I am reading through the Mortgage Servicing to determine if we are a Small Creditor. My thought was that we qualified, but now concerned I might have missed something.

We service less than 5000 loans, but the item I am concerned with the with the part of being the creditor for all loans serviced. We close loans in our name but sell them to a third party and retain the servicing. Will that exempt us from the small creditor status?

Thanks for the help.

This is not the entire section, but it sounds like for all of the mortgage loans you are either the creditor or the assignee for the ones that you sold?

1026.41(e)(4) Small servicers. (i) Exemption. A creditor, assignee, or servicer is exempt from the requirements of this section for mortgage loans serviced by a small servicer.
(ii) Small servicer defined. A small servicer is a servicer that:
(A) Services, together with any affiliates, 5,000 or fewer mortgage loans, for all of which the servicer (or an affiliate) is the creditor or assignee;

If you closed those loans in your own name, but sell them to investors, you remain the creditor on the loans whether you retain servicing or not.

John - how are we still the creditor if we sell the loans 'servicing released' to an investor? We've signed over the docs with an allonge and they've paid us off. I wasn't confused...?

Exert from the Commentary to 1026.41(e):

. . . To be the creditor or assignee of a mortgage loan, the servicer (or an affiliate) must either currently own the mortgage loan or must have been the entity to which the mortgage loan obligation was initially payable (that is, the originator of the mortgage loan). . . .

To borrow a phrase that is being used these days in a political sense, "words mean something." "Creditor" is defined for the purposes of Regulation Z in §1026.2(a)(17) as "[a] person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract."

If your bank closed the mortgage loan in its own name, it will always be the creditor, regardless of how many times the loan is assigned or sold, with or without servicing.

And that brings us back to your original question -- you asked about your status as a small creditor. That's a question that you might ask if you are looking at the HPML escrow requirements in 1026.35 or the ATR requirements of 1026.43. The question you are really asking is about whether you qualify as a small servicer. Whether you are the creditor or assignee of the loans you service is one of the criteria for being a small servicer.

That's also helpful with the ROR. If your customer's loan, originally payable to you, has been sold 6 times and Timbucktoo National Bank now owns the note and your customer wants to do a no cash out refinance with you for a lower rate, or for whatever, the ROR would not apply since you are the original creditor.

4. New advances. The exemption in §1026.23(f)(2) applies only to refinancings (including consolidations) by the original creditor. The original creditor is the creditor to whom the written agreement was initially made payable.