As concerns about the spread of the coronavirus escalate, some of our clients have raised branch office licensing questions about employees originating mortgage loans from their homes during a period of being quarantined in their home due to the coronavirus. All but a handful of states license branch offices, and most states require a licensed mortgage loan originator ("MLO") to conduct his or her mortgage loan origination activities from a licensed location, whether it is the main office, or a licensed branch office. Some states may require the activity to be supervised by the branch manager. No state mortgage finance licensing statute addresses a situation where a licensed MLO is quarantined in his or her home and wants to continue originating mortgage loans. Given the absence of any guidance on this unique situation, we raised this matter with administrators of the Conference of State Bank Supervisors ("CSBS"), who indicated that they were as yet unaware whether the commissioners had considered this issue. We also raised this issue with the Ombudsman for the Nationwide Multistate Licensing System ("NMLS"), who advised that he will encourage state regualtors to communicate with their licensees as it relates tot his issue.
CSBS also encouraged us to contact state regulators. Therefore, we did. Regulators in some states had not yet considered the matter, but would be meeting to discuss our concerns. Regulators in other states had met and were considering issuing written guidance on their website. We understand that the Washington Department of Financial Institutions ("DFI") has done so in response to our inquiry, and has pointed out that it grants licensed loan originators the temporary authority to work from home, even if their home addresses are not licensed locations, provided certain enumerated data security provisions are met. Please check the Washington DFI website for the full text of the posting and the referenced data security provisions. We have not yet contacted regulators in each state, but where we did, the regulators were very sensitive to the concerns. Many were looking to determine the extent of their discretionary authority under state law to allow the origination activity to be conducted from a licensed mortgage loan originator's home, which was not licensed as a branch office, while the person was quarantined. Similar to the Washington DFI, some state regulators also were considering granting some sort of temporary license authority for a home office. If originating mortgage loans from the quarantined licensed MLO's home was permitted, the origination of a mortgage loan by the licensed MLO would still need to be supervised by someone in the licensed office to which the licensed MLO was assigned. One state regulator suggested that the supervision should be done by the branch manager of that location. Additionally, one regulator also noted that precautions would need to be taken with respect to any loan application-related information that was not transmitted electronically, but submitted after being handled by the MLO. All good points to consider.
More to come as we learn of a substantive state action. We will seek to convey additional state regulator guidance next week. In the interim, check the state regulators' websites. And, of course, if you have any related questions, please let us know.
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