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#1855922 - 09/26/13 05:04 PM
LOs/MLOs and Credit Reports
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Joined: Aug 2006
Posts: 645
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I think based on the jobs our current employees do and the updated defintion of loan originator, only our MLOs will be LOs. That said, as the regulation has changed, I've read differing opinions on BOL about the obtaining a credit report. Under SAFE Act, all of our MLOs required and received criminal background checks, but did not recieve credit reports. Do we have to retroactively get credit reports on all of our existing MLOs prior to the implementation date in January, or is this ONLY for new hires after the January implementation date?
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#1855957 - 09/26/13 05:26 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Mar 2012
Posts: 574
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If your bank pulled a CR as part of the MLO/LOs employment screening, you would not be required to pull a new report. If there was no Credit Report pulled then IMO, you would need a credit report pulled.
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#1856032 - 09/26/13 06:28 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Joined: Aug 2006
Posts: 645
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If I'm not mistaken, there was no requirement for SAFE Act originally. Of course, my management is going to want to know if it is a requirement, or optional. At first, they way I read the regulation, it seemed to be a requirement,but now I'm not so sure.
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#1856079 - 09/26/13 07:08 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Power Poster
Joined: Nov 2003
Posts: 3,726
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The commentary states -Retroactive obtaining information not required.The Loan Originator Organization is not required to obtain the covered informatino for an indivdual whom the loan origniator hired before 1/1/2014 and screened under the SAFE Act. However, if that person quits and comes back, then they are required to obtain all the information. 1026.36(f)(3)(i)-2
Also in the guide it says if you become aware of an event that could disqualify an LO, you must re-screen.
Last edited by Tesla; 09/26/13 08:01 PM. Reason: More information
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#1856100 - 09/26/13 07:24 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Mar 2012
Posts: 574
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leobsayer, you are correct that the original SAFE Act did not require a credit report pull for Depositories, only non-depositories. It is still a very vague reference. We are working on the policies and procedures for SAFE ACT and Reg "Z" this week, so I have the CFPB Guide open. This is exerpt for guide:
"You must collect the above information for any individual:
1. Hired on or after January 10, 2014 or
2. Hired before that date but for whom no applicable statutory or regulatory background standards were in effect at the time of hire to screen that individual, or the applicable standards were not used to screen that individual."
Last edited by hgliii; 09/26/13 07:25 PM.
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#1856177 - 09/26/13 08:40 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Aug 2006
Posts: 645
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Well, there were standards in place, but they were the SAFE Act standards, which as I said, didn't require a credit report. That sounds like anyone we hire after 1/10/14 as an LO would reqire a background check and a credit report pull, but our current LOs would be grandfathered in under the SAFE Act, unless a situation presented itself that informed the bank of the need for further investigation, such as in a bankruptcy.
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#1856324 - 09/27/13 01:50 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Mar 2012
Posts: 574
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That is my understanding also. However, my understanding is that if you were to hire a MLO that was licensed instead of registered, you would not need to pull credit or Background check. Licensed MLOs were required to undergo a review of both for their initial license.
Last edited by hgliii; 09/27/13 01:53 PM.
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#1857278 - 10/01/13 03:45 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Joined: Aug 2006
Posts: 645
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When pulling credit reports on employees for the purpose of loan originagor compensation, FCRA must still be followed, correct? In other words, you would have to make a clear and conspicuous disclosure in writing to the employee before the report is obtained, in a document that consists solely of the disclosure, that a credit report may be obtained for employment purposes AND obtain the employee’s written authorization for you to procure the report. If the employee refuses, then the bank has a decision to make regarding reassignment or termination, correct?
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#1857349 - 10/01/13 05:16 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Mar 2012
Posts: 574
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#1858536 - 10/04/13 02:59 PM
Re: LOs/MLOs and Credit Reports
hgliii
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100 Club
Joined: Mar 2004
Posts: 248
Midwest
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I attended a Fed Reserve Compliance Seminar last week and the Examiner stated that a credit report would be required to be pulled for our existing MLOs since they were only "registered" under the SAFE Act (credit report not required for registered MLOs).
