How to Form a Mortgage Company in Illinois | Essential Steps

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Illinois Mortgage Company

The mortgage industry plays a crucial role in the economy as it facilitates the dream of homeownership of Illinois people. Forming a mortgage company can be a rewarding and profitable LLC in Illinois. 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 Illinois 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 Illinois mortgage company, all the steps in this article must guide you.

How to Form a Mortgage Company in Illinois

What is a Mortgage Company?

In Illinois, 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 Illinois Division of Banking regulates mortgage companies in Illinois 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 Illinois 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 Illinois 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 Illinois 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 Illinois

Forming a mortgage company in Illinois 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 Illinois 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 Illinois Division of Banking. The Illinois Division of Banking is responsible for licensing and regulating mortgage companies and their activities within the state.

Before starting a mortgage company in Illinois, it is essential to understand the different types of mortgage licenses and activities regulated by the Illinois Division of Banking. 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 Illinois.

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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 Illinois, 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 Illinois include:

Sole Proprietorship

This is the simplest form of business entity, where an individual operates the Illinois 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 Illinois 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 Illinois, consult a Business Attorney in Illinois 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 Illinois 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 Illinois 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 Illinois 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 Illinois in your business name can help establish a sense of familiarity and trust with potential clients from the same state. For example, “Illinois Mortgage Solutions” or “Illinois 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 Illinois Secretary of State Corporation/LLC Search to ensure that no one else has trademarked the name. There is a complete guide on Illinois 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 Illinois 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 Illinois, every business entity, such as an LLC or a corporation, must have a Registered Agent with a physical address within Illinois. 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 Illinois, the cost of having a Registered Agent ranges from $50 – $200. 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 Illinois Registered Agent Services.

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File for Articles of Organization or Articles of Incorporation

If you form an LLC for your Illinois mortgage company, you must file the Illinois Articles of Organization, which costs $150. However, you must file the Articles of Incorporation if you form a Corporation for your Illinois 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 Illinois if you will open a bank account or hire an employee for your Illinois mortgage company. 

The application of an EIN in Illinois 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 Illinois Division of Banking to operate a mortgage company in Illinois. 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 Illinois:

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 Illinois Division of Banking. 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 Illinois Division of Banking.
  6. Pay the applicable licensing and application fee of $2,000.

