While mortgage industry advocates had been pushing to open up remote work opportunities for lenders for years, the arrival of COVID-19 turned what may have previously been a preference into a necessity in many states, helping make what were originally short-term changes permanent.

"The need for it was bubbling up, but the pandemic was a real accelerant for it," said William Kooper, vice president of state government affairs and industry relations at the Mortgage Bankers Association.

Twenty-one states currently have rules in place that allow originators to conduct business from home, according to the MBA. Meanwhile, 11 other states, including Montana, are operating under temporary guidelines introduced during the COVID-19 pandemic to facilitate remote loan originations. But many others still prohibit loan-origination work to be conducted outside of branch locations. 

The push for the policy changes has received support from both the MBA and Community Home Lenders of America, who cite not just convenience, but also the need to keep businesses running during disruptions, including natural disasters, as a reason to update rules. 

"We need these flexibilities for these kinds of environmental challenges that we face in addition to other kinds of things," Kooper said. 

"If there's a burst pipe and somebody's closing on that day, that loan officer needs to be able to serve that customer."

Some of the newer enacted laws also removed requirements in states that had set a perimeter limiting the distance loan officers could reside from their branch — rules that had the effect of inhibiting growth and discouraging service to rural and other areas with few home buying services, according to CHLA President Taylor Stork.

"A lender may decide not to enter a market because it's too difficult to establish a physical branch, and that is a detriment to borrowers, specifically, a detriment to underserved borrowers who live in underserved areas," Stork said. "Work from home should open up doorways for more flexibility to sponsor loan officers, particularly in underserved markets."

Doing so would lead to increased competition, he added.

Most states with work-from-home policies established similar rules for lenders and branches to allow originators to operate remotely. Face-to-face client meetings in a loan officer's residence are still typically prohibited, while appropriate security standards must be in place. 

"The patches and system updates on software have to be done regularly," Kooper said. "And the company has to have a security plan to make sure that they're demonstrating to regulators that they've got all of this as part of their protocols."

The consumer shift during COVID-19 to doing business online, where electronic signatures are common, has also helped drive demand from borrowers as well for remote lending methods. 

"I think probably our customers also learned something during the pandemic, that 'I can get this done without sitting in front of somebody across the desk,'" said Joey Davidson, president of Goodlettsville, Tennessee-based Acopia. "Now there's almost an expectation there that you'll be able to e-sign your closing docs versus going into an attorney's office. There's an expectation that I can fill out an application without talking to a human being."

But while momentum related to codifying remote work options for originators into law has grown, two of the three largest U.S. states that also saw some of the heaviest loan volumes in the boom period of 2020 and 2021 remain holdouts. California and Florida have no legal guidance to permit lenders to work outside of branch offices. New York also prohibits loan officers from working on applications outside a licensed branch, but the state department regulating mortgage bankers is currently considering a proposal that would change those rules, according to Stork.