Because some of our MLOs are not renewing their NMLS registrations, some of our branches will not have any MLOs available to originate residential loans. In those branches, can non-MLOs take loan applications to forward for processing, provide their names on loan documents (such as the promissory note), or act as the closing agent for loans or modifications?

In our view, if an employee’s name appears on loan documents or if the employee is actively participating in a loan or modification closing, those actions likely would trigger the SAFE Act mortgage loan originator (MLO) registration requirements. However, if the employee’s actions are limited to taking completed loan applications from customers and forwarding them to the appropriate bank personnel, those actions will not trigger the registration requirement.

Under the SAFE Act, a bank employee who takes a loan application or offers or negotiates the terms of a residential mortgage loan must register with the NMLS. There are exceptions for certain activities that do not involve a discussion of rates or terms (particularly for “purely administrative or clerical tasks”). Appendix A to the SAFE Act regulation provides several examples of activities that do and do not trigger MLO registration.

Receiving loan applications. Receiving completed loan applications is not likely to trigger the MLO registration requirement. Appendix A states that “receiving a loan application through the mail and forwarding it, without review” would not trigger MLO registration. We believe that the same reasoning would apply if an employee receives a completed application in person and forwards it to underwriting without review.

Names on loan documents. Providing an employee’s name on loan documents could trigger the MLO registration requirement. Appendix A states that “presenting a loan offer to a consumer for acceptance, either verbally or in writing, including, but not limited to, providing a disclosure of the loan terms after application under the Truth in Lending Act,” triggers MLO registration. We believe that the same reasoning would apply if an employee provides his or her name on a promissory note or other loan document, which very likely could be construed as presenting a loan offer to the customer.

Conducting a loan closing. We believe it is possible that an examiner or court would view conducting a loan closing as triggering the MLO registration requirement. As discussed above, presenting a loan offer and loan disclosures are considered triggering activities, and both of those activities could take place at a loan closing. To avoid any appearance of evading the MLO registration requirements, we recommend that all employees conducting loan closings be registered MLOs.

However, there is an argument to be made that conducting a loan closing does not involve offering a loan or providing disclosures, because the bank makes the offer and provides disclosures before the closing, not at the closing (particularly under the new TILA-RESPA Integrated Disclosure rules, which require you to provide the Closing Disclosure at least three business days before closing). But there is no guarantee that a regulator or court would accept this argument. We recommend consulting with bank counsel if your bank wishes to take the position that its employees may conduct loan closings without registering as MLOs.

For resources related to our guidance, please see:

SAFE Act regulations, 12 CFR 1007.103(a) (“Each employee of a covered financial institution who acts as a mortgage loan originator must register with the Registry, obtain a unique identifier, and maintain this registration in accordance with the requirements of this part. Any such employee who is not in compliance with the registration and unique identifier requirements set forth in this part is in violation of the S.A.F.E. Act and this part.”)

SAFE Act regulations, 12 CFR 1007.102 (“Mortgage loan originator means (1) An individual who: (i) Takes a residential mortgage loan application; and (ii) Offers or negotiates terms of a residential mortgage loan for compensation or gain. (2) (i) The term mortgage loan originator does not include: (A) An individual who performs purely administrative or clerical tasks on behalf of an individual who is described as a mortgage loan originator in this section.”)

SAFE Act regulations, Appendix A (This Appendix provides several examples of activities that do and do not require MLO registration.)

Regulation Z, 12 CFR 1026.19(f)(1)(ii)(A) (A creditor must provide the Closing Disclosure “no later than three business days before consummation.”)