3rd party loan processors: MLO license or Exempt?

Are 3rd party loan processing companies struggling with whether to get their loan processors individually licensed?

I represent numerous companies that provide 3rd party loan processing services for large banks.  

The question:  Are 3rd party loan processing companies required to obtain MLO licenses for their loan processors or are they exempt?    

The problem: The reason this is a hot issue for loan processors is because of a little known, hidden provision of the SAFE Act that said: “(2) INDEPENDENT CONTRACTORS.—An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless such independent contractor is a State-licensed loan originator.”   Therefore, the SAFE Act [which was adopted by each of the 50 states] stated that a Mortgage Loan Originator needs a MLO license but a W-2 “employee” loan processors is excluded while a 1009 “independent contractor” loan processors is included.  

The Solution:  If a company’s loan processors qualify as W-2 “employees” rather than 1009 “independent contractors” then they are exempt for obtaining a MLO license in the majority of the states but unfortunately not in CT or KY and a few others.

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