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Thursday, March 2, 2017

Loan Officer Licensing: Multiple Locations

We have a few questions regarding RMLO licensing. Our scenario is a bit complicated, so please excuse the length. We have a branch office in City “Y,” which is within a one hour drive of our headquarters in City “X.” It is not uncommon to live in one and commute to the other for work. We have a Loan Officer (“LO”) based in our headquarters office in City X and licensed there. The LO also assists our loan officer in City Y, taking applications there, and often commuting from City X to City Y to meet borrowers. Because the LO is licensed in our state, she is able to do business out of our headquarters office in City X for anyone in our state.

The issue we’re curious about concerns business cards and representation on our website.

The LO has run into some resistance from some borrowers in City Y who want someone “local,” even though the LO is regularly in City Y once or twice a week.

Our LO wants to print business cards for her City Y clients using the address of our branch office in City Y, and to have us show her on our website as resident under both the City X office and the City Y office. All of her applications, LE’s, etc., would reflect the office she is licensed out of (City X), and all applications would be taken out of the City X office.

So, here are our questions:
  • Would this scenario be permissible?
  • Do we need to get our LO licensed in both locations in order to allow her to distribute business cards for both locations?
  • And if so, does NMLS allow for LO’s to be licensed in multiple locations? 

Please let me know as soon as you can. Thank you!

In answer to your question, it is important to distinguish between “licensing” and the information required to be submitted to the National Mortgage Licensing System (“NMLS”).  Your question indicates that the LO is licensed in your state. That should allow her to originate loans to borrowers in your state from anywhere in the state. Depending on your state’s requirements for having a “brick and mortar” office in the state, her license may even allow her to originate loans from outside the state as long as she is employed by your company and your company has an office in the state.

NMLS reporting requirements are something different. The NMLS does not issue licenses. The NMLS also does not restrict your LO’s state license to a particular location, or limit her ability to originate loans from anywhere in the state. The NMLS is an information tracking and reporting system, not a licensing authority. Its purpose is to enable consumers and regulators to find your LO and keep track of who she is working for. Under 12 CFR 1007.103(d)(1)(C), one of the regulations implementing the federal “SAFE Act” (“Secure and Fair Enforcement for Mortgage Licensing Act of 2008” pursuant to which the NMLS was established), the LO is required to report to the NMLS only her “principal business location address and contact information.” (Emphasis added.)  I could not find any provision in the SAFE Act or its implementing regulations permitting or requiring your LO to report multiple addresses.
Moreover, in the “employment history” section of the NMLS “MU4” report form (which is the NMLS reporting form for individual loan officers), there is only room enough to report one address for the LO’s “current employer.” There is no mention of, or provision for, multiple locations. According to page 83 of the NMLS Guidebook (which can be found on the NMLS website), the address of the LO’s “current employer” is defined as being “where the individual receives their compensation.” Under the situation you have described, that location is probably your headquarters office in City X.  

Further, page 60 of the Guidebook, dealing with NMLS Branch Registration form MU3, says:

“Applicant and licensees are not considered authorized to conduct licensed activities from branch locations in a participating state unless they have an approved license tied to the Branch Form. Only one Branch Form is allowed to be filed per physical location. Regulators and SRR will periodically monitor compliance with this requirement.”

While this provision may at first seem confusing, in practice it applies only to your company and not individual loan officers employed by your company. Since the LO is an employee of your company and not operating independently, this reporting requirement does not apply to her – unless she is the manager of the branch, in which event she would need to be identified as such on form MU3.

There appears to be nothing in the NMLS Guidebook or MU3 form that authorizes or provides for a listing of individual loan officers working out of a branch office; only a requirement for listing of the branch manager. Thus, it does not appear that NMLS requires you to report City Y as an alternative location out of which the LO does business. You should check the reporting requirements of your particular state, however, to confirm that your state does not require reporting more specific information to the state.

Finally, neither state licensing rules, nor the NMLS reporting requirements, alter your LO’s obligations to be truthful and avoid deceptive marketing. In most states, the laws implementing the SAFE Act contain certain “prohibited acts and practices,” under which persons required to be licensed may not:
  • employ, directly or indirectly, a scheme, device or artifice to defraud or mislead borrowers or lenders or defraud a person;
  • engage in an unfair or deceptive practice toward a person;
  • make, in any manner, a false or deceptive statement or representation; 
  • negligently make a false statement, or knowingly or willfully make an omission of material fact in connection with: (A) information or a report filed with a governmental agency or the Nationwide Mortgage Licensing System and Registry…” 

In light of these provisions, both you and your LO should be careful not to distribute any marketing materials – including business cards and information on your website – that contain information which is false, misleading, or deceptive. For example, if your LO never performs any activities for which a license is required at your City Y office, it may be misleading to borrowers for her to list that location on her business cards, or for you to list her on your website as someone working out of that office.

This is a highly technical area, however, so if you have any questions, please do not hesitate to contact us.

Michael Pfeifer
Director/Legal & Regulatory Compliance 
Lenders Compliance Group