Topic: Mortgage Loan Originators (MLOs)
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A recent U.S. Supreme Court decision confirms the Department of Labor’s determination that mortgage loan originators (MLOs) are nonexempt and entitled to overtime pay. Does that rule also apply to commercial loan officers? The DOL’s Administrative Interpretation No. 2010-1 seems to indicate in an example on page seven that commercial lenders are exempt employees.
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It depends. A commercial loan officer is not automatically exempt, but he or she may be exempt based on the specific facts of the arrangement. The DOL Interpretation does not distinguish between consumer loan officers and commercial loan officers. Instead, it bases its conclusion on the “typical job duties” of a mortgage loan officer (e.g.,…
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What are the risks for hiring NMLS-registered mortgage loan originators who have bankruptcies or numerous collection items on their credit reports? Can we have two different standards, one for unregistered originators and another for registered originators?
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We believe that hiring a mortgage loan originator (MLO) with a bankruptcy or numerous collection items could pose some risks under the Regulation Z, which requires you to run credit checks and assess each loan originator’s financial responsibility, character, and general fitness, among other requirements. However, the degree of risk would depend on the specific…
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Our lending software requires our loan originators to enter their NNLS “license” number when preparing loan documents. All of our MLOs are registered with the NMLS, but they are not licensed (because they are employed by a financial institution). Is our software asking for a “license” number because there any other states that might require MLOs to be licensed, in the event that we originate loans outside of Illinois?
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From what you have told us, it sounds like your software vendor needs to clarify how to use its system to ensure that your mortgage loan originators (MLOs) are correctly displaying their unique identifiers (as required under 12 CFR 1007.105 and 12 CFR 1026.36(g) [effective January 10, 2014]). We recommend contacting your software vendor to…
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Are we required to print a loan originator’s NMLS number on our bank’s billboard advertisements?
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No, we do not believe that a mortgage loan originator’s unique identifier would have to be stated or printed in your bank’s billboard advertisements. The SAFE Act regulations require that a mortgage loan originator (MLO) “provide his or her unique identifier to a consumer: (1) Upon request; (2) Before acting as a mortgage loan originator;…
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We’d like to hire an independent contractor to bring in customers from a previous bank that has failed. Can we treat this type of hire as an independent contractor? What other issues should we look for?
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Below are some potential pitfalls to consider: Checking that the individual is available to work for the bank and is not bound by a non-competition agreement from his previous employer. Clarifying, via contract, that the individual will be considered an independent contractor (for tax purposes, benefits, workers compensation purposes, etc.). Also clarifying that the contractor…
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If a bank employee who is a registered loan originator volunteers to help a charity originate loans, would the employee need to be licensed as an MLO in Illinois?
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We do not believe that a bank employee who is a registered mortgage loan originator (MLO) would be required to obtain an MLO license under either federal or state law, if the employee is volunteering the origination services without expectation of compensation or gain. The federal regulations governing MLO registration and licensure would not require…
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If our commercial loan officers close mortgage loans, but do not take any other action on the loans, do they have to register as mortgage loan originators (MLOs)?
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Allowing commercial loan officers to conduct mortgage loan closings without registering as MLOs would be highly suspect. Any contact between the employees and borrowers before the loan closing, no matter how minor, would probably cause a regulator to consider the employees to be MLOs. We agree that the MLO definition states that an individual will…
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If a loan officer chooses not to register as a mortgage loan originator (MLO), can that officer continue servicing existing loans in his or her portfolio?
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We believe that an employee who does not engage in any mortgage loan originator (MLO) activities would be allowed to service existing residential mortgage loans. If an employee is neither taking consumer residential mortgage loan applications (for personal, family, or household use) nor offering or negotiating the terms of such loans for compensation or gain,…
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As to advertising, e.g. a banner advertisement in newspaper, to what extent does the MLO unique identifier number have to be displayed?
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We do not believe that the mortgage loan originator’s unique identifier would have to be stated or printed in your advertisements. The SAFE Act regulations require that a mortgage loan originator (MLO) “provide his or her unique identifier to a consumer: (1) Upon request; (2) Before acting as a mortgage loan originator; and (3) Through…
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We are starting to register employees as loan originators under the SAFE Act, and we discovered that one employee has a criminal history. Are we required to immediately terminate the employee?
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While the SAFE Act does not require that such an employee be terminated upon discovery of such on his or her criminal background check, the employee cannot act as a loan originator without obtaining registration, a license, and a unique identifier. 12 USC 5103(a). Section 5104 of the SAFE Act sets out minimum standards for…