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#1861685 - 10/16/13 03:45 AM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Aug 2006
Posts: 645
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Kay, I'm confused. The Fed examiner stated that existing MLOs would need a credit report pulled or wouldn't? The last part of your statement seems to indicate that they aren't required for existing MLOs. Of course it's late, and I'm probably reading that incorrectly.
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#1861706 - 10/16/13 01:38 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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Kay, I'm confused. The Fed examiner stated that existing MLOs would need a credit report pulled or wouldn't? The last part of your statement seems to indicate that they aren't required for existing MLOs. Of course it's late, and I'm probably reading that incorrectly. What Kay is saying is that under the SAFE Act registered MLOs were not required to have a credit report pulled when they registered. Now, however, under the Reg Z LO Compensation rule, those same MLOs would have to have a credit report pulled. See Post #1847623 in this thread: http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=18461141026.36(f)(3) For each of its individual loan originator employees who is not required to be licensed and is not licensed as a loan originator pursuant to § 1008.103 of this chapter or State SAFE Act implementing law:
---background check (would already have from registration of SAFE MLOs)
---credit report
---training
Commentary to 1026.36(f)(3)
1. Unlicensed individual loan originators. Section 1026.36(f)(3) sets forth actions that a loan originator organization must take for any of its individual loan originator employees who are not required to be licensed and are not licensed as a loan originator pursuant to the SAFE Act. Individual loan originators who are not subject to SAFE Act licensing generally include employees of depository institutions and their Federally regulated subsidiaries and employees of bona fide nonprofit organizations that a State has exempted from licensing under the criteria in 12 CFR 1008.103(e)(7).
1008.103 gives the requirements for who should be licensed and specifically excludes bank MLOs who are registered who have been exempted from licensing by their states. In TN at least, a bank MLO is exempt from licensing and the way I read 1026.36(f)(3), my MLOs would still need training (which we already do) and a credit report if not pulled at hire (I believe our bank already does this, but I know other banks in TN that don't).
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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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#1861717 - 10/16/13 02:11 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Aug 2006
Posts: 645
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Thanks Dani. So, if I am understanding correctly, our existing MLOs, who were not required to have a credit report pulled under SAFE Act, are now retroactively required to have a credit report pulled and cannot act as an LO in January if they have not done so. This regulation does not simply impact those new LOs that are hired on or after January 10, 2014.
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#1861738 - 10/16/13 02:31 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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Thanks Dani. So, if I am understanding correctly, our existing MLOs, who were not required to have a credit report pulled under SAFE Act, are now retroactively required to have a credit report pulled and cannot act as an LO in January if they have not done so. This regulation does not simply impact those new LOs that are hired on or after January 10, 2014. That's how I'm reading it.
_________________________
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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#1863247 - 10/21/13 06:18 PM
Re: LOs/MLOs and Credit Reports
Dani York, CRCM
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Gold Star
Joined: Nov 2005
Posts: 438
California
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Thanks Dani. So, if I am understanding correctly, our existing MLOs, who were not required to have a credit report pulled under SAFE Act, are now retroactively required to have a credit report pulled and cannot act as an LO in January if they have not done so. This regulation does not simply impact those new LOs that are hired on or after January 10, 2014. That's how I'm reading it. Okay, I'm really confused. In one of the prior threads, its states "The commentary states -Retroactive obtaining information not required.The Loan Originator Organization is not required to obtain the covered informatino for an indivdual whom the loan origniator hired before 1/1/2014 and screened under the SAFE Act. However, if that person quits and comes back, then they are required to obtain all the information. 1026.36(f)(3)(i)-2. Also in the guide it says if you become aware of an event that could disqualify an LO, you must re-screen. So, if we have registered MLOs, do we need to pull credit?
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#1863253 - 10/21/13 06:27 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Power Poster
Joined: Oct 2009
Posts: 9,105
OK
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If you have an existing credit report on the LO, you don't have to pull a new one. If you never pulled one on them prior, you need one now. That's how i read it.
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#1863257 - 10/21/13 06:35 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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10K Club
Joined: Jul 2001
Posts: 83,364
Galveston, TX
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So, if we have registered MLOs, do we need to pull credit?
Only if if you become aware of an event that could disqualify an LO
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1863264 - 10/21/13 06:43 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Aug 2006
Posts: 645
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Wow. At least I'm not alone. Everyone is all over the map on this one.
