Pennsylvania New Loan Officer Rule Changes in Effect

Originators no longer have to be W-2 employees. Credit: © Jacob Kearns - Fotolia.com

Pennsylvania has amended its Mortgage Licensing Act, making changes that were effective as of Sept. 3 with the aim of more closely tracking the language of the Consumer Financial Protection Bureau’s licensing act and eliminating or reducing requirements considered burdensome or outdated.

Some examples of changes in the law as a result of the amendments are as follows:

The revisions put into place a so-called 100-mile restriction which requires a mortgage originator to be assigned to be a licensed branch, which can be the originator’s home if it is licensed, or a licensed branch within 100 miles of the originator’s residence, according to Rachel Wolf, an associate at law firm Offit Kurman.

Also the definition of “loan originator” has been changed to individuals who “habitually and repeatedly” engage in loan origination activities “such as taking an application, negotiating loan terms, and/or advertising that he or she will do either of these,” according to Wolf.

“'Habitually and repeatedly’ is defined as 'engaging in any activity at least four times in a calendar year,’” she explained in an email sent in response to questions from this publication. “It means, for example, that a mortgage loan processor who took a few loan applications in one year is not in violation of the licensing laws for having done so because she or he is not habitually and repeatedly engaged in [origination] activities.”

The state law continues to require individual mortgage loan originators to only originate loans for one licensee but “due to the amendments, a mortgage loan originator may now be an independent contractor (subject to certain requirements) as opposed to only a W-2 employee,” Wolf said.

However, Federal Housing Administration regulations specifically state that “managers, loan originators and underwriters may not be independent contractors or contract employees” if they originate loans which are guaranteed by the agency, its frequently asked questions page declares.