When You Are—And Aren't—A Loan Originator

New Reg Z rules contain a broader definition of ‘loan originator.’

July 22, 2013
/ PRINT / ShareShare / Text Size +

Will you be a mortgage loan originator (MLO) under the Consumer Financial Protection Bureau’s (CFPB) new Regulation Z rule?

If you’re not an MLO under the SAFE (Secure and Fair Enforcement for Mortgage Licensing) Act then no, right? Wrong.

The new loan originator rules in Reg Z—expected to be effective Jan. 10, 2014—contain a much broader definition of “loan originator.”

The loan originator compensation rule was the last mortgage rule the CFPB issued in January.

With the industry gasping for breath under the weight of the previously issued rules, this rule has flown a bit under the radar. (I’m guilty of this. After reading and analyzing the other mortgage rules shortly after the CFPB issued them, it was a few weeks until I begrudgingly sifted through the loan originator rule).

Now that we’ve stepped back from the ability to repay and servicing rules, we can see the loan originator compensation rule also has a lot of moving parts that will require changes at most credit unions.

One major change will be defining who at your credit union is a loan originator. The SAFE Act defines an MLO as an individual who takes a residential mortgage application and offers or negotiates the terms for compensation. The new Reg Z rule defines “loan originator” as a person who performs any of the following activities for compensation:

Takes an application;

Offers, arranges, or assists a consumer in obtaining, applying, or negotiating an extension of consumer credit; or

Advertises that they’ll perform the activities described above.

The difference between “and” and “any” is exactly one letter, but the meanings are miles apart. You can be a loan originator under Reg Z’s rule without offering or negotiating the terms of the transaction at all. Merely collecting certain information from a consumer or assisting a consumer in filling out an application form could qualify you as a loan originator under the new rule.

So, what does this difference mean? It doesn’t mean that as a loan originator under Reg Z you’ll have to register with the Nationwide Mortgage Licensing System (NMLS). The SAFE Act and Reg Z are separate—the new Reg Z definition of “loan originator” doesn’t change anything in the SAFE Act. MLOs under the SAFE Act still must register with the NMLS and use their unique identifier.

Beginning Jan. 10, 2014, they also must comply with the new loan originator rules. All MLOs under the SAFE Act are loan originators under Reg Z, but not vice versa.

If you or any other employees are loan originators under Reg Z for consumer credit transactions secured by a dwelling—whether or not you’re an MLO under the SAFE Act—you’ll be subject to the rules on dual compensation, compensation based on a term of a transaction, loan originator qualifications, and training requirements.

All credit unions engaging in home-secured lending should take a close look at who within the credit union is performing “loan originator” activities under the new rule and analyze how to most efficiently implement the new requirements.

One last note: Always think about “what’s next” with the CFPB. Congress ordered the CFPB to issue these mortgage rules, but the CFPB has barely started issuing rules solely on its own initiative.

The definition of “loan originator” actually isn’t limited to home-secured loans. The substantive provisions of the new rule all limit their applicability to home-secured loans, but the definition of “loan originator” actually extends to any consumer credit transaction.

It wouldn’t surprise me to see the CFPB in the future apply this broad definition outside of the home-secured arena.

JEFF ANDERSEN is regulatory counsel for PolicyWorks LLC. Contact him at or at The services provided by PolicyWorks shouldn’t be construed as legal services, legal advice, or in any way establishing an attorney-client relationship. 

►CUNA and PolicyWorks have partnered to create two mortgage lending compliance solutions for credit unions. Click here to learn more.

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory ( will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive