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Under the mortgage servicing rules, would a bank lose its small servicer exemption if it originates mortgage loans that it sells to an investor but still services?

If a bank originated the loan, the bank still qualifies as a small servicer if all other conditions are met. Comment 2 to §1026.41(e)(4)(ii) of Regulation Z explains that to qualify as a small servicer, the servicer must service only mortgage loans for which the servicer (or an affiliate) is the creditor or assignee. “To be the creditor or assignee of a mortgage loan, the servicer (or an affiliate) must either currently own the mortgage loan or must have been the entity to which the mortgage loan obligation was initially payable (that is, the originator of the mortgage loan).” (Emphasis added.)

In this case, it appears that the mortgage loan was initially payable to the bank. Of course, the bank must meet the other condition that, together with any affiliates, it services 5,000 or fewer mortgage loans for which the servicer (or affiliate) is the creditor or assignee. (June 2020)

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