Employment Training Periods and Loan Originators

EMPLOYMENT TRAINING PERIODS AND LOAN ORIGINATORS

The Wisconsin Department of Financial Institutions, Division of Banking ("department") has become aware that a number of mortgage broker and mortgage banker licensees may be violating Chapter 224 of the Wisconsin Statutes when implementing training programs for their loan originators.

The department has come across a number of instances in which a mortgage broker or mortgage banker has waited for a new loan originator employee to pass a probationary period (training period) before requiring the employee to obtain a loan originator license.

If prior to licensing, the new loan originator employee "finds a loan" or "negotiates" a loan, regardless of whether the trainee is accompanied by a seasoned loan originator or manager, the originator and sponsoring employer are violating Section 224.72(1m), Wisconsin Statutes, which provides:

"REGISTRATION REQUIRED. A person may not act as a mortgage banker, loan originator or mortgage broker, use the title "mortgage Banker", "loan originator" or "mortgage broker", or advertise or otherwise portray himself or herself as a mortgage banker, loan originator or mortgage broker, unless the person has been issued a certificate of registration from the division."

According to Chapter DFI-Bkg 40.02(3) of the Wisconsin Administrative Code, "finds a loan" means assisting a loan application in locating a lender for the purpose of obtaining a loan for the applicant and to make arrangements for a loan applicant to obtain a loan. DFI-Bkg 40.02(6) defines "negotiates" as discussing, explaining or presenting the terms and conditions of a loan or a land contract with or to a loan applicant.

Penalties for violations of s. 224.72(1m), Wis. Stats., may be found in s. 224.80, Wis. Stats., and include a fine up to $1000.00 per violation or imprisonment for up to six months or both. By employing an unlicensed loan originator, a mortgage banker or mortgage broker employer may be in violation of s. 224.77(1)(i), (j), (k) and (L), Wis. Stats. Penalties for violations of s. 224.77(1)(i), (j), (k) and (L), Wis. Stats may result in revocation of the mortgage banker or mortgage broker's certificate of registration (license).

In order to comply with the above licensing statute, mortgage broker and mortgage banker employers must see that their loan originator employees are licensed prior to allowing them to do any loan originator activities, which includes "finding a loan" or "negotiating" a loan as defined above.

Mortgage banker and mortgage broker employers are encouraged to use the department's web site at www.wdfi.org to check that their loan originators have maintained an active status on their license and have registered to work on behalf of the banker or broker who is currently employing them. In addition, loan originator application forms and loan originator employment transfer forms can be obtained at this site.

For any questions regarding the registration of loan originators, please contact the Mortgage Banking Section at 608-261-7578.