Navigating all of the laws, rules, and requirements to run a compliant business is not an easy task. Our Examinations staff is always available to try to provide answers to questions. Below are responses to some Frequently Asked Questions that the Department routinely receives under the Consumer Loan Act and the Mortgage Broker Practices Act.
Do the CLA or MBPA have a commutable distance requirement?
No, neither the CLA nor MBPA have a commutable distance requirement for residential mortgage loan originators. As of July 25, 2021, with the passage of Senate Bill 5077, both the CLA and MBPA were amended to allow loan originators to work either from a licensed location (branch or main) or from their home. Previously, on March 5, 2020, the department issued interim regulatory guidance to temporarily allow loan originators to work from home due to the COVID-19 pandemic. This interim regulatory guidance has been extended through December 31, 2022. Rulemaking to implement the statutory changes and interim guidance will commence in the future.
What address should appear on the residential mortgage loan application in the “Loan Originator Information” section when a mortgage loan originator is working from an unlicensed home location?
Licensees may complete the residential mortgage loan application using the company’s main license location or any branch the originating loan officer is associated with.
If a residential mortgage loan originator is operating under Temporary Authority, what individual license number should they use on the residential mortgage loan application and other documents?
Residential mortgage loan originators should use their NMLS license number when operating under Temporary Authority in the state.
Can residential mortgage loan originators be employed as 1099 independent contractors?
Neither the CLA nor MBPA restrict a company from hiring residential mortgage loan originators as 1099 independent contractors. The company is responsible for any conduct that violates the MBPA or CLA by any person it engages as an independent contractor who is performing business activities covered by the company’s license. Additionally, whether the company considers an individual to be an employee (W-2) or an independent contractor (1099), the company is responsible for properly complying with tax laws, the department will not review, examine, or provide advice on these issues.
How can a licensee compensate its residential mortgage loan originators?
The Department expects licensees to comply with Regulation Z, 1026.36(d) when compensating residential mortgage loan originators. Additional information on the requirements can be found in the Consumer Financial Protection Bureau’s Loan Originator Rule: Small entity compliance guide.
What is the maximum origination fee a licensee may charge on personal loans under the CLA?
When originating personal loans, licensees may charge a loan origination fee not to exceed four percent of the first twenty thousand dollars and two percent thereafter of the principal amount of the loan advanced to or for the direct benefit of the borrower.
What information must licensees include in supervisory plans under the CLA?
Under the Consumer Loan Act, each licensed supervisor must maintain a written supervisory plan. The plan must include the number of employees supervised and their physical location, how the supervisor will adequately supervise the employees if an employee is not in the same location as the supervisor, and the type and volume of work performed by the supervised employees. The Department published the following model form to help companies comply with the requirements of the CLA: model supervisory plan form.
What Bank Secrecy Act/Anti-Money Laundering requirements apply to companies licensed under the MBPA?
Financial institutions, including mortgage brokers, are required to establish an anti-money laundering program and report suspicious activity under the Bank Secrecy Act. The program must be specific to the size, product offerings, and complexity of the licensee. The Department published the following guidance to assist brokers in developing their program: AML Program Outline/Summary.