QUESTION
We parted ways with one of our Loan Officers today. We have a new
loan officer who will be taking over his pipeline but are awaiting his license.
In the interim, I will be handling his pipeline since I am still licensed. I
seem to remember at some point in the past that when a new Loan Officer was
taking over an existing application, the borrower had to be notified in writing
about the change with the new LO’s phone number and RMLO number. Can you
confirm for us what our requirements are here? I appreciate your help!
ANSWER
Yes, you probably need to notify the borrower of the change in
loan officers, even if the change is only temporary. The need to provide such
notice to the consumer under existing regulations is fairly straightforward.
Under 12 CFR 1007.105 (Regulation G), the implementing regulation for the SAFE
Act, a registered mortgage loan originator “shall” provide his or her “unique
identifier” to a consumer…”before acting as a mortgage loan originator. …” The regulation states:
§1007.105 Use of
unique identifier.
(a) The covered financial
institution shall make the unique identifier(s) of its registered mortgage loan
originator(s) available to consumers in
a manner and method practicable to the institution.
(b)
A registered mortgage loan originator shall provide his or her unique
identifier to a consumer:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's
initial written communication with a consumer, if any, whether on paper or
electronically. (Emphasis added.)
The Appendix to §1007.105
contains detailed examples of mortgage loan origination activities that
constitute “acting as a mortgage loan originator.” As a substitute loan
officer, you would most likely perform at least one of these activities.
Whether this notice to the consumer needs to be in writing is not
clear. In the commentary accompanying the original version of this rule jointly
issued by the OCC, Federal Reserve, FDIC, OTS, FCA, and NCUA, it is specified
that the notice can be given “in a manner and method practicable to the
institution.” That language is carried forward in subpart (a) of §1007.105, which is the portion pertaining to
a covered institution’s duty to make the unique identifiers of its
registered mortgage loan originators available to consumers, but is not
specifically mentioned in subpart (b), which deals with the disclosure
obligations of individual MLOs. Prudence would indicate, however, that
to make sure there is a record of compliance with the Rule, providing the
notice in writing is essential. Individual states may prescribe additional
requirements or even specify the form of any such notice.
In addition, under the 2013 amendments of TILA, 12 CFR 1026.36(g) (Regulation Z) the name and unique identifier of the mortgage loan officer must be
included in the “loan documents,” including the “note” and “security instrument”
when they are signed. Since those documents are not normally signed at the
application stage, you would most likely be the person who would need to be identified
as the loan officer on the “loan documents” issued at or near closing.
The commentary makes it clear that the lender does not need to go
back and re-issue loan documents if the identity of the MLO changes during the
application process. But any documents issued after the change has been
made should reflect the change. This would need to be in writing. Again,
however, there is no prescribed form, except that the GSEs are now requiring
the name and NMLS identifier appear on their documents such that, if you use
their documents, the disclosure will need to appear in the place provided for
on their documents. This is a highly technical area, so if you have any
questions, please do not hesitate to contact us.
Michael R. Pfeifer
Director/Legal & Regulatory Compliance
Lenders Compliance
Group
