Are Loan Originators Allowed to Originate Loans When They Are Conditionally Licensed?

Your state is still transitioning to the Nationwide Mortgage Licensing System. Some of your loan originators have transitioned their licenses but they have not been approved yet by the state licensing agency. Are they allowed to originate loans? Can you pay them for the loans they originate?

Check your state’s licensing statute and find out whether the licensing agency has issued any bulletins or memos to its licensees outlining its interpretation of the licensing statute. In many cases, the state agency has taken the position that, so long as your loan originators have license applications pending with the state or have extended licenses or registrations, then they may receive compensation for originations. A different position may be taken by your licensing agency for new originators who are awaiting approval of their licensing applications during the transition period. You may find that your state takes the position that a new loan originator may not originate loans until the license application has been approved. Each state has a different licensing statute subject only to the requirements of the SAFE Act. Each licensing agency will interpret its own laws and regulations so you must check each state's laws and regulations for every state in which you and your loan originators are licensed or wish to be licensed. You may find that one state will allow originators to originate (and get paid) while the application is pending but another state may require the loan originator to wait to originate until the application is fully approved.