Appendix A to Part 1007 - Examples of Mortgage Loan Originator Activities
12:8.0.2.1.8.0.1.6.24 : Appendix A
Appendix A to Part 1007 - Examples of Mortgage Loan Originator
Activities
This appendix provides examples to aid in the understanding of
activities that would cause an employee of a covered financial
institution to fall within or outside the definition of mortgage
loan originator. The examples in this appendix are not
all-inclusive. They illustrate only the issue described and do not
illustrate any other issues that may arise under this part. For
purposes of the examples below, the term “loan” refers to a
residential mortgage loan.
(a) Taking a loan application. The following examples
illustrate when an employee takes, or does not take, a loan
application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the consumer qualifies for a loan, even if the
employee:
(i) Has received the consumer's information indirectly in order
to make an offer or negotiate a loan;
(ii) Is not responsible for verifying information;
(iii) Is inputting information into an online application or
other automated system on behalf of the consumer; or
(iv) Is not engaged in approval of the loan, including
determining whether the consumer qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a consumer to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
(iii) Assisting a consumer who is filling out an application by
clarifying what type of information is necessary for the
application or otherwise explaining the qualifications or criteria
necessary to obtain a loan product;
(iv) Describing the steps that a consumer would need to take to
provide information to be used to determine whether the consumer
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a consumer has received from a covered financial institution,
collecting only basic identifying information about the consumer
and forwarding the consumer to a mortgage loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the covered
financial institution's loss mitigation efforts when the borrower
is reasonably likely to default.
(b) Offering or negotiating terms of a loan. The
following examples are designed to illustrate when an employee
offers or negotiates terms of a loan, and conversely, what does not
constitute offering or negotiating terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a consumer for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the covered financial
institution's loan approval mechanism function for a specific loan
product is communicated without authority to negotiate the
rate.
(ii) Responding to a consumer's request for a lower rate or
lower points on a pending loan application by presenting to the
consumer a revised loan offer, either verbally or in writing, that
includes a lower interest rate or lower points than the original
offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to consumer queries regarding qualification for a specific loan
product, such as explaining loan terminology (e.g.,
debt-to-income ratio); lending policies (e.g., the
loan-to-value ratio policy of the covered financial institution);
or product-related services;
(ii) In response to a consumer's request, informing a consumer
of the loan rates that are publicly available, such as on the
covered financial institution's Web site, for specific types of
loan products without communicating to the consumer whether
qualifications are met for that loan product;
(iii) Collecting information about a consumer in order to
provide the consumer with information on loan products for which
the consumer generally may qualify, without presenting a specific
loan offer to the consumer for acceptance, either verbally or in
writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a consumer about those
arrangements, provided that communication with the consumer only
verifies loan terms already offered or negotiated;
(v) Providing a consumer with information unrelated to loan
terms, such as the best days of the month for scheduling loan
closings at the covered financial institution;
(vi) Making an underwriting decision about whether the consumer
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer,
including qualifications or criteria that would need to be met
without providing guidance specific to that consumer's
circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to
the Truth in Lending Act, has been sent to a consumer without
providing any details of that offer.
(c) Offering or negotiating a loan for compensation or
gain. The following examples illustrate when an employee does
or does not offer or negotiate terms of a loan “for compensation or
gain.”
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the covered
financial institution.