Is Underwriter Considered MLO under the SAFE Act?

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Question:

Could you please settle a disagreement we’re having regarding MLOs as defined by the S.A.F.E. Act? All of our mortgage (as defined by the S.A.F.E. Act) underwriters receive only straight salary compensation. They receive no additional compensation, e.g. incentive pay, bonuses, commissions, based on the number of mortgages they underwrite or the rates and terms of those mortgages and they do not engage in any solicitation of mortgage loan business. All rates and terms are set by senior management. There are no rate spreads and all underwriters are bound by the set rates and terms. They engage in no negotiating of rates or terms with applicants. Although manufactured home underwriters are permitted to consider a written request from an applicant for a deviation from the posted terms, the granting of the requested term does not affect the underwriter’s compensation. Do you believe these underwriters would be considered MLOs as defined by the Act.

Answer:

Answer from John: How your staff members are compensated doesn't affect their qualification as an MLO, unless they are working as volunteers. What matters is whether an individual's activities in connection with residential mortgage loans meet both parts of the two-pronged definition of mortgage loan originator.

Answer:

Answer from Andy: This BOL Banker Tool will help you identify employees subject to the SAFE Act based on what they actually do. (Do they take consumer residential mortgage loan applications secured by a dwelling and do they offer or negotiate terms for compensation? The form has the more finite details on this two-pronged test.) You can then decide to register them, or restrict their activities in this area so they are excluded from the SAFE Act.

First published on BankersOnline.com 3/7/11