Loan Originator Best Practices
When Changing Companies
Enforcement has recently received complaints regarding loan originators who “transfer” clients to their new employer, without the consent or knowledge of the applicant or the sponsoring entity. The rules related to loan files and prospective borrowers are quite clear, and are often part of the contractual relationship between the employer and the loan originator. Here’s a “best practices” primer for loan originators who know they will be transferring to a new employer:
- Loan files belong to the company, not the loan originator. Under both the MBPA and the CLA, loan files are the property of the company named on the application. The company must keep the original files and documents.
- Under both the MBPA and the CLA, the loan originator is not permitted to transfer loan files to the new sponsoring entity. The applicant is the only individual who may ask for the transfer of the file. The mortgage broker or consumer loan company must transmit the information as requested by the applicant within five business days.
- To confirm compliance with this rule, loan originators may wish to document the applicant’s request to transfer the file. The original documentation must remain with the applicant’s initial loan file, but the loan originator may, with the applicant’s approval, provide a copy to the “receiving” company to document compliance with the rule.
- Loan originators who violate the laws and rules of the MBPA or the CLA may be subject to enforcement action for failure to comply.
- But what if the loan originator believes that the change is in the best interest of the applicant? Loan originators may wish to review their contractual arrangement (employment contract, LO employee agreement, etc.) with their current sponsoring entity prior to discussing this topic with the applicant. The Department has asked for this document in past reviews to verify that the loan originator did not violate the terms of the agreement with the company. Loan originators who fail to comply with the contractual agreement may not meet the “character and fitness” requirements of the MBPA and CLA, and may find that they have placed their license in jeopardy.
MBPA: WAC 208-660-300(6)
CLA: WAC 208-620-700(2)