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Mortgage Grapevine

Loan Officer's personal bankruptcy

Any one know the ramifications for a Loan Officer working for a Federally Charter Bank who declares personal BK? Does this disqualify them from the industry?
by tatter salad April 23, 2010 2:03 AM


Per the BK code you can't be discriminated against due to BK. I know a guy who got a net branch 1 year after filing a BK 7.
by ssfranny1 April 23, 2010 5:03 AM


Now doing that and applyng for your NMLS License could be a challenge (Due to the credit requirements).
by UrNot2Bright April 23, 2010 9:15 AM


Passed the NMLS test and am registered in FL.I hear each state then has their "overlay of requirements" with FL being particularly difficult when it comes to LO's personal financial history. After 18 years in biz, may be forced out. I do not know. Any additional thoughts are appreciated! Thanks.
by tatter salad April 23, 2010 9:54 AM


If that is true ssfranny, that is one of the most ignored laws around.

Tatter, I wouldn't think it DQs them, but it would make it harder to get certain jobs in the industry.


by YATI April 23, 2010 11:18 AM


This is a very common concern among all LO's with NMLS.

tater is right- NMLS has no set standard, each and every state will determine on their own what is acceptable credit, and what is not.

What is important to realize is that there is still a process involved. My personal opinion is that the states and NMLS have made it sound bad, and as a result most loan officers have simple given up- and will not renew. Marv is a very good example of this.

Personally, if it were me, I'd go through the renewal process, and then once the state were to formally say they were going to deny renewal, go through whatever process that state has set up to contest that ruling.

Lose that, and then it's off to State Court. I'd imagine almost no LO's will actually take it that far, but I'd be VERY curious to see what the results are for the few that do.

When Ohio first passed licensing in 2002, a guy that I knew had his license denied because he had plead guilty to "streaking" while in college 10 years prior. Ohio DFI said that demonstrated poor moral character, so they denied him. He went to his hearing, plead his case, and was still told he was denied. It was not until his attorney told DFI that they would be filing an action in county court that his "denial" was suddenly reversed.

Long story short, they can do whatever they want if you let them. If you think you should be in this industry, and are willing to fight for your license, give it a try...the BK laws specifically stating that employment cannot be discriminated against on the basis of a BK is a great start. I'd be curious how a judge feels about that, rather than an anti-mortgage broker state enforcement board.
by XpressOH April 23, 2010 11:52 AM


I'll be very surprised if no one files a class action lawsuit on behalf of every loan officer denied because of BK.
by marin99 April 23, 2010 12:41 PM


How about foreclosure. I know an originator in AZ that purchased a home with an FHA loan on 12/31/08 before that guideline change, and then walked bailed immediately on two previous primary residences that had become rentals.
I would hope that application is denied.
by fisherman April 23, 2010 2:42 PM


NJ says that they're reviewing the MU4 on a case by case basis regarding BK's

a person with a 'control interest' or officer/manager would be ineligible with a bk in history for NJ.
by MikeM-NJ April 23, 2010 2:47 PM


After reading many of these posts, I get the idea that everybody thinks they can only apply in their home state.
Why can't you just apply to a state of your choice in the NMLS, get okayed there...go to work for a lender that services that state, then worry about expanding your license to other states.
Don't know if this will work...but it might be worth asking as different states seem to have significantly different interpretations of the SAFE Act.
by NoQual April 23, 2010 6:29 PM


NoQual - that's an interesting point. This 50 different interpretations of LO's credit history is definitely going to create major havoc. I hope there are enough attorneys out there willing to take these class action cases on. If so, you will definitely see a major loosening of standards before there are multi million dollar judgments handed down.
by sox fan April 23, 2010 8:56 PM


