A Member of a mortgage company notorized a document for their company signed by another member of their company. Is this legal?

Depends on the notary statutes and regulations for your state, but probably yes. Mortgage companies have to notarize documents all the time. To have to go to a different place to find a notary would be cumbersome. So most mortgage companies have at least two notaries on the payroll.

Would I - a notary - do it? No. However, I don't see a problem with it. All a notary does is verify that the person signing IS, indeed, that person.

The notary isn't swearing that the document is true or that he/she is an uninvolved party.

Why would you think it isn't? What is the real issue here?

Notarization is simply attesting to the identity of the signator. So if the other member did, in fact, sign the document, then there would be no reason it isn't legal.