Topic: Mortgage Loan Originators (MLOs)
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If we begin to offer FHA loans through our secondary market correspondent bank — with the correspondent bank funding the loans and closing the loans in its name — would we be considered a broker? We would order the appraisal and title work, pull credit reports, and submit the applications to the correspondent bank, which would make all decisions as to the application. If we are a broker, what compliance considerations do we need to be aware of?
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Yes, we believe you would be considered a mortgage broker in this scenario, which Regulation X defines as “a person (other than an employee of a lender) that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan.” Below is a non-exhaustive…
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Does Illinois law allow us to hire a real estate broker as a loan originator if the individual will not act in both capacities on a transaction? The employee will not be receiving any compensation for referring their clients to the bank, and the majority of the loans they will be working on are consumer purpose. We are a Federal Housing Administration (FHA)-approved lender.
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We are not aware of any law or regulation that would prohibit a bank employee from also working as a real estate broker in their free time, provided they do not receive any compensation for referring their clients to the bank, and provided that the employee does not act as both a real estate broker…
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A mortgage loan originator (MLO) at our bank would like to post a flyer on social media advertising a residential mortgage loan program for physicians. The flyer contains both the MLO’s Nationwide Mortgage Licensing System (NMLS) identifier and our bank’s NMLS identifier. Does this information need to be listed directly after the message describing the loan program, or is it sufficient under Illinois law for these items to appear anywhere on the flyer?
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We do not believe you are required to include either NMLS identifier on the flyer, but you may include them if you wish to do so. The federal Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)’s regulations require an MLO to “provide his or her unique identifier to a consumer: (1) Upon request;…
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A mortgage loan originator (MLO) at our bank would like to post a flyer on social media advertising a residential mortgage loan program for physicians. The flyer contains both the MLO’s Nationwide Mortgage Licensing System (NMLS) identifier and our bank’s NMLS identifier. Does this information need to be listed directly after the message describing the loan program, or is it sufficient under Illinois law for these items to appear anywhere on the flyer?
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We do not believe you are required to include either NMLS identifier on the flyer, but you may include them if you wish to do so. The federal Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)’s regulations require an MLO to “provide his or her unique identifier to a consumer: (1) Upon request;…
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We have a bank-wide incentive plan that all employees share in equally, with a pool based on the bank’s earnings, including income from secondary market mortgages. Last year, we had the potential to pay up to approximately 14% of an employee’s earned salary, with a very small percentage (less than 1% of the total) attributable to secondary market mortgages. Our outside compliance consultant has flagged this as a potential problem since mortgage loan originators are prohibited from receiving a bonus exceeding 10% of their total compensation. Is this a problem? Our regulators have never cited it.
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Based on your description of the profit-sharing program, we do not believe you should pay your mortgage loan originators a bonus exceeding 10% of their total compensation (unless they originated ten or fewer covered transactions in the preceding year), even if the profits from your mortgage related business account for only a very small percentage…
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We are considering opening a loan production office in a different state. Do we need to follow the laws of that state for any loans generated from that location, or can we continue to follow Illinois law since all origination activity will take place in Illinois? Does the answer change if we decide to open a branch rather than a loan production office? Are there any resources available to help us understand our responsibilities as we look to move to other states?
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While we cannot address all possible scenarios in fifty different states, we believe that an Illinois court would find that Illinois law applies to your loans if you include a provision specifying that Illinois law will govern the contract (i.e., a choice of law provision) and there is some relationship between Illinois and the parties…
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We are setting up a new loan origination system that will be used for commercial and agricultural real estate and non-real estate loans and for consumer non-real estate loans. The system asks us to choose one of three options for interstate lending — we can choose to use the lender’s state law, the borrower’s state law, or an option to “select at any time.” What is the most appropriate choice, given that our bank only has Illinois branches but commonly makes loans in other many other states?
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We believe that the option to “select at any time” may be the most appropriate choice, given that the governing law for a loan transaction will depend on the specific details of each loan. Illinois courts generally will enforce a choice of law provision provided in an agreement, provided there is “some relationship” between the…
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We are in the process of switching loan origination systems and have run into an issue with how to document a non-owner spouse waiving their homestead exemption rights. Our new mortgage documentation vendor does not support adding homestead waiver language to the mortgage and is suggesting that we edit the mortgage after the fact to include this language. What language does Illinois law require for waiving homestead exemption rights, and how should this be properly documented?
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Illinois law does not require specific language to be used in a homestead exemption waiver, but the Conveyances Act does provide that a grantor may waive the homestead exemption right in a mortgage or deed by inserting “in substance the following words, ‘hereby releasing and waiving all rights under and by virtue of the homestead…
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We are aware that the Department of Labor (DOL) issued a final rule that appears to allow mortgage loan officers (MLOs) at banks to be classified as exempt from overtime pay if more than 50% of their earnings come from commissions. We have an MLO whose earnings are based on commission, but the MLO also receives a monthly forgivable draw that acts as a floor on their compensation. When the MLO’s monthly earnings exceed the draw, they receive the draw plus the difference, and when the monthly earnings do not exceed the draw, the MLO receives only the draw. More than 80% of the MLO’s total wages are commission-based. Can an MLO with this income structure be classified as exempt?
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An MLO with this income structure may qualify as an exempt employee under the Fair Labor Standards Act (FLSA) if more than half of their compensation is from commissions for a representative period. However, your bank must have a “retail concept” and meet other criteria to claim this exemption. The FLSA generally provides that employers…
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Our mortgage loan originators (MLOs) are registered with the Nationwide Mortgage Licensing System (NMLS). Must they also register with the State of Illinois? We are aware that MLOs licensed in Illinois must complete eight hours of continuing education training before the end of the year to renew their licenses. Are our MLOs required to complete this training?
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No, MLOs that are registered with the NMLS and employed by financial institutions are not required to register or obtain state-issued licenses in Illinois. Consequently, the NMLS-registered MLOs at your bank are not required to complete the continuing education requirements for Illinois-licensed MLOs. Although the Illinois Residential Mortgage License Act of 1987 generally requires licensed…