Sunday, August 19, 2007

query: is a mortgage broker owner liable for the actions of their employees

I don't see why not. I see an employee as an extension of the employer so in my opinion, negligence in the performance of work done by an employee for the mortgage brokerage would create liability on the part of the company and its owners.

Actions by the employee outside of their job function is another matter entirely.


Anonymous said...

As a general legal matter, you're right. Mortgage brokerages, however, often try their hardest to make loan officers independent contractors - thinking that employer liability can be avoided, usually for loan officer acts, or for loan officer payroll tax (and workers comp, etc). Assuming that that designation doesn't hold up (that is, that it is a sham), there are still the practical problems that the brokerage may/likely does have no assets, no effective insurance, is insolvent, is shut down, etc.

Getting relief will no be easy or cheap.

Diane Cipa, The Closing Specialists® said...

You sure are right. We can only hope moving forward that states tighten up licensing rules, add some fiduciary duties into their regs and require some kind of E & O coverage.