Many mortgage companies hire their loan officers as independent contractors and not as W-2 employees. Some states require that all persons that work for you be paid as W-2 employees (such as Virginia) and others do not (such as California). New York does not require that you pay everyone as a W-2 employee but it has a requirement that you notify the Banking Department of everyone who is an independent contractor by filing an Undertaking of Accountability. Through this filing, you agree to be responsible for the actions of all of the listed persons even though they are not your employees. When such listed persons are no longer doing work for you, you must notify the New York Banking Department of that fact as well.
What are the repercussions of not filing an Undertaking of Accountability? Since it is a Banking Department regulation, you are in violation if the Undertaking is not filed. This can lead to penalties and fines when the Banking Department finds out about it. The usual circumstances under which the Banking Department discover the omission is during an examination or when the independent contractor applies for his own license.
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