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#1863293 - 10/21/13 07:09 PM
Re: LOs/MLOs and Credit Reports
rlcarey
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Gold Star
Joined: Nov 2005
Posts: 438
California
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So, if we have registered MLOs, do we need to pull credit?
Only if if you become aware of an event that could disqualify an LO So, if we didn't originally pull credit & aren't aware of any issues, we don't need to pull credit on existing MLOs, correct?
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#1863296 - 10/21/13 07:18 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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10K Club
Joined: Jul 2001
Posts: 83,364
Galveston, TX
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I'm a little late to this discussion, but I'm looking at 36(f)(3)(ii):
i) Obtain for any individual whom the loan originator organization hired on or after January 1, 2014 (or whom the loan originator organization hired before this date but for whom there were no applicable statutory or regulatory background standards in effect at the time of hire or before January 1, 2014, used to screen the individual)
Your registered MLOs were subject to the regulatory required background checks established at 1007.104(h). Just because that did not include a credit report at that time does not mean you have to go back and get one now.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1863304 - 10/21/13 07:29 PM
Re: LOs/MLOs and Credit Reports
Dani York, CRCM
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Platinum Poster
Joined: Aug 2006
Posts: 645
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1026.36(f)(3) For each of its individual loan originator employees who is not required to be licensed and is not licensed as a loan originator pursuant to § 1008.103 of this chapter or State SAFE Act implementing law:
---background check (would already have from registration of SAFE MLOs)
---credit report
---training
Commentary to 1026.36(f)(3)
1. Unlicensed individual loan originators. Section 1026.36(f)(3) sets forth actions that a loan originator organization must take for any of its individual loan originator employees who are not required to be licensed and are not licensed as a loan originator pursuant to the SAFE Act. Individual loan originators who are not subject to SAFE Act licensing generally include employees of depository institutions and their Federally regulated subsidiaries and employees of bona fide nonprofit organizations that a State has exempted from licensing under the criteria in 12 CFR 1008.103(e)(7).
1008.103 gives the requirements for who should be licensed and specifically excludes bank MLOs who are registered who have been exempted from licensing by their states. In TN at least, a bank MLO is exempt from licensing and the way I read 1026.36(f)(3), my MLOs would still need training (which we already do) and a credit report if not pulled at hire (I believe our bank already does this, but I know other banks in TN that don't). [/quote] RL, can you comment on the information that Dani York posted, quoted above from 1026.36? It specifically refers to those individuals who are not required to be licensed, who are simply registered.
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#1863322 - 10/21/13 07:39 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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10K Club
Joined: Jul 2001
Posts: 83,364
Galveston, TX
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She is quoting from the same section of the regulation that I am. Yes, I agree - MLOs for depository institution's are not normally subject to the SAFE Act licensing requirements. But that does not mean they were not subject to applicable statutory or regulatory background standards in effect at the time of hire under 1007.104(h).
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1864895 - 10/24/13 10:14 PM
Re: LOs/MLOs and Credit Reports
rlcarey
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Diamond Poster
Joined: Nov 2004
Posts: 1,005
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What if at time of hire, the employee was hired as a teller or back office staff and we performed our normal credit report pull and criminal background check.
Now thru promotion, they are a lender and doing real estate equity loans. Do we need to pull new credit reports and criminal background checks since the original ones weren't while they were in the capacity of a "loan officer"?
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#1864909 - 10/24/13 10:58 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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10K Club
Joined: Jul 2001
Posts: 83,364
Galveston, TX
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If they are not currently licensed at the State level or have not gone through the background checks and are registered with NMLS, yes.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1866254 - 10/29/13 08:41 PM
Re: LOs/MLOs and Credit Reports
leo_bsayer
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Platinum Poster
Joined: Aug 2008
Posts: 555
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I thought I understood this but now I'm questioning myself. If your LO's are not required to register under the SAFE Act due to the diminimus exception, then it was my understanding we would only have to apply the LO background check/credit report/training to any new hires after 1/1/14 or if we had a reasonable basis to believe current LO's do not meet the financial standards etc. (Or if a current employee is promoted to LO position). Is that correct?
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