QUESTION
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!
ANSWER
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
