The Facebook Ad, the Indiana Condo, and the Fee Collected Before Any Disclosure
Andre holds an Illinois MLO license sponsored by an Illinois-licensed brokerage. He posts a Facebook ad reading: "3.5% down, no PMI, $500 closing-cost credit - best rates in Chicagoland." The ad names neither him nor his brokerage and shows no NMLS identifier. In the comments he adds that he will personally pay the appraisal fee for any borrower who closes by the end of the month.
A couple buying a condo in Hammond, Indiana asks him to move quickly. Because they are in a hurry, he collects a $450 application fee before giving them any written disclosure. He also tells a separate Illinois borrower that he can structure a loan with a two-year prepayment penalty and points and fees above the state's trigger, even though the compliance officer has flagged the loan as a high-risk home loan under Illinois law.
1. Identify every advertising problem in the Facebook post and comment, and state what a compliant version requires.
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Missing identifiers: every advertisement must clearly show the MLO's NMLS unique identifier and be presented under the licensed name. The post shows neither, and the brokerage name is missing as well - that independently misrepresents who is legally responsible for the origination.
"No PMI" on a 3.5% down loan: at that leverage there is almost always mortgage insurance, whether borrower-paid, lender-paid, or structured as a second lien. Saying "no PMI" without disclosing the cost embedded in the rate or the second lien is misleading even if technically no monthly MI line appears.
"Best rates in Chicagoland": a comparative superlative requires substantiation; unsubstantiated, it is a deceptive claim.
"$500 closing-cost credit": permissible only as an actual lender credit, disclosed on the Loan Estimate and Closing Disclosure, with any conditions (deadline, property type, minimum loan amount) spelled out.
Paying the appraisal fee personally: this is an undisclosed inducement. A fee paid to a third party on the borrower's behalf must appear on the disclosures as a credit from the lender, and a personal payment creates a payment outside the closing statement, an unearned advantage over competitors, and a conflict of interest. It should be eliminated or converted into a properly disclosed lender credit, and it must not be conditioned on a closing deadline that pressures the borrower.
2. May Andre originate the Hammond, Indiana loan under his Illinois license? What should he do?
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No. A state MLO license authorizes origination of loans secured by residential property in that state. An Illinois license and its sponsorship cover Illinois property; a condo in Hammond is Indiana collateral, requiring Indiana licensure through the NMLS and a sponsoring Indiana-licensed entity, and the brokerage itself must be authorized to do business there.
Federal SAFE Act registration is not a nationwide practice license, and temporary authority is a narrow bridge for an MLO moving between states who holds an eligible recent license and a pending application - it does not let a sitting Illinois-only MLO take an application on out-of-state collateral.
What to do: refer the couple to an Indiana-licensed MLO at a firm authorized in Indiana, or pursue Indiana licensure before taking the application. Taking the application, quoting the terms, or collecting a fee now is unlicensed activity in Indiana and a violation of the Illinois Residential Mortgage License Act's conduct provisions as well. Note also that even a referral must be handled without an unearned fee to Andre.
3. Evaluate the $450 fee collected before any written disclosure and the proposed high-risk loan features.
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The fee timing: the creditor must deliver the Loan Estimate no later than three business days after receiving the application, and may not impose any fee before the consumer has received the LE - the sole narrow exception being a bona fide credit report fee. Collecting a $450 application fee first is a violation, and the fee must in any event be itemized on the LE, where fees paid to the creditor sit in the zero-tolerance bucket. Illinois also requires delivery, at application, of the state-required notice identifying the licensee and directing complaints to IDFPR; taking money before any disclosure defeats that requirement too.
The high-risk loan: Illinois restricts high-risk home loans, and the features described are the ones the statute targets - prepayment penalties, balloon payments, negative amortization, and interest-rate increases triggered by default are prohibited in this category, and borrowers must receive homeownership counseling before closing. The compliance officer's classification is the controlling signal here; Andre may not shop for a structure that avoids the label or tell the borrower the terms are available when they are not.
Correct handling: disclose the fee and the state notice before taking money, remove the prohibited features, confirm the counseling requirement and the current statutory thresholds with compliance, and re-disclose the corrected terms. Promising prohibited terms to win a borrower is itself a deceptive practice regardless of whether the loan ever closes.