Compliance Topic: Other Employment or Self-employment of Loan Officers

HUD allows loan officers to have other employment including self-employment.
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​ HUD Handbook 4000.1 eff 9/14/15: I A. 3 (iv) Dual Employment: “The Mortgagee must require its employees to be its employees exclusively, unless the Mortgagee has determined that the employee’s other outside employment, including any self-employment, does not create a prohibited conflict of interest” The CFPB, state regulators and the Company are concerned about potential “reputation and brand risk”.  Regulations potentially violated include: RESPA; TILA ; Loan Officer Compensation rules as well as others.
 
Some thoughts for Company policies:  Outside employment/self-employment can benefit both the Company as well as the loan officer but can lead to serious compliance problems. The Company should institute a written policy for additional employment/self-employment which should include:  

1. Nature of Employment:  Policy should state that the loan officer does not have a right to other employment but may be permitted by the Company.  Establish a non-exclusive list of prohibited additional businesses.  Examples: Realtor, title agent, credit reporting, appraiser or financial planning.
2. Approval by Company:  The Company reserves the right to deny additional employment if in its sole discretion there is a potential for reputation or brand risk or potential violation of laws, rules and regulations. 
3. Social Media use:  The loan officer must maintain separate phone, email and addresses and not mix or appear that the Company is endorsing the employment.  Marketing material and social media sites must not be “combined” with loan origination activity.
4. NMLS Consumer Site:  Require all additional employment be listed on the consumer access site.
5. Licensed Professionals: The Company might employ, as part-time loan officers, attorneys, accountants, financial planners or other licensed individuals.  The policy needs to include specific disclosures regarding the relationship between the Company and licensed professional.  The policy also should prohibit the licensed professional from receiving compensation both from loans he/she originates as well as from the professional representation.  No double dipping.    
6. Disclosure, Approval and Recertify Process:  Upon hiring require that all other employment/self-employment be disclosed and specifically approved by the Company. Thereafter the loan officer is required to disclose any changes and to re-certify annually to the Company. 
7. Family Members:  The policy should also include, at least, disclosure of close family members in prohibited business or as licensed professionals where referral relationships might occur.  This should include spouses, same sex partners, children or parents.
8. Due Diligence:  Include as part of the social media compliance a review of additional employment.

Michael J. Wallace, Esq.
President
mwallace@acuclix.com
(813) 933-2200