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We have two MLO’s who recently started with our organization. One transferred from financial institution to ours and has an NMLS number already and the other is new to the industry and has no prior NMLS number. It was determined that both have taken loan applications on behalf of our organization before they were listed on the registry as being representatives of our bank. (The current status of the new MLO is pending, but an NMLS ID has been generated) It was communicated to me that as long as they don’t make five loans before they get their information associated with our bank, they are allowed to take applications right away, as long as they do not exceed 5. That is not my understanding of the regulation. Can the transferring MLO have any customer contact and represent that they are part of our organization prior to the completion of the transfer on the registry and their assignment to our organization? At what point can the new to the industry MLO have any customer contact? Can both MLO’s use the 5 loan exemption until their NMLS number is generated and associated with our organization? Does that exemption only apply to someone who is already in the industry but does less than 5 covered loans per year or does it cover new MLO’s? If we have acted outside of the guidelines of this regulation, what are the consequences of non-compliance?
The de minimis exception applies to someone who has never been registered as an MLO and has not originated more than 5 residential mortgage loans in the past 12 months. For your new employee that was not previously registered you might be able to argue this exception; however, since he/she has been registered and his/her registration is processing it could be argued that it would not apply. In my opinion the exception would not apply to the new employee that was already registered. I would recommend waiting until their NMLS registration is complete/updated before allowing them to act as MLOs. Also check your SAFE Act policy to ensure you comply with its requirements.
As for SAFE Act penalties, the final rule references the agencies authority under 12 USC 1818 (see footnote).\
The OCC, Board, FDIC, and OTS have the
authority to take enforcement actions against their
respective Agency-regulated institutions and
individual employees of those institutions who
violate the S.A.F.E. Act and this final rule, pursuant
to 12 U.S.C. 1818.12 USC 1818 allows for various actions, but 1818(i) refers to CMPs.
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