In its February 2024 Emerging Issues Meeting, the Texas Department of Savings and Mortgage Lending highlighted the statutory and regulatory requirements for the use of “team names” by mortgage companies, mortgage bankers, and individual mortgage loan originators in conducting business and communicating with customers, as well as in general advertising and social media.
In order to use a team name in its business or communications with customers, the name must be registered as an “assumed name” (i.e. trade name or DBA) of the licensee and a copy of the certificate of assumed name be filed with NMLS.
Team names that have not been registered as an assumed name may still be used in advertising and social media, provided the company name of the licensee or registrant (i.e., its legal name) is prominently displayed in a manner that clearly relates it to the team name.
The Department also announced that it expects to begin a rule review process in the next few months to provide additional clarity to team name requirements in these areas.
Team Names Can Only be Used on Loan Documents and in Applicant/Borrower Correspondence if the Name Has Been Registered as an Assumed Name.
Chapters 156 and 157 of the Finance Code prohibit a licensed entity from conducting business under an assumed name unless that name is the registered assumed name of the entity. This prohibition means that a licensee or registrant cannot use a team name on loan documents or correspondence with applicants and borrowers—including conditional pre-qualification letters and conditional approval letters—unless that name has been registered as an assumed name.
As part of its examination process, the Department will verify that any team names contained in the loan file or communications with applicants and borrowers have been properly registered as an assumed name. The failure to have properly registered an assumed name can result in a violation under the Texas Finance Code. Note that there are possible criminal penalties under Section 71.202 of the Texas Business & Commerce Code if a person uses an assumed name that has not been filed or registered.
In order to register an assumed name, the licensee or registrant must file an assumed name certificate with the appropriate governmental authority ten (10) days prior to its use. Sole proprietorships and general partnerships must register their assumed name with the counties in which a business office is or will be maintained. If the sole proprietorship or general partnership does not maintain an office in Texas it must file in each county in which it conducts business. Corporations, limited liability companies, and limited liability partnerships must register with the Secretary of State.
A file-stamped copy of the certificate of assumed name must also be filed in NMLS, and the failure to do so is a separate violation.
Unregistered Team Names Can be Used in Advertising and Social Media if the Following Conditions are Met.
Chapters 156 and 157 of the Finance Code prohibit licensees or registrants from publishing any advertisement that is misleading, likely to deceive the public, creates a misleading impression, and/or fails to identify the licensee. In the context of team names, the Department has stated that in order to meet these advertising requirements, “a consumer should be able to easily decipher who they are working with.”
If the team name has been registered as an assumed name, it may be used in advertising and social media without the need to also include the licensee’s or registrant’s company name.
However, team names that have not been registered as an assumed name can still be used by licensees or registrants in advertising and social media provided the following conditions are met:
- The mortgage company or mortgage banker’s name and NMLS ID is shown prominently in the advertisement or on the social media page.
- The mortgage loan originator’s name and NMLS ID is shown prominently in the advertisement or social media page.
- The team name or logo does not obscure or obfuscate that the person or group of employees is/are Texas-licensed mortgage loan originators of a particular sponsoring mortgage company or mortgage banker.
- The team name or logo is clearly connected to the sponsoring mortgage company or mortgage banker by some reference. The Department does not require the use of any specific language, but has offered the following examples of language that clearly connects the team name to the sponsoring company or banker:
- “sponsored by [XXXX] mortgage company”
- “powered by [XXXX] mortgage company”
- “[XX] Mortgage Team of [XXXX] mortgage company”
For social media accounts, the Department also highlighted the importance of disclosing the company name alongside the team name on each post or advertisement. The Department does not consider it sufficient to meet the advertising requirements if the company name is disclosed only on the profile page of the team or individual originator, but does not appear in the social media posts themselves.
If you have any questions about this memo, or general licensing, examination, or regulatory questions, please reach out to caroline.jones@mortgagelaw.com or peter.idziak@mortgagelaw.com. Please note that our firm is available for all services and issues relating to residential mortgage lending. Our team can be accessed through www.mortgagelaw.com/people.