I imagine this should be outlined in a Bank's lending/ethics Policy as part of their Non-Arms Length transaction practices, but is there any regulatory guidance that prohibits or discourages someone from originating their own mortgage?

Example: A husband and wife are borrowers on the loan, the wife is a loan originator and wants to originate the loan.

I cannot imagine this is permissible.

But I am having trouble finding regulatory citation to support. I tried skimming through the LO Rule small entity compliance guide but was unable to find what I was looking for.

And while I have not finished looking, I have yet to locate something addressing this in our Policy.

Any help is greatly appreciated.

It's been touched on several times in the forums.

NO. There is a lack of checks and balances. Who is going to monitor quality, if all steps were done, rates, etc. It would be too easy to ignore something that might disqualify the loan. It is a safety and soundness issue, akin to letting the fox guard the henhouse.

I am shocked that your bank doesn't prohibit this in its code of ethics policy or employee manual or something of that nature.

Show me a law that says I'm not allowed to be in the cash vault by myself after I've disabled all the security cameras...

(Rhetorical, but to the point of others some processes are basic controls to mitigate risk of loss to the Bank's stakeholders, depositors, etc.)

And while I have not finished looking, I have yet to locate something addressing this in our Policy.


if not in lending policy chec your Code of Ethics

NO! and we recently discover at our bank we don't have the "thou shalt not....maintence your own account, handle your own transactions, etc." in policies even though we train and monitor on this - it's in there now and headed to the Board

A husband and wife are borrowers on the loan, the wife is a loan originator and wants to originate the loan.

It's a conflict of interest.

The following document speaks to management's responsibilities.

https://www.fdic.gov/regulations/safety/manual/section4-1.pdf

"Loans extended personally by officers, directors or principal stockholders (or immediate family member of each) to parties who are also borrowers from the bank or loans extended personally by any borrowing customers to an officer, director or principal stockholder of the bank."

Both parties, H&W, in this scenario are (will be) borrowers from the bank.