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 Illinois 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 Illinois 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 Illinois 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 Illinois 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 are the legal requirements for forming a mortgage company in Illinois?
One needs to obtain a license from the Illinois Department of Financial and Professional Regulation (IDFPR).
Is there a fee for obtaining a mortgage company license in Illinois?
Yes, there is a fee of $3,000 for the initial license application in Illinois.
Who is eligible for a mortgage company license in Illinois?
Any individual or entity that meets the state’s qualifications for financial responsibility and good character can obtain a mortgage company license in Illinois.
What type of business entities can apply for a mortgage company license in Illinois?
Illinois allows sole proprietorships, partnerships, limited liability companies (LLCs), S-corporations, and corporations to apply for a mortgage company license.
How long does it take to obtain a mortgage company license in Illinois?
It takes around four to six months to obtain a mortgage company license in Illinois.
What documents do I need to submit with my mortgage company license application in Illinois?
Applicants must submit the required application fee, a business plan, incorporation documents (if applicable), and the Individual Company Licensing / Registration Record.
Are there any other licensing requirements for mortgage companies in Illinois?
In addition to licensing, mortgage companies in Illinois are required to have a licensed mortgage loan originator (MLO) on staff.
How often must mortgage companies renew their license in Illinois?
Mortgage companies in Illinois are required to renew their licenses annually.
Are there any continuing education requirements for mortgage companies in Illinois?
Yes, licensed mortgage loan originators (MLOs) in Illinois must complete continuing education courses to maintain their license.
Can mortgage companies hire independent contractors as loan originators in Illinois?
No, Illinois law prohibits mortgage companies from hiring independent contractors as loan originators.
Are mortgage companies required to be bonded in Illinois?
Yes, mortgage companies in Illinois are required to be bonded.
What is the minimum bond amount for mortgage companies in Illinois?
The minimum bond amount for mortgage companies to operate in Illinois is $100,000.
Can a mortgage loan originator work for more than one mortgage company in Illinois?
Yes, loan originators can work for more than one mortgage company in Illinois as long as they obtain approval from each company.
Are there any marketing restrictions for mortgage companies in Illinois?
Yes, mortgage companies in Illinois are required to comply with the state and federal advertising laws and regulations.
How do mortgage companies verify a borrower’s employment in Illinois?
Mortgage companies in Illinois can verify a borrower’s employment by contacting the borrower’s employer.
Can mortgage companies make direct payments to borrowers’ debtors in Illinois?
No, mortgage companies in Illinois are not authorized to make direct payments to borrowers’ debtors.
Are mortgage brokers and mortgage lenders the same in Illinois?
No, mortgage brokers assist borrowers in finding the right lender, whereas mortgage lenders offer and fund the actual loan.
Can a mortgage company operate without a physical office in Illinois?
Yes, a mortgage company can operate without a physical office in Illinois, but it must have a resident office manager.
What is the SAFE Act, and how does it relate to mortgage companies in Illinois?
The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) requires mortgage loan originators to be licensed and registered with the Nationwide Mortgage Licensing System and Registry (NMLS).
Is there a penalty for operating a mortgage company without a license in Illinois?
Yes, operating a mortgage company without a license is illegal in Illinois and could lead to industry sanctions or fines.
Can mortgage companies charge prepayment penalties in Illinois?
Mortgage companies in Illinois can charge prepayment penalties based on the terms of the loan agreement.
Are there any state-specific disclosures that mortgage companies must provide in Illinois?
Yes, Illinois requires mortgage companies to provide a finance charge disclosure.
Who regulates mortgage companies in Illinois?
The Illinois Department of Financial and Professional Regulation (IDFPR) regulates mortgage companies in Illinois.
Is there a limit on how much a mortgage company can lend in Illinois?
There is no limit on how much a mortgage company can lend in Illinois.
Are mortgage companies required to keep customer information secure in Illinois?
Yes, mortgage companies in Illinois are required to have procedures in place to protect customer information.
What should I do if I want to file a complaint against a mortgage company in Illinois?
To file a complaint against a mortgage company in Illinois, you can contact the IDFPR.
Can mortgage companies charge higher fees for borrowers with low credit scores in Illinois?
Mortgage companies in Illinois can charge higher fees based on the risk assessment of each borrower.
Are there any special requirements for Illinois mortgage companies when it comes to escrow accounts?
Mortgage companies in Illinois are required to follow the state laws and regulations regarding escrow accounts.
What are the requirements for starting a mortgage company in Illinois?
Some requirements include obtaining a license from the Illinois Department of Financial and Professional Regulation and completing a criminal background check.
Can you operate a mortgage company in Illinois without a license?
