Sponsorship Transfer and Advertising Before NMLS Approval
Marcus Bell has been a Kentucky-licensed mortgage loan officer sponsored by Bluegrass Mortgage LLC since 2022. On Monday, June 2, he accepts a job with Riverbend Mortgage, a Kentucky-licensed mortgage loan company. That same day, Marcus begins taking applications for Riverbend from Kentucky borrowers, using Riverbend's loan origination system. His NMLS record still shows Bluegrass as his sponsor, and his sponsorship transfer to Riverbend has not been approved. Marcus also updates his social media profile to say “Kentucky's lowest mortgage rates-Marcus Bell, Riverbend Mortgage” without including his NMLS ID or the company's license information. On June 10, a borrower calls the Kentucky Department of Financial Institutions to ask whether Marcus is licensed. Marcus says he is “licensed in Kentucky” and has been for years.
1. Under Kentucky law and NMLS rules, may Marcus originate loans for Riverbend before his sponsorship transfer is approved? Explain.
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No. Kentucky licenses mortgage loan officers through NMLS, and the license must be associated with a licensed mortgage loan company. Marcus's NMLS record still shows Bluegrass. Taking applications is loan origination activity, not a harmless administrative step. Until Riverbend's sponsorship is active in NMLS and the transfer is approved, Marcus may not originate for Riverbend. He should stop taking applications immediately, secure the files, and wait for the sponsorship change. Riverbend should not let him originate under its license until the transfer is effective. Continuing could violate KRS Chapter 286.8 and DFI rules and expose both Marcus and Riverbend to license discipline.
2. What are the advertising problems with Marcus's social media profile, and what must Kentucky-licensed MLOs include?
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The profile has two problems. “Kentucky's lowest mortgage rates” is an unsubstantiated superlative that can be deceptive. In addition, the ad omits the required NMLS unique identifier and the company's licensed name. Mortgage loan originators must include their NMLS ID on advertising, and Kentucky advertising rules require accurate company identification. Marcus should remove “lowest” and add his NMLS ID and Riverbend's licensed name. He should also make sure the ad does not imply he is already sponsored by Riverbend if the transfer is not effective. The company should review and approve the ad before it runs.
3. What should Marcus and Riverbend do to correct the situation, and what are the risks if they continue?
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Marcus should stop originating for Riverbend, correct or take down the ad, and document the dates. Riverbend should submit the sponsorship transfer through NMLS, confirm the license status, and assign any pending files to a properly sponsored MLO or hold them. If applications were taken improperly, the company should review whether disclosures were timely and whether borrowers were harmed, and consult counsel about notifying DFI. Risks include suspension or revocation of Marcus's license, fines for him and Riverbend, rescission or refund demands, and damage to the company's ability to renew its license. Marcus should not say he is “licensed in Kentucky” without clarifying the company sponsorship.