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#1688470 - 04/12/12 09:39 PM
SAFE Act - Loan Processors
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Joined: Oct 2009
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If you had to ask a loan processor a series of questions to determine if they met the definition of an MLO, what would they be? I know the basics:
An MLO means an individual who:
1) takes a residential mortgage loan application; AND
2) offers or negotiates terms of a residential mortgage loan for compensation or gain.
However, I'm not sure that sometimes the lines are being blurred and want to develop a questionnaire that a loan processor would understand (e.g., is a loan procesor considered 'negotiating' if they are communicating the terms to the customer as directed by the loan officer?).
I just don't want to be caught in a situation where one person thinks that they are an MLO (auditor or examiner) and another person thinks not (loan officer).
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I hear and I forget. I see and I remember. I do and I understand.--Confucius
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#1688472 - 04/12/12 09:52 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Sep 2011
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A CU, Where Regs Don't Apply
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May be better suited if this were in the SAFE Act forum if someone would move it. That being said, you must hit both prongs to qualify. Unless your processors are taking the application and then negotiating terms, they aren't MLO's by definition of this act and don't need to be registered. If they are doing both things on one file, they're MLO's and what are your title loan officers doing all day??  We have one processor that has done some originating herself, as well as the head of our "operations" department, when things are busy (we're a relatively small outfit though, and this is very infrequent!). They are both registered. I was a processor myself when the act went into effect and did not register as I never took apps.
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#1688474 - 04/12/12 10:01 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Oct 2009
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I won't say that I often wonder what our title loan officers are doing all day, that would get me in trouble. I don't want to have to register all the processors, but I also wanted to ensure that if an auditor/examiner asked them a series of questions that they understood the answer they gave.
For instance, if the loan processor does communicate the loan terms on the direction of the loan officer, and they take applications, they might respond that they both take applications and "negotiate" terms. It's one of those grey areas that I haven't wrapped my mind around quite completely.
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I hear and I forget. I see and I remember. I do and I understand.--Confucius
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#1688537 - 04/13/12 12:50 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Apr 2005
Posts: 3,663
TN
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In the preamble to the Act, the regulators stated that issuing GFEs and TILs qualify as offering or negotiating credit. On your questionnaire, you will want to ask:
1) Have you ever accepted an application for a residential loan (HELOC included) from a customer?
2) Do you issue GFEs or TILs to customers?
3) If yes to #2, how do you deliver them to customers? In person? If mail, do you sign the cover letter?
4) Do you ever call to communicate the approved loan terms on behalf of the loan officer?
If the answer to 1 is yes and you get a yes to any of the other questions, they are an MLO for purposes of the SAFE Act and need to be registered to be in compliance. Or you need to issue an edict restricting their activities to only accepting apps or only communicating (issuing GFEs, etc) on behalf of the LO.
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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#1688858 - 04/13/12 09:34 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Oct 2009
Posts: 3,927
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Thanks, Dani. Let me give you a hypothetical. Customer comes in and discusses applying for a loan with a loan officer. After the discussion the loan officer gives them an application to fill out. If, when the customer comes back in to drop off the application, if the loan officer is not around and they leave it with the loan processor, is the loan processor now 'accepting' the application?
And would it make a difference if it was not the loan processor who ultimately might be issuing the GFE/TIL for that specific loan? In short, if they accpeted applications for one loan officer, but only issued GFEs/TILs on the loans for another officer and never on one they accepted, are they still subject to the regulation?
I know it sounds like I'm trying to draw a fine line, but I want to be clear with my LOs and LPs as far as what the regulations allows and doesn't allow.
