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Wednesday, December 31, 2014

Loan Originator Titles

QUESTION
Could you provide clarification on what titles are allowed for Licensed Residential Mortgage Loan Originators? Can such titles as “Advisor,” “Specialist,” “Consultant,” “Loan Officer,” be used in representing themselves on marketing collateral and websites? It seems there are many titles being used in the industry even though the license is under the title Residential Mortgage Loan Originator.

ANSWER
The SAFE Act (“Act”) defines "loan originator" as "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." [Section 1503(3)(A)(i)]

Acronyms used for this definition are “MLO” and “RMLO.”

The Act also provides a section, entitled "Other Definitions Relating to Loan Originator," which further elaborates that the RMLO is an individual who “assists a consumer in obtaining or applying to obtain a residential mortgage loan” by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan. [Section 1503(3)(B)]

The definition of “loan originator” encompasses any individual who, for compensation or gain, offers or negotiates pursuant to a request from and based on the information provided by the borrower. Such an individual would be included in the definition of “loan originator,” regardless of whether the individual takes the request from the borrower for an offer (or positive response to an offer) of residential mortgage loan terms directly or indirectly from the borrower.

Ultimately, in order to determine the accuracy and acceptability of a title, the title itself really is not as important as the actual activity conducted by an individual, with respect to the definition in the Act of a “loan originator.”

Other titles suggested, such as “Advisor,” “Specialist,” and even “Consultant” are freighted with inferences that may impact the use of these titles in the context of the Act’s specificity. It is obviously the case that the Act has clearly defined the title “loan originator” and, to that extent, using this term or a modest variation of this term, such as “loan officer,” would be most conducive to clarity.

Jonathan Foxx
President & Managing Director
Lenders Compliance Group