Isn't a shame everybody is worrying about this? It SUCKS to worry that you might be out of a job when you can't help what's going on with our industry. When the credit requirements are in place in 2011, reviews will be on a state by state, case by case basis. I expect class action and I think the sooner that can happen, the better for us all. >>Licensed in 13 states, includes CA, TX, and FL, I live in Tennessee and Florida, so if anyone has a problem, send me your email address, we'll talk. This whole chaotic mess of a business we're in now REALLY pisses me off. 26 years and I never would have thought... TGIF!!!!
by VolBlondie April 24, 2010 1:34 AM


Thanks everyone for the great input! Some days I just don't have the stomach anymore for all the new rules and regulations and I just want to give up. But most days, I fight because I love what I do, I do it well and this is my career - damn it! I'll post any updates. Best to you all - TS
by tatter salad April 25, 2010 6:26 PM


Well, I suppose I am about to embarq upon the expensive and all consuming task of fighting the provision of the SAFE act baring my renewal of a LO license due to a previous felony conviciton of acces devise fraud (15 years ago). I actually have excellent credit, no other criminal history, perfect mortgage license, other state licenses, perfect driver's license and a significant net worth. I have already filed my appeal of denial for licensure renewal. I have delayed the hearing as long as possible, hoping for a hearing's findings in another states that i could use in my own hearing. Unfortunately, I cannot find a single hearing, NONE on the web. I am willing to file suit after my hearing (which I realistically expect denial of my appeal). I intend to file suit in my state. It will be expensive. I wish i did not have to do this, but i hate the fact that the government can pass a law taking my career from me, when i have been a model loan officer with zero enforcement actions. I built the company. Now the government tells me after 11 years, I am not welcome in the industry. Well, i have two choices: take it or fight it. i choose the later. Does anyone out there have any information on hearings that might help? I would appreciate it. I would also appreciate it if anyone has any good tips or ideas. Thanks you. Wish me luck.
by dlo3575 May 25, 2010 1:14 AM


OK... I took the NMLS test today... I have 7 years exp and have NEVER had a complaint! Every Audit has ALWAYS been perfect! I am licensed in two states. I failed this test by 1 question. I still have to take both state exams even AFTER I pass the National test! WTF??? does anyone else feel my frustration? Why do I have to take 3 tests in order to keep my licensing status and Fed Regulated L.O.'s don't have to take a single test!? If this isn't discrimination... I don't know what is!!! I just spent 3 hours testing on Regs... What's fair... what's not... and I am getting the shaft by the very people "protecting" the industry. This is the biggest scam ever... I thought HVCC was a trip... but this takes the cake! I wan tot file a class action suit! this is not right by any means!
by angrybroker June 8, 2010 1:36 PM


go to work for a FDIC Bank! They can do whatever they want! Lets file a class action!
by angrybroker June 8, 2010 1:37 PM


@dlo3575. Have you had any luck with your appeal? I am starting mine for a 20 yr old conviction for going into a Frat house. If you have any advice please send me a note at Canbyshark at AOL.com thanks for any help you can give.
by cmorris100 March 9, 2011 1:09 AM


I'm being affected by the BK inclusion as a denial reason into the NMLS Loan Originator licensure (government over control status quo). My state is Florida. Who can refer me a good lawyer to start a Class Action Lawsuit? BK is a citizen right; and accordingly with the BK law, the government is discriminating many LO’s which are being scrubbed from licensure like myself. Please, reach me at: avielluis@yahoo.com . Thank you.
by AvielLuis May 1, 2011 5:45 PM