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I hear and I forget. I see and I remember. I do and I understand.--Confucius
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#1688870 - 04/13/12 09:58 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Sep 2011
Posts: 1,648
A CU, Where Regs Don't Apply
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I believe they would have to meet both qualifiers on the same loan for it to count. Also, I believe the "take a loan application" qualifier means to actually take the data and input it to the application directly from the customer, not to physically be handed a completed application. The list of questions could be useful and depending on what you find, you may need to discuss having a more clear division of responsibility, or a more even distribution of income!  From http://mortgage.nationwidelicensingsystem.org/fedreg/NMLS%20Document%20Library/Final%20Rule.pdf
As defined by the S.A.F.E. Act, this term means an individual who takes a residential
mortgage loan application and offers or negotiates terms of a residential
mortgage loan for compensation or gain. The term does not include an individual
who is not a mortgage loan originator and: (1) Performs purely administrative
or clerical tasks on behalf of an individual who is a mortgage loan
originator; (2) performs only real estate brokerage activities (as defined in
section 1503(3)(D) of the S.A.F.E. Act (12 U.S.C. 5102(3)(D)) 1 and is licensed
or registered as a real estate broker in accordance with applicable State law,
unless the individual is compensated by a lender, a mortgage broker, or other
loan originator or by any agent of such lender, mortgage broker, or other
mortgage loan originator; or (3) is solely involved in extensions of credit related
to timeshare plans, as that term is defined in 11 U.S.C. 101(53D).1
For purposes of the definition of mortgage loan originator, section
1503(3)(C) of the S.A.F.E. Act (12 U.S.C. 5102(3)(C)) defines ‘‘administrative or
clerical tasks’’ to mean: (1) The receipt, collection, and distribution of
information common for the processing or underwriting of a loan in the
mortgage industry; and (2)communication with a consumer to
obtain information necessary for the processing or underwriting of a
residential mortgage loan. The proposal included this definition as well, with
one nonsubstantive difference—the proposal used the phrase ‘‘residential
mortgage industry’’ instead of ‘‘loan in the mortgage industry’’ in the first prong
of the definition.
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#1688896 - 04/14/12 11:44 AM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Jul 2001
Posts: 83,583
Galveston, TX
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"I believe they would have to meet both qualifiers on the same loan for it to count."
It may also somewhat depend on the State that you are talking about. In Texas State law, there is an "or" between the two qualifiers and not an "and".
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1689050 - 04/16/12 03:38 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Apr 2005
Posts: 3,663
TN
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Matt, I'm not sure accepting an app only means inputting the information for the customer. SAFE Act doesn't define "accepting an application". I would take the more conservative approach and define accept an application as taking an application from the customer (via telephone, assiting with completion, face to face delivery of a completed one, or receiving one in the mail). The kicker is the 2 prong test (unlesss your in an "or" state as Randy pointed out).
Doug, in your hypothetical, can you ensure that the LPs will never meet the 2 prongs on the same loan? Our LPs rarely ever meet both prongs on the same loan; however, due to the fact that they can and do perform both prongs at some point (same loan or not), the probability that they may perform both on one loan is relatively high. Now could I not register them and invoke the de minimis, sure, provided I want to track all of that. Because I don't want to track that, nor do I have time, it was just easier to register my LPs.
Unless it's a huge cost factor for your bank (for us it wasn't), it is just easier to register the LPs if there is any chance that they MAY perform both prongs on the same loan. If the cost factor is too high, you should really consider segregating duties by prohibiting your LPs from performing one of the prongs.
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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#1689096 - 04/16/12 04:40 PM
Re: SAFE Act - Loan Processors
rlcarey
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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It may also somewhat depend on the State that you are talking about. In Texas State law, there is an "or" between the two qualifiers and not an "and".