No, a mortgage company must have a license from the Illinois Department of Financial and Professional Regulation.
How do I get a mortgage company license in Illinois?
Submit an application to the Illinois Department of Financial and Professional Regulation and meet the necessary requirements, such as completing pre-licensing education and a passing the National Mortgage Licensing System (NMLS) exam.
What sort of education do I need to obtain a mortgage company license in Illinois?
You must complete 20 hours of pre-licensing education on specific topics related to the mortgage industry.
What do I need to do to renew my mortgage company license in Illinois?
You must complete continuing education and submit a license renewal application to the Illinois Department of Financial and Professional Regulation before the expiration date of your license.
How long does it take to get a mortgage company license in Illinois?
It can take several weeks or months to get all the necessary requirements completed and receive the license.
How much does it cost to get a mortgage company license in Illinois?
The application fee varies, but it is typically around $3,000 for a mortgage lender license.
Who needs to be licensed in a mortgage company in Illinois?
Any person or business entity that engages in the business of mortgage lending in Illinois must be licensed.
Can individuals apply for a mortgage company license in Illinois?
Yes, individuals can hold a mortgage company license in Illinois.
Do you need to have a physical office location to run a mortgage company in Illinois?
Yes, a mortgage company must have a physical office location in Illinois.
Can a mortgage company operate outside of Illinois with an Illinois license?
An Illinois mortgage license only allows the license holder to operate within Illinois.
How does the state of Illinois regulate mortgage lenders and brokers?
The state of Illinois regulates mortgage lenders and brokers through the Illinois Department of Financial and Professional Regulation.
Are there any financial or net worth requirements for mortgage company licensees in Illinois?
Yes, mortgage company licensees in Illinois must meet specific financial and net worth requirements.
Can a person have a criminal record and still operate a mortgage company in Illinois?
Individuals with felony convictions may be precluded from licensure as a mortgage company in Illinois.
How is the mortgage loan interest rate set in Illinois?
Mortgage loan interest rates in Illinois are dependent on market factors.
What are the most common fees charged by mortgage lenders in Illinois?
The most common fees charged by mortgage lenders in Illinois include underwriter fees, application fees, and appraisal fees.
How long does it take to get a mortgage loan in Illinois?
The time it takes to get a mortgage loan approved in Illinois varies depending on the lender, type of loan, and applicant’s creditworthiness.
What factors determine the maximum amount a borrower can obtain in an Illinois mortgage loan?
Mortgage loan amounts in Illinois, like anywhere else, are largely determined by the borrower’s credit score, job stability, and income level.
Can mortgage lenders in Illinois sell a borrower’s loan to another lender?
Yes, many mortgages in Illinois are sold or transferred to other lenders in the secondary market.
What is the Illinois Consumer Loan Act?
The Illinois Consumer Loan Act provides legal protections to individuals who take out consumer loans.
How has the Illinois mortgage industry fluctuated throughout the years?
The Illinois mortgage industry has fluctuated along with the overall health of the U.S. housing sector. At times, Illinois has experienced booming housing markets, while other times an economic recession has dampened housing prices.
What is the foreclosure process in Illinois?
In Illinois, the foreclosure process begins after a borrower has missed their first loan payment. The lender can file a legal complaint with the circuit court, which eventually leads to the property being auctioned off to pay off any unpaid debts.
What assistance programs are available for Illinois residents who are behind on their mortgage payments?
Illinois residents who are behind on their mortgage payments can access resources such as counseling services and loan modification programs.
What’s the difference between the Illinois Residential Mortgage license and the Illinois Residential Mortgage Broker license?
A mortgage broker brings together mortgage lenders and borrowers, while a mortgage lender directly funds the mortages loan.
What types of loans do Illinois mortgage companies offer?
Illinois mortgage companies offer various types of mortgage loans such as conventional loans, FHA loans, jumbo loans, and VA loans.
How much should I expect to pay in closing costs for my Illinois mortgage loan?
Closing costs in Illinois vary, but borrowers should expect to pay several thousand in additional fees when purchasing a home, including attorney fees and title insurance.
What factors will Illinois mortgage lenders consider when I apply for a loan?
Illinois mortgage lenders consider an applicant’s credit score, credit history, income, employment history, and other factors when deciding on a mortgage loan.
What’s the benefit of using a local Illinois mortgage lender?
Local Illinois mortgage lenders may be able to offer insight into local housing trends and can provide personal customer service that larger banks may not offer.
How do Illinois mortgage lenders work with borrowers during the COVID-19 pandemic?
Illinois mortgage lenders are providing COVID-19 relief options, such as forbearance, loan modifications, and mortgage payment deferrals, for struggling borrowers.

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Conclusion

Forming a mortgage company in Illinois 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 Illinois.

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