Public Chapter 747 of the Acts of 2004 amends the Residential Lending, Brokerage and Servicing Act, Tennessee Code Annotated Section 45-13-101 et seq., by requiring that all mortgage loan originators register with the Department in affiliation with one licensed/registered mortgage company. The mortgage loan originator registration requirements become effective January 1, 2005. The Department has received some inquiries from the mortgage industry about who is subject to these registration requirements. This Bulletin is issued to provide the mortgage industry guidance, consistent with Public Chapter 747, regarding these registration requirements.
Public Chapter 747 defines mortgage loan originator as:
- an individual;
- who works for one licensee or registrant and is subject to the direct supervision and control of that licensee or registrant;
- who, in exchange for compensation from that licensee/registrant, performs any one or more of the following acts: solicits, processes, places, negotiates or originates mortgage loans for others, or offers to solicit, process, place, negotiate or originate mortgage loans for others or who closes mortgage loans which may be in the mortgage loan broker's own name with funds provided by others and which loans are thereafter assigned to the person providing the funding of such loans; and,
- who performs any of these acts through contact with the borrower or potential borrower.
Examples of the types of activities which the Department would consider to be included within the definition of "mortgage loan originator" are:
- soliciting or offering to make a mortgage loan;
- explaining or recommending specific 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;
- obtaining personal or financial information from the borrower;
- assisting the borrower with the preparation of a mortgage loan application or other documents; or,
- explaining any term or aspect of any disclosure or agreement given at or after a mortgage loan application is received.
Public Chapter 747 goes on to provide that the term "mortgage loan originator" does not include an employee of a licensee or registrant whose job responsibilities are limited to clerical tasks. The Department interprets clerical tasks to include such tasks as:
typing documents from drafts prepared by others, answering telephones, making appointments and maintaining schedules and calendars for others, operating office machinery, opening and routing mail, mailing correspondence, maintaining office supplies and inventory, and maintaining files.
The Department certainly recognizes that an employee who engages in clerical tasks such as those listed above might very well have contact with the borrower or potential borrower. Provided that the contact is limited to contact in a clerical capacity, that employee would not need to be registered.
Additionally, the Department has determined that the definition of mortgage loan originator does not include those "back office" employees of a licensee or registrant whose job duties are limited to underwriting tasks. The Department considers underwriting tasks to include:
analyzing the risk involved in making the mortgage loan to determine whether the risk is acceptable to the lender, including the evaluation of the property as outlined in the appraisal report, and of the borrower's ability and willingness to repay the mortgage loan.
In making a determination whether to register an employee, a licensee or registrant should review the job duties and responsibilities of the employee. Obviously, an employee whose job duties fall within the definition of mortgage loan originator as discussed above must be registered. An employee, however, whose job duties are limited to clerical tasks would not need to be registered, even if the employee, in the course of performing those clerical tasks, might have contact with a borrower. Additionally, "back office" employees who engage solely in underwriting tasks would not be subject to registration.
If you have questions regarding whether an employee is subject to the mortgage loan originator requirements you should contact the Department's Compliance Division. Additional information about mortgage loan originator registration requirements may be found on the Department's web site at www.tennessee.gov/tdfi/ and clicking on the heading "Mortgage Loan Originator Registration" or by calling the Department's Compliance Division at (615) 741-3186.