Mortgage Loan Originator: Exempt or Non-Exempt Status

California Infosight Compliance Home » Employment » Mortgage Loan Originator: Exempt or Non-Exempt Status  

Mortgage Loan Originator: Exempt or Non-Exempt Status
Last Reviewed: March, 2017

The United States Department of Labor (“DOL”) has issued an opinion stating mortgage loan officers did not qualify as exempt administrative employees. (Click here for a copy of the Opinion) In so holding, the DOL determined a mortgage loan officer had the following responsibilities:

  • Receives internal leads and contact potential customers or receive contacts from customers generated by direct mail or other marketing activity;
     
  • Collects required financial information from customers they contact or who contact them, including information about income, employment history, assets, investments, home ownership, debts, credit history, prior bankruptcies, judgments and liens;
     
  • Runs credit reports;
     
  • Enters the collected financial information into a computer program that identifies which loan products may be offered to customers based on the financial information provided;
     
  • Assesses loan products, identifying and discussing with a customer the terms and conditions of particular loans, trying to match the customer’s needs with one of the loan products;
     
  • Compiles customer documents for forwarding to an underwriter or loan processor; and
     
  • Finalizes documents for closings.

Applying these facts to the test, the DOL held mortgage loan officers did not perform work directly related to management. Instead, the DOL held mortgage loan officers primarily perform sales responsibilities which is production work, not responsibilities related to management- an essential element of the administrative exemption.

In this Opinion, the DOL expressly rejected the employer’s arguments that there was a mortgage loan officer exemption for individuals who worked in the financial service industry. Specifically, §541.203(e) provides:

Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption.

The DOL acknowledges this exception identifies the characteristics of a mortgage loan officer but emphasized this section did not create an additional exemption for financial institutions.

Similarly, an in-house MLO does not qualify as a sales employee exemption. The FLSA provides an outside sales exemption for employees who are salespeople; however, they cannot be employed in house. Similarly, there is an exemption for sales staff who work for retail or service establishments. 29 U.S.C. §207(i). The United States Supreme Court in Mitchell v. Kentucky Fin. Co., 359 U.S. 290 (1959) held financial institutions do not fall within the exemption.

Accordingly, an MLO properly is classified as non-exempt as it does not fall within any applicable exemption.