Topic: Mortgage Loan Originators (MLOs)
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We have a producing manager on our mortgage team. Can we pay them a commission based on the loan volume that their team produces, as well as a commission based on the loan volume they individually produce?
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Yes, we believe that your bank may compensate loan originators based on their individual loan volume and their team members’ loan volume. Regulation Z prohibits loan originator compensation that is based on the terms of the transactions that they originate. But this prohibition does not apply to compensation based on an individual loan originator’s loan…
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Revisions of the Illinois Notary Public Act recently went into effect, including a provision that prohibits non-attorney notaries from explaining, certifying, or verifying the contents of any document for which they notarize a signature. Would this prohibit a mortgage loan originator from describing loan documents to a borrower at a loan closing and also notarizing the borrower’s signature on the loan documents?
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Based on information we received from the Illinois Secretary of State’s Office, we believe that a mortgage loan originator may explain loan documents to a borrower and notarize the borrower’s signature on the same documents. The Illinois Notary Public Act now provides that “no notary public shall be authorized to explain, certify, or verify the…
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Our bank operates a mortgage company that purchases loans after they have closed through the correspondent lending channel. The loans close in the name of a third-party originator (TPO) after an underwriter at our mortgage company reviews the loan file and issues underwriting conditions to the TPO. If we deny a loan application, should our mortgage company issue an adverse action notice and list our regulator or should the TPO issue the notice and list its regulator? If our mortgage company issues the adverse action notice, should we reference the TPO on the notice?
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We believe that either your mortgage company or the TPO can issue the adverse action notice, and the notice should disclose each creditor involved in the adverse action decision. Regulation B provides that when a loan application is made on behalf of an applicant to more than one creditor and no credit is offered (or…
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Do you have sample written procedures for making determinations of a prospective loan originator’s financial responsibility, character, and general fitness, as required under Regulation Z for loan originators who are not required to be licensed?
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No, we do not have sample written procedures for determinations regarding a prospective loan originator’s financial responsibility, character, and general fitness. However, we have requested sample written procedures from the IBA’s Compliance Division Advisory Committee and will send you any submissions we receive. Regulation Z requires banks to determine whether a loan originator employee (who…
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Our bank partners with a third-party originator that refinances home mortgage loans. We underwrite these refinancings and purchase the loans from the third-party after the closing. Do we need to complete a “Tangible Net Benefit Form” when purchasing these loans, even though we are not considered the lender when the loan closes? Because we prepare closing documents on behalf of the third-party originator, should we be completing the “Tangible Net Benefit Form” for them? Also, would we be violating any law or regulation if we refinance a mortgage without completing a “Tangible Net Benefit Form” to remove a borrower due to a divorce? If this occurs, would we be protected if we keep the divorce decree on file to show that the refinance was justified?
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Because the Illinois Fairness in Lending Act applies to any entity that “assists” with a refinancing, we recommend working with your third-party originator to ensure that their refinancings result in a tangible net benefit to the borrower if you will be assisting in the refinancings and receiving related fees. The Illinois Fairness in Lending Act…
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We have a mortgage company that is a third party-originator and does mortgage document preparation and underwriting for all banks under our holding company. Would the proposed administrative rules for residential mortgage lenders under the Illinois Community Reinvestment Act (Illinois CRA) apply to our mortgage company? Also, would our mortgage company be considered an “affiliate” of our bank since they are under the same holding company?
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The Illinois CRA rules for residential mortgage lenders will apply to your mortgage company if it is licensed under the Illinois Residential Mortgage License Act of 1987 and lent or originated 50 or more residential mortgage loans in the previous calendar year. Additionally, if the Illinois CRA rules for banks are finalized as proposed, your…
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Are national banks required to include a reference to the Nationwide Multistate Licensing System (NMLS) website and their bank’s unique identifier on advertisements, as outlined in the Residential Mortgage License Act of 1987?
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No, national banks are not required to include a reference to the NMLS’s website and their unique identifiers on advertisements. Banks and mortgage loan originators employed by banks are exempt from the Residential Mortgage License Act, and the federal requirements for banks and registered mortgage loan originators do not require their unique identifiers to appear…
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Our loan origination system recently updated and the addendum to the application inquiring of civil union was removed. Is this form still necessary? If so, is it only applicable to certain types of loans?
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An Illinois Civil Union and Same-Sex Marriage Addendum is not required, but we believe using such a form is helpful in all residential real estate transactions to identify individuals who may have relevant property rights and interests because they are a member of a civil union. We believe it is helpful to know whether a…
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We would like our mortgage loan originators to send out an email reminders to mortgage loan customers with the details of their upcoming closing, such as the time and place. The subject line of the email would be “Your Closing.” The email would contain one line near the end asking the borrower to refer anyone they know looking for a mortgage to our bank. Does this email need to comply with the CAN-SPAM rules?
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No, we do not believe the email needs to comply with the CAN-SPAM rules, as the email’s “primary purpose” does not seem to be “commercial.” The CAN-SPAM Act applies only to commercial emails, defined as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or…
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Does Illinois law prohibit a loan originator from notarizing a mortgage securing a loan they originated? Our external auditor recommended that we have someone who is not involved in the loan transaction notarize the mortgage. Is this a legal requirement or simply a best practice?
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Disclaimer: The IBA has received information from the Office of the General Counsel for the Illinois Secretary of State that changes our guidance on this question. Please review this Q&A for our most recent guidance on this subject. We believe that your external auditor’s suggestion is based on recent revisions to the Illinois Notary Public…