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#1873110 - 11/21/13 03:04 PM Terminated LO's
Corrie Offline
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Corrie
Joined: Nov 2013
Posts: 3
Florida
During a Fair Lending audit I found final 1003's from terminated loan officers that were signed by the sales manager of the mortgage lending department. He doesn't have a NMLS# because he doesn't originate loans or even talk to our clients. I believe we are in violation of the SAFE Act because he isn't registered but I can't find any information about this type of scenrio. Any advice is greatly appreciated.

example signature is (Joe Smith, AB is terminated)

Thank you,
Corrie

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#1873111 - 11/21/13 03:11 PM Re: Terminated LO's Corrie
Dani York, CRCM Offline
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Dani York, CRCM
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TN
Just signing the 1003 doesn't make him an MLO under the SAFE Act. Why did he sign the 1003? Was it just because you require a signature? Are these in-house loans or loans you are selling to an investor? Did he take over the file because the original LO was terminated (meaning did he communicate terms and conditions to the borrower)?
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#1873146 - 11/21/13 03:53 PM Re: Terminated LO's Corrie
hgliii Offline
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If you look at the 1003 section the instructions state: "To be completed by the Originator"
It then asks the question as to how the application was taken
The Signature Line requires the Loan Originator's Signature:
The Sales Manager may have made him self a MLO.

NOW, that not to say I am saying he is, but I think I would call the NMLS Hotline and ask the question as to how to handle. The question will and has been asked in a SAFE Act Exam who handled the file after the LO left?

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#1873165 - 11/21/13 04:13 PM Re: Terminated LO's Corrie
Dani York, CRCM Offline
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Dani York, CRCM
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TN
The instructions on the 1003 do NOT make the person signing it an MLO. The SAFE Act defines an MLO as someone who accepts an application for a covered loan AND offers/negotiates terms and conditions to a consumer. The NMLS helpline will more than likely not be able to answer the question for the OP.

My point is that just because I signed the 1003, I am not now an MLO. The OP needs to find out why the sales manager signed it. If it was signed after loan closing just because the bank requires someone to sign it, that does not mean the singer is an MLO requiring them to have a number. It does speak to sloppy controls and needs to be addressed.

After determining what actually happened and whether or not they actually do in fact have a SAFE Act violation (did he meet the second prong of the test and requires a number?), the bank needs to address how to better handle termination situations and documentation.
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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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#1873168 - 11/21/13 04:15 PM Re: Terminated LO's Dani York, CRCM
Corrie Offline
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Corrie
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Florida
He signed because post closing needed someone to sign the 1003's. Some are in house and some are FNMA loans. He didn't take over the files and he didn't communicate terms and conditions to the borrower.

He's just a bank employee that doesn't originate loans no different than myself.

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#1873170 - 11/21/13 04:17 PM Re: Terminated LO's Corrie
Dani York, CRCM Offline
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Dani York, CRCM
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TN
I don't see a SAFE Act violation here. BUT the bank does need to address the sloppy documenation and get a process in place to "reassign" loans after an MLO has been terminated.

ETA: This opinion is based on if your state also has a 2-prong test like TN. If your state has a 1-prong test like Texas, then you would have a SAFE violation under your state SAFE Act.
Last edited by Dani York, CRCM; 11/21/13 04:19 PM.
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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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#1873171 - 11/21/13 04:19 PM Re: Terminated LO's Dani York, CRCM
Corrie Offline
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Corrie
Joined: Nov 2013
Posts: 3
Florida
There is no doubt that our mortgage area needs better controls, how do I determine if there is a SAFE Act violation? I can't find any information pertaining to this.
Last edited by Corrie; 11/21/13 08:49 PM.
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#1873175 - 11/21/13 04:28 PM Re: Terminated LO's Corrie
Dani York, CRCM Offline
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Dani York, CRCM
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Posts: 3,663
TN
I tried to Google search Florida's SAFE Act, but could not find anything. You could contact your state department of financial institutions for guidance or for the Florida statute reference.
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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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#1873303 - 11/21/13 07:37 PM Re: Terminated LO's Corrie
hgliii Offline
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Let me give you my thinking and the reason I responded as I did. I do understand why (s)he signed the final and he was only trying to keep the bank in compliance. The bank needed a signature on that line. That being said the signature in the originator position(1st Prong), as originator and the fact that there was a rate and term as part of that application(2nd Prong) would make me as an auditor/examiner ask the question with reference to the NMLSR originator number.
Is there no other LOs who could have signed and used his/her number?

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#1873367 - 11/21/13 09:25 PM Re: Terminated LO's hgliii
Dani York, CRCM Offline
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Dani York, CRCM
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Posts: 3,663
TN
Originally Posted By: hgliii
and the fact that there was a rate and term as part of that application(2nd Prong) would make me as an auditor/examiner ask the question with reference to the NMLSR originator number.


How does him just signing the 1003 have anything to do with the rate and term associated with the application? I understand that it would lead an auditor to question what's going on, but I still don't see where the signer in the OP's scenario became an MLO just because they signed the 1003. The signature on the 1003 may meet prong 1, but it doesn't meet prong 2. Other file documentation should indicate whether or not the signer meets prong 2.

Based on the OP's response that the sales manager signed the 1003 after closing basically to clear an internal exception, leads me to believe that the termnated LO was still on board when the loan closed and thus would have signed the note. As an auditor, this and the manner in which the sales manager signed the 1003 where he referenced the original MLO was terminated, would indicate to me that the 1003 was signed after the fact and may not have had anything to do with offering or negotiating terms.

A good auditor should question what happened, but should not automatically assume that one signature on the 1003 equates to the signer being an MLO. If I were doing the audit, I would ask the question "Why did this person sign it?" Then make recommendations that the bank document the file as to what happened, and implement a better process to have a registered MLO take over for termed MLOs.
_________________________
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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