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By Rob
Real Estate & Mortgage Broker... Creator of the Sink or Swim Loan Closing System
With all the rules
and regulations out there to keep track off, here’s one more—the FTC
privacy rules. It’s mandatory that all mortgage offices comply with the
law. And anyone caught breaking the rules, risks losing their license
and their livelihood. Don’t make a mistake that could land you in hot
water.
Below are some of
the most frequently asked questions mortgage brokers have regarding the
FTC privacy rules. It doesn’t hurt to review and make sure your firm is
in compliance. If you are a net branch loan officer or work from home,
the rules are even of more importance to you. Audits of “home” loan
officers are on the rise. Don’t make a costly mistake that could cost
you thousands!!!
I want you to be in
the mortgage industry for many years to come. Best of luck in your
business. This is a wonderful industry to be in.
Warm Regards,
Real Estate & Mortgage Broker... Creator of the Sink or Swim Loan Closing System
http://www.myloansystem.com
Frequently Asked
Questions About the Privacy Regulation and Mortgage Brokers
Staff of the Federal Trade Commission has developed the following
Additional Frequently Asked Questions ("AFAQs") to assist mortgage
brokers in complying with sections 502-09 of the Gramm-Leach-Bliley Act
(GLB Act) and the FTC's Privacy Rule. These AFAQs illustrate how select
provisions of the Commission's Privacy Rule apply to specific situations
a mortgage broker may confront. However, they do not address all
provisions that may apply to any given situation and should be read in
conjunction with the general FAQs and other materials available on the
FTC's website at
www.ftc.gov/privacy/glbact/index.html. Additionally, this staff
guidance does not address mortgage brokers' obligations under section
501 of the GLB Act and the FTC's Safeguards Rule or the applicability of
the Fair Credit Reporting Act or any other federal or state law that may
pertain to the questions and answers. Staff may supplement or revise
these AFAQs as necessary or appropriate in light of further questions
and experience.
1. I am a mortgage
broker. Am I a financial institution subject to the Privacy Rule?
Yes. Mortgage brokers are financial institutions because brokering loans
is a financial activity referenced in section 4(k)(4)(F) of the Bank
Holding Company Act and listed in 12 C.F.R. § 225.28(b)(1).
See 15 U.S.C. § 6809(3); 16
C.F.R. § 313.3(k)(2)(xi).
Mortgage brokers are subject to the FTC's enforcement
authority, its Privacy Rule, and its Safeguards Rule.
See 15 U.S.C. § 6805(a)(7);
16 C.F.R. § 313.1(b). The Privacy Rule applies when individuals seek
your assistance in obtaining mortgage loans that are primarily for
personal, family, or household purposes. Under the Privacy Rule, you
establish a customer relationship when an individual enters into an
agreement or understanding with you whereby you undertake to arrange or
broker a residential mortgage loan for him or her.
See 16 C.F.R. § 313.3(i)(2)(i)(E).
You also establish a customer relationship when an individual provides
any personally identifiable financial information to you in an effort to
obtain a residential mortgage loan through you.
See 16 C.F.R. § 313.4(c)(3)(i)(E).
2. When an
individual is interested in a residential mortgage loan, I often have
them come into the office and provide application information to me in
person. May I deliver a privacy notice at the same time as individuals
provide this type of information to me in person?
Yes. The Privacy Rule requires that you provide an initial privacy
notice not later than when the customer relationship is established.
See 16 C.F.R. § 313.4(a). A customer relationship is
established as soon as an individual provides personally identifiable
financial information to you in an effort to obtain a mortgage loan
through you. See 16
C.F.R. § 313.4(c)(3)(i)(E). That means that you must deliver a privacy
notice before or at the same time as the individual provides such
information in person.
3. My website
invites individuals to submit applications for residential mortgage
loans online. May I deliver an initial privacy notice at the same time
as individuals submit their application information online?
Yes. The Privacy Rule requires that you provide an initial privacy
notice not later than when the customer relationship is established.
See 16 C.F.R. § 313.4(a). A customer relationship is
established as soon as an individual submits application information to
you. See 16 C.F.R.
§ 313.4(c)(3)(i)(E). As a result, you must deliver a privacy notice not
later than when the information is submitted.
See 16 C.F.R. § 313.4(a).
You may deliver a notice to online applicants by posting your current
privacy notice clearly and conspicuously on your website if the
applicants acknowledge its receipt not later than when they submit their
application information. See
16 C.F.R. § 313.9(b)(1)(iii). You must also provide the notice so that
your customers can retain it or obtain it later.
See 16 C.F.R. § 313.9(e).
One way of doing this is to make your current privacy notice available
on your website for online applicants who agree to receive the notice at
the website.
4. I take
residential mortgage applications over the phone without meeting the
applicants face-to-face. Under the Privacy Rule may I deliver an initial
privacy notice after these individuals give me their personally
identifiable financial information?
Subsequent delivery is permitted under certain circumstances. The
Privacy Rule permits subsequent delivery of notices within a reasonable
time after you establish a customer relationship if (1) providing notice
not later than when you establish the customer relationship would
substantially delay the customer's transaction, and (2) the customer
agrees to receive the notice at a later time.
See 16 C.F.R. § 313.4(e).
Note, however, that if you delay delivering your initial notice to a
customer, you may not disclose that customer's nonpublic personal
information to any nonaffiliated third party (except as permitted by the
exceptions under §§ 313.14 and 313.15 of the Privacy Rule) before you
provide the notices and a reasonable opportunity to opt out, in
accordance with §§ 313.7 and 313.10 of the Privacy Rule.
5. Do I need to
provide an annual privacy notice
to an individual who has obtained a mortgage loan through me if we're no
longer in communication?
No. An individual who has obtained a loan through you becomes a former
customer when you no longer provide any statements or notices to the
customer concerning that relationship. (Likewise, a customer who ceases
using your services without obtaining a loan through you becomes a
former customer.) See 16
C.F.R. § 313.5(b)(2)(iv). You are not required to provide an annual
notice to a former customer. However, you may need to provide a revised
privacy notice and opt out notice if you intend to disclose nonpublic
personal information about a former customer other than as described in
the initial privacy notice that you provided.
See 16 C.F.R. § 313.8.
6. In order to
obtain loans for my customers, I share nonpublic personal information
with lenders and credit reporting agencies, and my privacy notice
notifies my customers that I make disclosures as permitted by law. Am I
required to allow my customers to opt out of this type of information
sharing?
No. The Privacy Rule allows you to disclose nonpublic personal
information about your customers without providing them a reasonable
opportunity to opt out under certain circumstances. These exceptions to
the opt out requirement are described at §§ 313.13 through 313.15 of the
Privacy Rule. Pursuant to § 313.14, you do not need to allow your
customers to opt out of disclosures that are necessary for processing or
administering financial transactions that they have requested or
authorized. This would include, for example, disclosures to a
prospective lender where your customer has authorized you to look for a
mortgage loan and the disclosure is necessary to broker the loan.
Further, the exceptions under § 313.15 include disclosures of
information to a consumer reporting agency that are made in accordance
with the Fair Credit Reporting Act, 15 U.S.C. § 1681
et seq.
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