Common Compliance Mistakes New MLOs Make (and How to Avoid Them)

Getting your mortgage license is a major accomplishment. But the real challenge begins the moment you start originating loans. The mortgage industry is one of the most heavily regulated sectors in financial services, and compliance is not just a box to check. It is the foundation of your entire career. One violation can mean fines, license suspension, or a permanent ban from the industry.

The good news is that most compliance mistakes are preventable. They come from not fully understanding the rules, getting swept up in the pressure to close deals, or simply not knowing what you don't know. This guide covers the most common pitfalls new MLOs face and how to steer clear of them from day onePre License Your First 30 Days As An Mlo What To Expect After Youre Licensed Resources.

RESPA Violations That End Careers

The Real Estate Settlement Procedures Act (RESPA)Compliance Resources Mortgage Resources Real Estate Settlement Procedures Act Compliance was enacted in 1974 to protect consumers from predatory lending practices. It is enforced by the Consumer Financial Protection Bureau, and violations carry serious consequences, including substantial fines and potential imprisonment for the most egregious offenses under Section 8.

Kickbacks and Referral Fees

Section 8 of RESPA prohibits giving or accepting anything of value in exchange for the referral of mortgage business. This is the compliance area that trips up more new MLOs than almost anything else, largely because the line between "building relationships" and "paying for referrals" is not always intuitive.

What counts as a thing of value under RESPA? Almost everything. Sporting event tickets you give to a real estate agent who sends you business. Free subscription services you provide to brokerages in exchange for referrals. Hosting dinners or happy hours for agents who regularly refer clients your way. Even seemingly small gestures like a gift card as a thank you for a referral or covering event admission for a real estate partner can be interpreted as prohibited compensation tied to referral activity.

The CFPB has made this a renewed enforcement priority. In a recent enforcement action, a mortgage lender received a seven-figure civil penalty for providing subscription services, event tickets, and entertainment to real estate brokerages that referred mortgage business to the lender. The real estate brokerage involved in the same arrangement was also fined significantly.

Seems Harmless	Why It Is a Problem	What to Do Instead
Buying lunch for a real estate agent who sends you referrals	Can be interpreted as a thing of value tied to referral activity under RESPA Section 8	Build relationships through excellent service and market knowledge, not incentives
Giving agents free access to property data subscriptions	CFPB has specifically cited this as a kickback violation in enforcement actions	Let your closing track record speak for itself
Hosting a happy hour for your top referral partners	Entertainment tied to referral relationships violates Section 8 regardless of the dollar amount	Host educational events open to all agents, not just referral sources
Sending gift cards after a successful closing	Even small gifts can be viewed as compensation for referrals	Send a handwritten thank you note instead

Fee Splitting and Unearned Fees

RESPA Section 8(b) prohibits splitting settlement service fees unless each party receiving a portion of the fee actually performed a service. If a fee is divided among multiple parties but not all of them provided a genuine service, that is a violation. New MLOs should pay close attention to how their employer structures fees and understand exactly what services correspond to each charge on a borrower's closing disclosure.

Advertising Compliance and Social Media Pitfalls

Federal advertising rules apply to every platform where you promote mortgage services, and that includes every social media post, video, story, and comment. The Truth in Lending Act (Regulation Z)Regulations 1026 24 Rules Policy and the Mortgage Acts and Practices Advertising Rule (Regulation N) set strict standards for mortgage advertising, and the CFPB enforces them aggressively.

Mistake	Why It Matters	How to Fix It
Missing your NMLS ID on social media posts	The SAFE Act requires your unique identifier on all public facing materials. Every post that references mortgage services needs it.	Add your NMLS ID to all profiles and include it in every post about lending
Using trigger terms without full disclosures	Mentioning a specific rate, payment amount, or loan term triggers mandatory APR and term disclosures under Regulation Z	Have your compliance team review all content that mentions specific numbers
Claiming "guaranteed approval" or "everyone qualifies"	Regulation N prohibits deceptive claims. No lender can guarantee approval before reviewing a borrower's complete financial picture.	Focus on your process and support rather than making outcome promises
Not archiving social media content	Regulators can audit your advertising at any time. Failing to retain copies can result in penalties.	Screenshot every post. Save every story. Archive all video content.