If you're talking only about federally-supervised institutions subject to the CFPB's regulation at 12 CFR Part 1007, state SAFE Act rules are irrelevant.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8
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#1689101 - 04/16/12 04:50 PM
Re: SAFE Act - Loan Processors
Matt_B
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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I believe they would have to meet both qualifiers on the same loan for it to count. Also, I believe the "take a loan application" qualifier means to actually take the data and input it to the application directly from the customer, not to physically be handed a completed application. The list of questions could be useful and depending on what you find, you may need to discuss having a more clear division of responsibility, or a more even distribution of income! From http://mortgage.nationwidelicensingsystem.org/fedreg/NMLS%20Document%20Library/Final%20Rule.pdf
As defined by the S.A.F.E. Act, this term means an individual who takes a residential
mortgage loan application and offers or negotiates terms of a residential
mortgage loan for compensation or gain. The term does not include an individual
who is not a mortgage loan originator and: (1) Performs purely administrative
or clerical tasks on behalf of an individual who is a mortgage loan
originator; (2) performs only real estate brokerage activities (as defined in
section 1503(3)(D) of the S.A.F.E. Act (12 U.S.C. 5102(3)(D)) 1 and is licensed
or registered as a real estate broker in accordance with applicable State law,
unless the individual is compensated by a lender, a mortgage broker, or other
loan originator or by any agent of such lender, mortgage broker, or other
mortgage loan originator; or (3) is solely involved in extensions of credit related
to timeshare plans, as that term is defined in 11 U.S.C. 101(53D).1
For purposes of the definition of mortgage loan originator, section
1503(3)(C) of the S.A.F.E. Act (12 U.S.C. 5102(3)(C)) defines ‘‘administrative or
clerical tasks’’ to mean: (1) The receipt, collection, and distribution of
information common for the processing or underwriting of a loan in the
mortgage industry; and (2)communication with a consumer to
obtain information necessary for the processing or underwriting of a
residential mortgage loan. The proposal included this definition as well, with
one nonsubstantive difference—the proposal used the phrase ‘‘residential
mortgage industry’’ instead of ‘‘loan in the mortgage industry’’ in the first prong
of the definition.
I don't see anything in the definition that says it applies only of the individual satisfies both prongs of the definition with respect to a single application/loan.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8
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#1689116 - 04/16/12 05:01 PM
Re: SAFE Act - Loan Processors
John Burnett
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Joined: Sep 2011
Posts: 1,648
A CU, Where Regs Don't Apply
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I don't see anything in the definition that says it applies only of the individual satisfies both prongs of the definition with respect to a single application/loan.
Point taken. I guess I'd never had to look too deep into this one, since we have everyone registered that would be doing either/or of the two activities. Next I'll find out that the person working at the receptionist's desk needs to be registered because someone might drop off a completed app with her, and she helps process mail, so she could be sending out disclosures and meeting both prongs!
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#1689144 - 04/16/12 06:08 PM
Re: SAFE Act - Loan Processors
Dani York, CRCM
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Power Poster
Joined: Jul 2002
Posts: 5,568
New Jersey
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SAFE Act doesn't define "accepting an application". I would take the more conservative approach and define accept an application as taking an application from the customer (via telephone, assiting with completion, face to face delivery of a completed one, or receiving one in the mail). The kicker is the 2 prong test (unlesss your in an "or" state as Randy pointed out).
Our LPs rarely ever meet both prongs on the same loan; however, due to the fact that they can and do perform both prongs at some point (same loan or not), the probability that they may perform both on one loan is relatively high. Now could I not register them and invoke the de minimis, sure, provided I want to track all of that. Because I don't want to track that, nor do I have time, it was just easier to register my LPs.
My thinking was the same, and we proceeded exactly this way.
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#1689162 - 04/16/12 06:48 PM
Re: SAFE Act - Loan Processors
Doug Hendrickson
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Joined: Sep 2002
Posts: 13,965
TN
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Ditto - all of our processors are registered.
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#1689283 - 04/17/12 02:43 AM
Re: SAFE Act - Loan Processors
John Burnett
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Joined: Jul 2001
Posts: 83,583
Galveston, TX
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It may also somewhat depend on the State that you are talking about. In Texas State law, there is an "or" between the two qualifiers and not an "and".
If you're talking only about federally-supervised institutions subject to the CFPB's regulation at 12 CFR Part 1007, state SAFE Act rules are irrelevant. John, That may normally be true, but State law then indicates they either need to then be licensed at the State level or alternatively registered with the NMLS. The State law mimics 12 CFR 1007, except for the "or". There is no Federal preemption of which I am aware...
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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