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Financial Outsourcing Solutions


FOS Blog

23 Jan

Mortgage Loan Originator Blunders

Mortgage Loan Originator Blunders

The mortgage reform that took effect in January 2014 now requires that Mortgage Loan Originator identification be included in 3 documents:

  • Credit Application;
  • Note or Loan Contract; and
  • Security Instrument (Mortgage).

These documents must identify both the Loan Origination Organization (financial institution) and the person originating the loan. For institutions using an automated application and loan documentation software, the key data is usually defaulted within the software to print on the required documents. But as we’ve conducted audits during 2014, we’ve found that this information required by Regulation Z {1026.36(g)} is sometimes not consistently provided. How or why does this happen?

For institutions whose custom is not to print electronic applications (but retain them electronically in the software), when the print command is activated, the controls have not been established to “print” the required information. If the bank has had software updates, an original print control may have been lost in the updating process. Are you periodically testing the “print” controls to assure the bank maintains compliance?

For institutions that are still taking paper applications, the information must be hand-written and is often not completed or not completed in its entirety. The four pieces of required information (name of the originating organization, NMLS# of the originating organization, name of the mortgage loan originator (person), and the mortgage loan originator’s NMLS#, if assigned) are not completed in their entirety. In this instance, a bank should establish an application review process to assure the application is properly completed before proceeding with underwriting.

Depending on how the financial institution handles loan closings, the note and mortgage may be prepared by an external settlement agent. We have been seeing that the required bank and mortgage loan originator (person) information is not effectively communicated from the bank to the settlement agent for inclusion on those documents. Again, it would be wise, in these instances, to establish a pre- and post-closing document review control to assure this information is communicated to the closing agent and correctly documented on the note and mortgage.

And finally, we’re seeing a lack of understanding for Mortgage Loan Originator training for those who are “federally registered” by financial institutions. Previously, only state “licensed” Mortgage Loan Originators had to demonstrate competency through training. Effective with the January 2014 reform, federally registered Mortgage Loan Originators must be sufficiently trained to meet the “licensed” loan originator continuing education requirement at §1008.107(a)(2).

This training requires 8 hours of continuing education annually regardless of hire date and must include:

  • 3 hours of Federal law and regulations;
  • 2 hours of ethics (including instruction on fraud, consumer protection, and fair lending issues); and
  • 2 hours of training related to lending standards for the nontraditional mortgage product marketplace.

Have your bank Mortgage Loan Originators met their 2014 training requirements?

For additional information please contact the author Evelyn Dehmey at


Evelyn (Evie) Dehmey – CRCM, CBA, CRP, AMLP
Senior Manager

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