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Unable to renew MLO license due to pending hearing with DBO?

Dec 10th, 2014 | By | Category: Real Estate Broker Law

Real Estate Mortgage Lending License – Department of Business Oversight Legal Issues

California mortgage lending lawyers


You have a mortgage lending license and cannot renew your MLO (Mortgage Loan Originator) license online due to “blocked by regulator” error message.  Say your regulator is either the California Bureau of Real Estate (“BRE”) which regulates mortgage brokers in California, or you work for a company with a CFL license (California Finance Lender’s license), or Residential Mortgage Lending License (“CRML”) which entities were formerly governed by the California Department of Corporations (“DOC”), now re-organized under the California Department of Business Oversight (“DBO”).  One of these entities may have blocked the right for you to renew your mortgage license through the NMLS system.  So what do you do?  If you cannot renew, you cannot originate loans in California, this could present a huge problem.

We have had this situation arise where due to a prior accusation and revocation of a real estate license (not a mortgage license), the DBO might block your renewal attempts, and seek to revoke or discipline your right to originate loans.   Perhaps you got a letter from the DBO seeking to revoke your license and setting a hearing.  This could cause the DBO to block your access to NMLS renewals.

TIP:  Keep in mind, mortgage loan originators that work for Federally Chartered Banks (Like Wells Fargo, Chase, Citi, Bank of America etc.) when an loan originator gets flagged through the NMLS, the overseeing entity is NOT the BRE or the DBO, the federal financial institutions hold the cards and decide who gets to be a mortgage lender and who does not.  This is something most people are not aware of.

At any rate, what do you do when faced with the loss of your right to earn a living, and loss of right to renew your real estate license while you have a pending hearing coming up that could cause the total loss of licensing rights?  This is where due process comes in.  If you recall, your real estate licensing rights are akin to a “property right” and before losing the same at the hands of government, including the state real estate regulatory body, you are entitled to “due process of law.”

What is due process of law in the real estate license context?

Due process is generally understood to mean you have a right to:

  • A timely hearing
  • Right to be represented by counsel (sorry, there is no right for the state to appoint a real estate lawyer if you cannot afford one like there is in a criminal law case) but the right to counsel should be honored and respected
  • Right to present evidence
  • Right to cross-examine witnesses against you
  • Right to have your case heard by a neutral arbitrator, mediator or administrative law judge (“ALJ”)
  • Right to appeal erroneous decisions

These things should happen BEFORE your license is automatically denied.  This of course assumes you have not previously waived your due process rights for this reason or that (ex. failed to remove restriction on your CalBRE real estate license following an accusation).

What to do if your legal due process rights are violated in regard to your real estate brokers, sales, property management or loan originator license in California

Here is some case law that you might be able to cite to help you request a fair hearing before your licensing rights are lost.  We always recommend that you speak with your real estate counsel BEFORE engaging with the real estate regulatory boards in California.  We are trained professionals, and in many cases we can do a better job of presenting your case than you can.  With all “due respect” of course.

A right to engage in mortgage lending, which Respondent has enjoyed for three years now, is a “property right” requiring due process of law

As the Court pointed out in Laisne v. State Bd. of Optometry, 19 Cal. 2d 831, 835, 123 P.2d 457, 460 (1942):

“The appellant’s right to practice optometry was a vested property right. Hewitt v. State Board of Medical Examiners, 148 Cal. 590, 84 P. 39, 3 L.R.A.,N.S., 896, 113 Am.St.Rep. 315, 7 Ann.Cas. 750; Suckow v. Alderson, 182 Cal. 247, 187 P. 965. In the proceeding against him by the board all the rights of ‘procedural’ due process were accorded him, viz., notice, right to appear and answer the charges made against him. Witnesses were subpoenaed and evidence was taken. A reporter was present and a record made of the whole proceedings.  Therefore, the DBO should not impose discipline on a licensee except after a hearing conducted pursuant to the Administrative Procedures Act.”

All real estate licensees and mortgage loan originators should be afforded due process before losing their right to earn a living.  Before a real estate license (and thus, a persons livelihood) can be taken, due process of law is required.

