Transferring a Loan Officer's Pipeline – NMP Skip to main content

Transferring a Loan Officer's Pipeline

Alan Cicchetti
Sep 04, 2014

Question: Our company (“Company B”) offered a loan officer a position in our company. He had worked for a competitor (“Company A”). The loan officer has loans in his pipeline at this former employer and wants to bring them to our company. While he is licensed in the states where the loans in the pipeline were originated, it takes several days to transfer the loan officer’s status in the NMLSR to a new sponsored entity. During this time that the transfer of sponsorship is pending, how would you suggest we handle the pipeline loans? Answer: There are many issues to consider in this scenario.  Make sure the affected borrowers are notified and have consented to the proposed “transfer” of their loan files—prior to the pipeline being moved. Failure to do so would be a violation of many regulations. A record of an affirmative withdrawal from Company A to Company B should be established in order to protect the company as well as the loan officer. In this situation, the loans in the pipeline would technically be treated as “withdrawn” from Company A and would need to be set up as new applications by Company B. This would require the GFE, TIL and all other required disclosures to be issued within three business days.  No personal information may be transferred from Company A to Company B without the borrower’s written consent; to do so would violate federal and state privacy laws. Another area of consideration is the stage of processing of the individual applications in the pipeline. Regulators would not look favorably on any situations where the consumer was negatively impacted by delays in closing or any other issues resulting from the “transfer” (i.e., the borrower having to re-lock at a higher rate or having to pay duplicate fees). Consumer complaints arising out of this situation could result in restitution, civil monetary penalties, and formal state banking department administrative orders, depending on the extent of consumer harm. Lastly, Company B must make sure that the loan officer does not engage in unlicensed activity before being sponsored by Company B. Any activity that meets the definition of "Mortgage Loan Originator" by the incoming loan officer, prior to sponsorship, would be deemed “unlicensed activity.” While these issues exist today, in order to provide uninterrupted service to the consumer, regulators and industry are working together to come up with solutions that would allow expeditiously transferring loan officers’ NMLSR licensing credentials. At this year’s recently held conference of the American Association of Residential Mortgage Regulators (AARMR), the NMLS Ombudsman, Robert Niemi, Deputy Superintendent for Consumer Finance, Ohio Division of Financial Institutions, posted an agenda that had some related topics, including the process for approving sponsorships of loan officers, uniform testing standards for all loan officers (including depository registrants), aligning HMDA and the Mortgage Call Report (MCR) Data Requests, and a variety of sponsorship Best Practices. These Best Practices include timing of approving sponsorship of a loan officer who is in transition between employers on the same day, the effect on the license between sponsorships, and the concept that the loan officer could be kept in an active status so that consumers may continue to be served - provided that there are no pending material issues with the license.  Alan Cicchetti is executive director of Brokers Compliance Group and director/agency relations for Lenders Compliance Group. he may be reached by phone at (516) 442-3456.
Sep 04, 2014
Markets Anxious As Fed Opens 2-Day Meeting

Investors, mortgage brokers & bankers await latest policy statement on fighting inflation

Regulation and Compliance
Jan 25, 2022
Ginnie Mae Streamlines FHA Advanced Loan Modification program

Documentation changes eliminate requirements for recordation and title insurance.

Regulation and Compliance
Jan 24, 2022
'A Long Road To Normal'

Nominated again to lead The Fed, Powell tells Senate committee to expect three rate hikes, but 'if we have to raise interest rates more over time, we will.'

Regulation and Compliance
Jan 11, 2022
CFPB: Complaint Response Worsens At Big 3 Credit Bureaus

Report claims Equifax, Experian, and TransUnion routinely failed to fully respond to consumers with errors.

Regulation and Compliance
Jan 10, 2022
The Fed Names Chairs, Deputy Chairs For 12 Reserve Banks

In recent years, the Federal Reserve System has worked to increase the overall diversity of the Reserve Bank and branch boards of directors and continues to build on those efforts.

Regulation and Compliance
Jan 06, 2022
The Fed: Rate Hike Likely Coming in June

Federal Open Market Committee's December minutes reveal discussion of first hike in federal funds rate in 2Q of 2022, as well as of ending asset purchases by March.

Regulation and Compliance
Jan 05, 2022