Entered the mortgage business in January of 2009 - Prior to spending nearly $1,000 in fees and expenses in early 2011, and studying for the MLO exams like I was trying to pass the BAR, I called the Virginia BFI and asked if a MLO license can be denied due to BK, collections, or other credit issues. The answer was, "NO". I actually called back two more times to validate this answer and received the same answer, “NO". So I humbly took on the MLO challenge, passed the state with 86, national with 88. My license was just denied in December 2011 due to "A Lack of a Finding of Financial Responsibility". Specifically, I've never had a misdemeanor, felony, DUI, customer complaint, etc, ever!! However, my credit is flawed. In November 2011, I submitted an Offer in Compromise for a tax lien that has been in a non-collectible status since 2005, and I have a judgment from 2006 that is in a non-collectible status. Although I provided all docs to substantiate my good faith efforts to resolve these credit issues, the Commissioner denied my application due to "A Lack of a Finding of Financial Responsibility". By the way, the Deputy Commissioner and a Senior Financial Analyst for the BFI have both told me the BFI has NO definition for, "A Finding of Financial Responsibility". How then can a MLO applicant be denied by using an undefined term?? The truth is, the only credible resource to determine “a finding of financial responsibility” is by pulling our credit report. This brings me to the next issue, which is: The BFI of Virginia states, "according to § 6.2-1706 Qualifications, the Commission shall not base a license denial, in whole or in part, on an applicant's credit score, “nor shall it use a credit report as the sole basis for license denial”. The key here is, regardless of the extent of how much negative credit is recorded on a credit report, an MLO applicant should NOT be getting denied solely due to what's on the credit report. If you have a combination of a felony and a bad credit report, yes, you can be denied. Further, a CBC should be used to determine eligibility. The BFI should not be denying for credit. The BFI has admitted to me there is NO definition for the term, "A Finding of Financial Responsibility". This is a BIG problem because they are saying you can be denied for "a lack of a finding of financial responsibility", yet they have no definition for that term. This reminds me of a ponzie schemne (was being deceived while someone was collecting fees?) Do the math!! The BFI wants a MLO to live by the TILA, (being up-front and honest about everything), yet they can deceive MLO applicants (who, by the way, are consumers) by stating we can be denied due to “a lack of a finding of financial responsibility”, yet, this is an undefined term. To me, this is the pinnacle of hypocrisy. The BFI is not offering a definition for a term you can be denied for. I will contact the Governor of Virginia this week to expose this scam. Right is right, wrong is wrong. Stand up for the truth!! Don’t cower to political correctness while arrogant suits don’t even read their own laws and contracts. Allowing me to spend my hard earned $, believing I cannot be denied, this is simply dishonest!!...Best to all…
by Retreiver December 27, 2011 1:00 PM


I cannot believe that states deny people due to bad credit or personal bankruptcy. I have a friend who had multiple judgements, foreclosures, repossessions, charge offs, and tax liens who just got his Mortgage Loan Originators license. The state only wanted an explaination on his bankruptcy.
by March007 March 11, 2012 9:28 PM


I cannot believe that states deny people due to bad credit or personal bankruptcy. I have a friend who had multiple judgements, foreclosures, repossessions, charge offs, and tax liens who just got his Mortgage Loan Originators license. The state only wanted an explaination on his bankruptcy.
by March007 March 11, 2012 9:28 PM


Can anyone give me updates, testimony, experience....?


I have been in financial services (licensed in various fields) since 1997. Most of that time in mortgages. (98-99 then 2001 to present.)


I have worked under a loan originator license since it became required in one of our great states in 2004. Then, in 2009 I let the license lapse to go work for 'the man' (giant Federal Charter institutions.)


Well, those 'giants' have since closed the divisions I was in and I find myself looking at the best opportunities if I go and get licensed for the 8 states I 'farm.'


As I'm studying and passing the tests, I'm reading about this 'financial fitness' test in every state. That's what led me here.


I want to vent out my frustrations, but rather, I am pretty worried about this. Every time I get a foot-hold in this industry something blows up. Now - with my last organization shutting down - I'm trying to get licensed to continue to do the same work I've done for 11 years. Why? Because I had a Chapter 7 Bankruptcy discharged just over a year ago and the foreclosure on my property that comes as a result of that BK just wrapped up.


Am I seriously to be denied the ability to work, provide for my very young family, and be faced with being put into another financial hardship situation?


I have never missed a payment, had a judgment, or collection - even up unto the bankruptcy. I have never had a missed payment, judgment or collection since the bankruptcy. I have cars that were reinstated out of the bankruptcy never with a single missed payment that now have over 2 years of seasoning on the both of them.


