Article By: Ben Giumarra, Spillane Consulting Associates, Inc.
You ask, we answer.
Question
A friend of mine sent me this compliance question a while ago:
What happens when an loan originator’s NMLS number is valid at time of application, but becomes invalid for a period of time, possibly being reinstated by- or after closing? Our system is reporting this as a compliance error. We have an originator that allowed their NMLS license to lapse, so there will be a couple of days (maybe more) before we can get the fingerprints done and paperwork completed so as to get the NMLS number reinstated. In that window of time, this originator does not have a valid NMLS number.
This is a good question because similar things happen more than you think. Maybe a loan officer quits and goes somewhere else. Maybe they get suspended. Or maybe they go on vacation and another originator finishes the application.
Answer
Well, first of all- having the system report a compliance “error” doesn’t necessarily mean it’s an actual violation. It might just represent an alert of something potentially wrong. Of course, some investors will require a clean system report – so you’ll have to do the extra work of demonstrating that, despite what the system is reporting, there actually isn’t any compliance violation.
But is this actually some kind of violation?
Both TILA and NMLS requirements are at play here, with overlapping requriements to disclose NMLS information on documents such as the Loan Estimate, application, commitment letter, and Closing Disclosure, among others.
TRID Rule:
Per TRID requirements, the person “who interacts most frequently with the consumer and who has an NMLSR ID” shall be disclosed on the LE and/or CD.
TILA Rule:
But per TILA originator requirements (1026.36), the loan originator disclosed on the application, note, mortgage, and also Loan Estimate and Closing Disclosure, must be the person “with primary responsibility for the origination and, if the NMLSR has provided such person an NMLSR ID, that NMLSR ID.”
The TILA Rule also provides some helpful commentary:
If more than one individual meets the definition of a loan originator for a transaction, the name and NMLSR ID of the individual loan originator with primary responsibility for the transaction at the time the loan document is issued must be included. A loan originator organization that establishes and follows a reasonable, written policy for determining which individual loan originator has primary responsibility for the transaction at the time the document is issued complies with the requirement. If the individual loan originator with primary responsibility for a transaction at the time a document is issued is not the same individual loan originator who had primary responsibility for the transaction at the time that a previously issued document was issued, the previously issued document is not required to be reissued merely to change a loan originator name and NMLSR ID.
So I would argue that an originator without a valid NMLS license cannot be the person with “primary responsibility” for the loan transaction at the time. It’s really important to note that, while that NMLS number is lapsed, this originator cannot act as an originator. They cannot take applications, attend closings, explain loan terms to borrowers, etc.
I would also reference the TRID requirement that the person disclosed is someone who actually has an NMLS number. If I have to disclose a Closing Disclosure today- how can I disclose the “contact” as someone who doesn’t have an NMLS number (right now at least)?
Takeaways
- While suspended, loan originator cannot perform origination activities
- If disclosures are issued while suspended, a different loan originator must be disclosed because they cannot be the “primary” person
- If the loan originator’s license is suspended after a disclosure is made – it is not required to go back and reissue disclosures for that sole purpose
Here is some extra material from Crescent Mortgage on this topic that it had delivered to its partners. Maybe helpful to you.
In Other News
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Here we go again? “Wall Street is livid over Wells Fargo’s latest scandal”
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Very large non-depository quits the mortgage business – this storyexplains why. So interesting!
On My Mind …
Are you happy? As many people learn, “success” does not guarantee happiness. This isn’t to say that being happy should get in the way of working hard, being successful, or providing well for loved ones, but it’s intriguing (and a little sad) to think how people can accomplish everything they ever dreamed of and still be miserable.
In this short article, is an author who used to be a bigwig at Google. One of his beliefs (as he’s written about) is that it’s unnecessary to swing for the fences in terms of being happy. He talks about “think slices of joy” adding up little by little to overall make you happy. So will getting a huge promotion make you reallyhappy? Sure, maybe. But if you teach yourself to find joy in the little things – like a hot cup of coffee, the sensation you get when you step from a hot room to an air conditioned room, all those little things will add up to make you a lot happier overall.
“Every morning when I wake up, I experience an exquisite joy -the joy of being Salvador Dalí- and I ask myself in rapture: What wonderful things is this Salvador Dalí going to accomplish today?”
– Salvador Dali (waking up every morning)
Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.