To:
Mortgage Brokers, Loan Originators, and Whom It May Concern
From: Division of Banking and Financial Institutions (Division) Date: January 23, 2008 Re: Loan Originator versus Loan Processor
In response to several inquires and examination findings regarding the definition of a loan originator under the Montana Mortgage Broker and Loan Originator Licensing Act (Act), the Division has issued the following memorandum to clarify the definition of a loan originator. A loan originator is required to have six months of experience in order to meet the minimum experience requirement for a loan originator license set forth by the Act. An employing mortgage broker entity or sole proprietor may hire an individual to work as a loan processor or loan assistant for a period of six months in order to meet the loan originator licensing requirement. The following are types of activities that the Division would consider to be included within the definition of a loan originator: Solicit or offer to make a mortgage loan May negotiate or arrange a mortgage loan between a borrower and a person or entity that makes or funds mortgage loans May offer to negotiate or offer to arrange a mortgage loan between a borrower and a person or entity that makes or funds mortgage loans May issue a commitment for a mortgage loan to a borrower Explain or recommend any terms, conditions, or benefits of any mortgage loan available from or through a licensee, whether or not the borrower has made or makes an application Obtain personal or financial information from the borrower Assist the borrower with the preparation of a mortgage loan application or other documents Explain any term or aspect of any disclosure or agreement given at or after a mortgage loan application is received The Division defines a loan processor or loan assistant as an individual who works under the instruction of a licensed mortgage broker or loan originator and performs only clerical functions relative to the origination of Montana residential mortgage loans such as gathering and requesting information, word processing, sending correspondence or assembling files. A loan processor or loan assistant must not engage in the following activity relative to the origination of Montana residential mortgage loans: May not solicit or offer to originate a mortgage loan May not negotiate or arrange a mortgage loan between a borrower and a person or entity that makes or funds mortgage loans May not offer to negotiate or offer to arrange a mortgage loan between a borrower and a person or entity that makes or funds mortgage loans May not issue a commitment for a mortgage loan to a borrower May not place, assist in placing, or find a mortgage loan for a borrower May not explain, define, or recommend any terms, conditions, or benefits of any mortgage loan available from or through a licensee or registrant, whether or not the borrower has made or makes an application May not obtain personal or financial information from the borrower
May not assist the borrower with the preparation of a mortgage loan application or other documents without the direct presence and supervision of a licensed mortgage broker or loan originator May not explain any term or aspect of any disclosure or agreement given at or after a mortgage loan application is received May not sign any loan documents May not pre-qualify a borrower May not be the only contact to a borrower May not be represented as a mortgage broker or loan originator May not request a borrower’s credit report
A loan processor or loan assistant may act in a limited capacity as a marketing representative for their employing broker. As a limited marketing representative a loan processor or loan assistant may refer borrowers to their employing broker provided that the loan processor or loan assistant does not engage in any of the prohibited activities outlined above. These limited marketing activities may also include the distribution of advertising or marketing materials to borrowers or other businesses that may assist borrowers in the purchase or refinance of Montana residential mortgage loans. Additionally, a loan processor or loan assistant must be a W-2 employee rather than paid by commission. The salary of a loan processor or loan assistant can be commensurate with the volume of loan files that the loan processor or loan assistant processes for their employing broker.
If you should have any questions or need further clarification this position statement please contact the Division at (406) 841-2920.
Section 32-9-133, MCA, Penalties -- restitution. (1) If the department finds, after providing a 10-day written notice that includes a statement of alleged violations and a hearing or an opportunity for hearing, as provided in the Montana Administrative Procedure Act, that any person, licensee, or officer, agent, employee, or representative of the person or licensee, whether licensed or unlicensed, has violated any of the provisions of this part, has failed to comply with the rules, instructions, or orders promulgated by the department, has failed or refused to make required reports to the department, has furnished false information to the department, or has operated without a required license, the department may impose a civil penalty not to exceed $5,000 for the first violation and not to exceed $10,000 for each subsequent violation. (2) The department may issue an order requiring restitution to borrowers and reimbursement of the department's cost in bringing the administrative action. In addition, the department may issue an order revoking or suspending the right of the person or licensee, directly or through an officer, agent, employee, or representative, to do business in this state as a licensee or to engage in the mortgage broker business. (5) In addition to the penalties in subsection (1), a person practicing as a mortgage broker or loan originator without being licensed as required under subsection (1) is guilty of a misdemeanor and may be punished by a fine of not less than $250 or more than $1,000, by imprisonment in the county jail for not less than 90 days or more than 1 year, or both. Each violation of the provisions of subsection (1) constitutes a separate offense.