I have never been the subject of any complaint, crime, conviction, charge, misdemeanor, felony, not even a 'repurchased loan.' I have ZERO history of being a risk to the public health or safety.


I was honorably discharged from the United States Marine Corps shortly after 9/11 - also no records there.


Since my bankruptcy and during the finalizing of this foreclosure situation - I have been representing our industry with a Federal Charter and performing at the top of my class. In fact - the last organization that just went down invited me to possible new operations. I was one of about 60 or so invited from a team of over 400. I perform well and I perform ethically. My success would speak to both of these.


So is that it then? I just get denied and turned away? From the industry that created this mess? From the industry CEOs that gets bonuse and raises during the hardest economic times of my and my parents' lifetimes? From the politicians who show utter disrespect for the laws, ethics and morality, and they get to keep their lifetime pensions, but I will be denied for getting caught 'holding the bag' when all my work was pulled out from under me due to the quick and drastic change to the mortgage industry?


I would hope that the entirety of my tenure and clean record would speak to my 'general fitness' as a representative in this mortgage industry.


But how will this go down? Can anyone tell me? Am I losing sleep over nothing? Will my applications come back in due time with the 'APPROVAL' stamp - or is it a 'zero tolerance' policy?


Will the fact that I took loans to start and build a mortgage business after I had about 6 years in learning through hard knocks - and then the industry 'blew up' on me just as I was about to replenish my debt and start turning profits? Will this matter at all or do I just have to walk away - become poor - sit tight - and hope there is enough dignity and ability for me to get my license after many more years go by?


Quite frankly I will end with this - first - if you do have insights - please share what I should expect - second - how much sense does it make to deny someone like me for unfortunate timing in investing in myself and the mortgage industry? I read that the reasoning behind denying someone like me because of BK and Foreclosure is because I would be a 'higher risk' to the public safety in that I would be 'more tempted' to cheat, steal, lie, mislead, defraud, trick, and deceive people in order to make gain, get ahead, and recover for all my 'financial misfortune.' So how much sense does it make to turn against someone like me when there was one unfortunate incident - take away my ability to perform my trade - the only thing I know how to do well and make a living for me and my family - and then throw me to the 'streets' to pick up something completely new and hope to be successful at it. I know it could happen (being successful at something else), but, wouldn't it stand to reason that by throwing me out it would put me at a MUCH HIGHER RISK to the public safety? Wouldn't taking away my ability to make money and provide for my family put me under more pressure to have to 'steal to eat?'


Anybody who reads that and says that I said I will steal to eat because I'm denied the mortgage industry is an idiot. But, anyone who stands with a reasonable head on their shoulders - what is more risky? Letting me go back to work with the same squeaky clean and ethical record of 15 years that I have or kicking me to the curb with nothing but my animal instincts to survive while living in completely foreign territory? Which option would potentially create a 'higher risk opportunity' for someone to actually turn to a 'pro-active' lifestyle of 'harming the public?'
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by creditsolut October 21, 2012 6:48 PM


@deskrookie, please let us know how it went. I have chptr 13 5 years ago and not sure if its worth spending all that money and time for the test. Thanks
by avocado April 26, 2013 12:50 AM


I have taken my National and State test and passed both, going to get fingerprints tomorrow. I filled out MU4 today and of course I had a chapter 7 bankruptcy almost 9 years ago due to loss of a good paying job. I am sweating it now after reading this. Can anyone ease my mind? I have nothing else bad going on except that. Pamp0286@gmail.com
by Pamp0286 May 30, 2013 7:33 PM


I have been in the mortgage field for 25 years . Left it for five years and now I passed my real estate exam , the SAFE exam The state exam and now the National exam . Now they may say no because of a BK 7 that had to do this year. Wow sad
by rsgotmail June 19, 2013 2:28 PM


These are the same people who put us American's in this mess and now as loan officer we have to pay the price for them . It comes from the very top and goes down hill. I spent a lot money to get back in the field of mortgages and it may be over.
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