QUESTION
Our
company (“Company B”) offered a loan officer a position in our company. He had
worked for a competitor (“Company A”). The loan officer has loans in his
pipeline at this former employer and wants to bring them to our company. While
he is licensed in the states where the loans in the pipeline were originated,
it takes several days to transfer the loan officer’s status in the NMLSR to a
new sponsored entity. During this time that the transfer of sponsorship is
pending, how would you suggest we handle the pipeline loans?
ANSWER
There are
many issues to consider in this scenario.
Make
sure the affected borrowers are notified and have consented to the proposed
“transfer” of their loan files - prior to the pipeline being moved. Failure to do
so would be a violation of many regulations. A record of an affirmative
withdrawal from Company A to Company B should be established in order to
protect the company as well as the loan officer.
In
this situation, the loans in the pipeline would technically be treated as
“withdrawn” from Company A and would need to be set up as new applications by
Company B. This would require the GFE, TIL and all other required disclosures
to be issued within three business days. No personal information may be
transferred from Company A to Company B without the borrower’s written consent;
to do so would violate federal and state privacy laws.
Another
area of consideration is the stage of processing of the individual applications
in the pipeline. Regulators would not look favorably on any situations where
the consumer was negatively impacted by delays in closing or any other issues
resulting from the “transfer” (i.e., the borrower having to re-lock at a higher
rate or having to pay duplicate fees). Consumer complaints arising out of this
situation could result in restitution, civil monetary penalties, and formal
state banking department administrative orders, depending on the extent of
consumer harm.
Lastly,
Company B must make sure that the loan officer does not engage in unlicensed
activity before being sponsored by Company B. Any activity that meets the
definition of Mortgage Loan Originator by the incoming loan officer, prior to
sponsorship, would be deemed “unlicensed activity.”
While
these issues exist today, in order to provide uninterrupted service to the
consumer, regulators and industry are working together to come up with
solutions that would allow expeditiously transferring loan officers’ NMLSR
licensing credentials.
At
this year’s recently held conference of the American Association of Residential
Mortgage Regulators, the NMLS Ombudsman, Robert Niemi, Deputy Superintendent
for Consumer Finance, Ohio Division of Financial Institutions, posted an agenda
that had some related topics, including the process for approving sponsorships
of loan officers, uniform testing standards for all loan officers (including
depository registrants), aligning HMDA and the Mortgage Call Report (MCR) Data
Requests, and a variety of sponsorship Best Practices.
These
Best Practices include timing of approving sponsorship of a loan officer who is
in transition between employers on the same day, the effect on the license
between sponsorships, and the concept that the loan officer could be kept in an
active status so that consumers may continue to be served - provided that there
are no pending material issues with the license.
Alan Cicchetti
Director/Agency Relations
Lenders Compliance Group
