What is something a mortgage lender may NOT do?

A mortgage lender may not employ unlicensed loan originators due to the strict regulatory requirements governing the mortgage industry. Each state has specific laws that mandate all individuals involved in the lending process, particularly those who engage directly with consumers to negotiate or originate loans, to obtain the appropriate licensure. This ensures that loan originators are knowledgeable about mortgage products, compliance, consumer protection laws, and ethical practices.

Employing unlicensed individuals poses significant risks, both legally and ethically. It can lead to legal liabilities for the lender, as not adhering to licensing requirements can result in severe penalties, including fines and restrictions on the ability to conduct business. Additionally, unlicensed loan originators may lack the necessary training and understanding of the complexities involved in the lending process, which can ultimately harm consumers who rely on accurate and responsible guidance when obtaining mortgages.

In contrast, other activities such as closing loans with money outside a lender's portfolio, servicing loans they did not originate, or closing loans in their own name are typically within the permissible actions of a mortgage lender, provided they follow the relevant regulatory guidelines and industry standards.