The Fourteenth Amendment to the United States Constitution prohibits any state deprivation or termination of a protected property interest without procedural due process safeguards.  As the California Court of Appeals (Second District) put it in Anchor Pacifica Management Co. v. Green, 205 Cal. App. 4th 232 (2012):

“Procedural due process imposes constraints on governmental decisions which deprive individuals of `liberty’ or `property’ interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment.” (Mathews v. Eldridge (1976) 424 U.S. 319, 332 [47 L.Ed.2d 18, 96 S.Ct. 893].) As relevant here, a protected property interest may be terminated or withdrawn by governmental action only for cause. (Logan v. Zimmerman Brush Co. (1982) 455 U.S. 422, 430 [71 L.Ed.2d 265, 102 S.Ct. 1148].)……..The California Constitution contains a similar due process guarantee: Article I, section 7, subdivision (a), states a person may not be deprived of life, liberty or property without due process of law.[1] “[T]he core purpose of procedural due process [is] ensuring that a citizen’s reasonable reliance is not frustrated by arbitrary government action.” (Castle Rock v. Gonzales (2005) 545 U.S. 748, 792, fn. 20 [162 L.Ed.2d 658, 125 S.Ct. 2796] (dis. opn. of Stevens, J.)

See Rodriguez v. Dep’t of Real Estate, 51 Cal. App. 4th 1289, 1296-97, 59 Cal. Rptr. 2d 652, 656-57 (1996).

The central purpose of procedural due process is to provide affected parties with the right “to be heard at a meaningful time and in a meaningful manner.” (People v. Sutton (1993) 19 Cal.App.4th 795, 803, 23 Cal.Rptr.2d 632; see Saleeby v. State Bar (1985) 39 Cal.3d 547, 565, 216 Cal.Rptr. 367, 702 P.2d 525 [opportunity to be heard is fundamental requirement of due process].) Due process is a flexible concept. (People v. Hansel (1992) 1 Cal.4th 1211, 1219, 4 Cal.Rptr.2d 888, 824 P.2d 694.) This flexibility is needed in order to gear the process to the particular need. (Conservatorship of Moore (1986) 185 Cal.App.3d 718, 728, 229 Cal.Rptr. 875.) “What must be afforded is a “reasonable opportunity” to be heard. See Saleeby v. State Bar, supra, at pp. 565–566, 216 Cal.Rptr. 367, 702 P.2d 525.)

“Under the California Constitution, the extent to which procedural due process is available depends on a weighing of private and governmental interests involved. The required procedural safeguards are those that will, without unduly burdening the government, maximize the accuracy of the resulting decision and respect the dignity of the individual subjected to the decision-making process.”

“Specifically, determination of the dictates of due process generally requires consideration of four factors: the private interest that will be affected by the individual action; the risk of an erroneous deprivation of this interest through the procedures used and the probable value, if any, of additional or substitute safeguards; the dignitary interest of informing individuals of the nature, grounds and consequences of the action and of enabling them to present their side of the story before a responsible governmental official; and the government interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail.”

If NMLS renewal rights cannot be provided so that the MLO license can be renewed prior to a hearing, an injunction should issue to prevent unlawful deprivation of licensing rights

The Current lockout of the NMLS MLO registration system is causing immediate irreparable harm, and must be stopped until a neutral court is able to hear all the relevant facts of this case, and a determination is made that the loan originator is not fit to have and maintain his NMLS mortgage lending license to which he has a vested right.

This is a drastic step that might have to be taken in the appropriate case, if things cannot be worked out amicably.

Our California real estate license law services

We have been helping California licensees for years with a wide variety of legal issues.  From advance fee agreements, trust fund accounting investigations, DRE hearings, recovery account cases, state and federal litigation, ethics matters, breach of fiduciary duties, commission disputes, and broker self audits, administrative hearings and general corporate counsel, we believe we are the best real estate law firm in California.  Attorney Steve Vondran has previously earned his real estate broker’s licenses (as well as law licenses) in both California and Arizona.  Before you hire ANY real estate law firm, you owe it to yourself to contact us and learn about what we do, and explore our affordable and flexible legal fees (including flat rate fees in most types of cases).

California Mortgage Lending Law Resources

1.  California Bureau of Real Estate (BRE Mortgage Lending Forms)

2.  NMLS online

3.  California Department of Business Oversight

Contact a NMLS real estate licensing law firm

We are glad you found us.  Contact us at (877) 276-5084 or fill out the contact form below to have one of our real estate lawyers contact you, usually within the hour.



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