaint against a mortgage company in Arkansas with the Arkansas Securities Department or the Consumer Financial Protection Bureau.
Are there any state-specific forms that I need to use for mortgage transactions in Arkansas?
Arkansas has some state-specific forms, such as the Arkansas Mortgage Brokerage Disclosure and the Arkansas Mold Disclosure, that mortgage companies must use in certain transactions.
What recourse do Arkansas homeowners have if a mortgage company violates their rights?
Arkansas homeowners can seek recourse through state and federal laws related to consumer protection, fair lending, and predatory practices if a mortgage company violates their rights.
What are the legal requirements for starting a mortgage company in Arkansas?
In Arkansas, mortgage companies must be licensed and regulated by the Arkansas Securities Department.
How do I obtain a mortgage company license in Arkansas?
You must submit an online application to the Arkansas Securities Department and pay a fee.
What kind of experience or education do I need to start a mortgage company in Arkansas?
Arkansas does not require specific educational or experiential qualifications, but applicants must pass an exam and provide a financial statement.
How long does it take to get a mortgage company license in Arkansas?
It typically takes several weeks to several months to obtain a mortgage company license in Arkansas.
Is there a minimum net worth requirement to start a mortgage company in Arkansas?
Yes, the company’s minimum net worth must be at least $25,000.
Can I operate a mortgage company in Arkansas from my home?
Yes, you can operate a mortgage company from your home in Arkansas, as long as you meet all other licensing requirements.
Do I need to have office space to operate a mortgage company in Arkansas?
Yes, you need to have an Arkansas office address and a designated office manager to operate a mortgage company in Arkansas.
Are there any annual reporting requirements for mortgage companies in Arkansas?
Yes, Arkansas requires mortgage companies to submit annual reports and financial statements to the Arkansas Securities Department.
How are mortgage companies regulated in Arkansas?
Mortgage companies are regulated by the Arkansas Securities Department, which enforces state and federal laws and regulations.
Can I offer mortgage loans to borrowers outside of Arkansas?
Yes, but only if your company is licensed in the other states where you do business.
Can I advertise my mortgage company in Arkansas?
Yes, but all advertisements must comply with state-specific laws and regulations.
Are there any fees involved in obtaining a mortgage company license in Arkansas?
Yes, there are several fees involved in applying for and maintaining a mortgage company license in Arkansas.
What types of mortgage loans can my company offer in Arkansas?
You can offer most types of mortgage loans in Arkansas, including fixed-rate and adjustable-rate loans.
How can I build relationships with borrowers and real estate agents in Arkansas?
Building relationships involves seeking out opportunities for partnership and mutual support, as well as being present at local events, conferences, and online professional communities.
Are there any particular advantages to starting a mortgage company in Arkansas?
Arkansas has lower taxes and a cost of living that is easily considered “reasonable.”
How do I stay up to date on mortgage regulations in Arkansas?
Track Arkansas and federal laws, and adjust / recommend business operations accordingly.
Can I serve as both a mortgage broker and a loan officer in Arkansas?
Yes, but you must have separate licenses for each role.
Are there any ethical considerations to keep in mind when operating a mortgage company in Arkansas?
Yes, mortgage industry professionals must be vigilant about their fiduciary duties, which involves acting in good faith and for the benefit of their clients.
Can borrowers file complaints against mortgage companies in Arkansas?
Yes, consumers can file complaints with the Arkansas Securities Department if they are dissatisfied with mortgage services.
What is the penalty for operating an unlicensed mortgage company in Arkansas?
Penalties for unlicensed mortgage company operation could vary depending on the company. Enforcement is done strictly by the rules.
How can I differentiate my mortgage company from other competitors in Arkansas?
Marketing your company mission, providing personalized experiences, having competitive rates, or even offering added services are just a few ideas to set yourself apart.
Are there any resources available to help me start and grow my business in Arkansas?
Yes, the Arkansas State Chamber of Commerce, Central Arkansas SCORE, and the Arkansas Small Business and Technology Development Center can offer support and guidance.
How do I know if my company is approved to offer VA home loans in Arkansas?
Obtaining approval for VA home loans is done through the Department of Veterans Affairs on a case-by-case basis.
Does Arkansas require loan origination software to operate a mortgage company?
No, while using trustworthy loan origination software can be helpful to improve productivity and lead Generation, currently using one in Arkansas is not necessarily required.
Do I need a specific type of insurance to operate a mortgage company in Arkansas?
Yes, every Arkansas mortgage company licensed must have a bodily injury and property liability policy with a minimum coverage of $100,000 and a surety bond at $50k-$250k.
After getting an Arkansas mortgage company license, what sort of businesses can my company conduct legally at the moment?
After obtaining an Arkansas mortgage company license, you can legally operate a mortgage company in Arkansas where borrowers are coming in. Open your company up to more branches to increase your borrower reach.
How will I get paid as the owner of a mortgage company in Arkansas?
Mortgage companies earn money through a lender margin and/or the fees that borrowers pay to obtain home loans.
Is seasoning important for mortgage companies in Arkansas?
Yes, mortgage seasoning sets the required waiting period for customers to redeem a loan from twenty years to thirty days before selling the mortgage loan on the secondary market.
How can my mortgage company weather the ups and downs of the housing market in Arkansas?
Build a range by product mix to target various risk classes of customers. Allocate creative financing options and carry thorough client repayments and payment fees insights to maximize returns.
Does Arkansas have any unique laws or regulations that my mortgage company needs to be aware of?
While no particular regulations yet stand to discriminate Arkansas from other states, it’s expedient for new market entrants to familiarize themselves with official state-specific policy pages and analysis resources of the relevant government sections.

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Conclusion

Forming a mortgage company in Arkansas can be fulfilling and profitable. By understanding the industry, forming a solid business foundation, obtaining the necessary licenses, and implementing effective marketing strategies, you can build a successful mortgage company that helps make the dream of homeownership a reality for countless individuals and families in Arkansas.

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