The SAFE ActCompliance Resources Mortgage Resources Secure And Fair Enforcement For Mortgage Licensing Act Compliance requires every MLO to include their NMLS unique identifier on all public facing materials. That includes your website, business cards, email signature, social media profiles, and every post or ad that references your mortgage services.

For new MLOs building their personal brandPre License Breaking Into The Mortgage Industry Resources, the safest approach is to have every piece of marketing content reviewed by your compliance department before posting. Most employers have established review processes. Use them.

Steering Clients the Wrong Way

Under the Dodd-Frank Act's Loan Originator Compensation rules, MLOs are prohibited from steering borrowers toward loan products based on what earns the originator a higher commission rather than what best serves the borrower's interests. This also means you cannot vary your compensation based on the terms of the loan. You cannot earn more for closing a higher rate loan versus a lower rate one.

For new MLOs, the risk is usually not intentional steering. It is recommending products you are most familiar with rather than exploring all options a borrower might qualify for. The fix is thorough training on your employer's full product menu and a genuine commitment to presenting all suitable options to every client. The CFPB expects MLOs to prioritize borrower interests at every stage of the origination process.

Disclosure Timing Errors

The TILA-RESPA Integrated Disclosure rule (TRID) establishes strict timelines for delivering Loan Estimates and Closing Disclosures to borrowers. A Loan Estimate must be delivered within three business days of receiving a complete loan application. A Closing Disclosure must be provided at least three business days before closing.

Missing these deadlines does not just create compliance risk. It can delay closings, frustrate clients, and damage your relationship with real estate agents who depend on timely transactions. New MLOs should build disclosure tracking into their daily workflow and understand exactly when each timeline begins.

Fair Lending Violations

The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act prohibit discrimination in mortgage lending based on race, color, religion, national origin, sex, marital status, age, or other protected characteristics. Fair lending violations can occur not just in loan decisions but in marketing, client interactions, and even the neighborhoods where you choose to advertise your services.

New MLOs should be particularly careful with social media advertising. Platforms like Facebook and Instagram require the use of Special Ad Audiences for housing ads to prevent discriminatory targeting. If you are running ads without these safeguards, you are creating fair lending risk even if that was not your intent.

Building a Compliance First Mindset

The MLOs who build lasting, successful careers are not the ones who figure out how to skirt the rules. They are the ones who make compliance a core part of how they operate every single day.

Know your company's compliance policies inside and out. Every employer has a compliance manual and a compliance officer. Make them your best friends in the first weeks of your career. Ask questions. Attend every training session. Do not assume you know the answer. Verify it.

When in doubt, do not do it. If you are unsure whether a marketing post, a client gift, or a fee structure complies with the rules, pause and ask. The few minutes it takes to get approval are infinitely better than the months or years it takes to recover from a violation.

Stay current. Continuing educationPre License Understanding Pre Licensing And Continuing Education Requirements For Mortgage Careers Resources is not just a licensing requirement. It is your opportunity to stay updated on regulatory changes, enforcement trends, and best practices that protect your career. The regulations governing mortgage lending evolve constantly, and the MLOs who invest in ongoing learning are the ones who avoid costly mistakes.

Your pre-licensing educationPre License What A Mortgage Licensing Course Teaches You About Real Life Resources covers the legal framework you need to understand, including RESPA, TILA, ECOA, the SAFE Act, and more. But real world compliance is about applying those principles to the messy, fast moving situations you will encounter every day as an originator.

Aceable Mortgage's NMLS-approved courses are taught by active mortgage professionals who know what compliance looks like on the ground, not just in a textbook. Our curriculum prepares you for the exam and the real world that comes after it. Get started with Aceable MortgagePre License and build your career on a foundation that lasts.