Insights

Lenders and servicers seeking to license their employees as mortgage loan originators should be on the look out for state provisions on the use of credit scores as a way to determine financial responsibility. For example, Oklahoma issued guidance setting a threshold FICO score of 550 to assist in the determination of financial responsibility of mortgage loan originator applicants. In Oklahoma, if the applicant’s score is above 550, the applicant will be deemed to have demonstrated financial responsibility. If the score is less than 550, then the administrator will need to review the details of the applicant’s credit report before making a decision on the application. North Carolina followed suit by including in its proposed SAFE Act rules a minimum credit score threshold of 600 in order for applicants to be deemed to have satisfied the financial responsibility requirement of the SAFE Act.

At least two states (Kansas and West Virginia) expressly prohibit denying a mortgage loan originator license application solely based on the applicant’s credit score, but neither state imposes a minimum credit score threshold that will satisfy the financial responsibility requirement.

If a state adopts a threshold score that will be deemed to satisfy financial responsibility, lenders and servicers may be able to better manage the licensing process and anticipate whether employees will easily meet financial responsibility requirements or encounter difficulty in obtaining a loan originator license.

Hudson Cook is tracking SAFE Act developments in each state. HouseLaw subscribers may find additional information in the HouseLaw “At-A-Glance” State SAFE Act Legislation Tracking Chart.”