On September 16, the Oregon Department of Consumer and Business Services Division of Finance and Corporate Securities adopted a rule amending several sections of the Oregon Administrative Rules related to the licensing of mortgage loan originators. The amendment makes minor changes to sections related to (i) definitions; (ii) the license application process; (iii) criminal records check requirements; (iv) significant event and financial reporting requirements; (v) bonding calculations; and (vi) retention of advertising samples. In addition, the rulemaking added a new section that designates the filing of a report containing false or incorrect information as a practice subject to denial, suspension, or revocation of licensure. The amendment also clarifies the manner in which deposits into or withdrawals from a trust account of borrower funds must be documented. Finally, the amendment adjusts the amount of pre-licensing and continuing education required to obtain and maintain licensure. The amendments become effective on January 1, 2015.
On February 17, Governor Steve Bullock of Montana signed S.B. 98 into law, which amends the Montana Mortgage Act to clarify licensing requirements. Among other things, the revised Montana Mortgage Act (i) modifies education and experience requirements; (ii) revises the responsibilities of designated managers; (iii) allows reports and notices to be filed and delivered through the NMLS; and (iv) amends the licensing requirements for loan processors and loan underwriters.
On May 29, Louisiana Governor Bobby Jindal signed HB 807, which requires companies that service mortgage loans in the state to obtain a state license. The bill amends the state’s Residential Mortgage Lender Law to require a company to obtain a state license by June 30, 2015 if it collects or remits payment for another, or if it holds the right to collect or remit payments for another, of principal, interest, tax, insurance, or other payment under a mortgage loan. The bill subjects mortgage loan servicers to existing licensure requirements and establishes the process to be used to determine the amount of the surety bond mortgage loan servicers must obtain. Finally, the bill requires any individual who services mortgage loans (which, according to the Louisiana Office of Financial Institutions, includes individuals who modify mortgage loans) to register as a mortgage loan originator through the NMLS. The Louisiana Office of Financial Institutions is expected to issue guidance on the new law later this year.
New York Announces Numerous Initiatives To Update Its Mortgage Licensing Processes, Rules, And Resources
On June 5, the New York Department of Financial Services (DFS) announced several changes to streamline the state’s mortgage licensing requirements and processes, and new mortgage-related resources. The DFS also is proposing additional changes to the state’s mortgage licensing regulations.
Uniform State Test
The DFS announced that it will adopt the Uniform State Test (UST) for mortgage loan originators (MLOs) effective September 2, 2014. The UST will replace the current state-specific test for New York. Further, any MLO that passed the UST even prior to the effective date will satisfy the testing requirements for MLOs in New York starting on September 2, 2014. Adoption of the UST will not change the current educational requirements for MLOs in New York.
Effective immediately, DFS is offering transitional licensing for MLOs currently licensed in other states and seeking licensure in New York. Specifically, individuals can now apply for a New York license prior to being employed with a New York licensed entity. This eliminates the previous delay in obtaining licensure until after one had been employed by such an entity, thus resulting in an inability to actually perform work in New York pending approval. Now, applicants can apply and have their application fully processed prior to being hired by a New York licensed entity so there is no delay in the ability to start working once hired and affiliated with the new employer. Read more…
On May 15, Maryland Governor Martin O’Malley signed SB 1091, which expedites mortgage loan originator licensing in that state by requiring the Commissioner of Financial Regulation to waive the state’s criminal history records check for any applicant who was employed as a registered mortgage loan originator within 45 days before the date of application for a Maryland license. The change takes effect October 1, 2014. The bill is less sweeping than the version initially introduced, which would have allowed the Commissioner to issue transitional licenses to individuals licensed under the laws of another state.
New York DFS Superintendent Promises Scrutiny Of Nonbank Servicer Affiliates, Previews Originator Licensing Changes
On May 20, New York DFS Superintendent Benjamin Lawsky spoke during the Mortgage Bankers Association’s National Secondary Market Conference and extended his recent focus on nonbank mortgage servicers. As detailed in excerpts from the remarks he delivered, Mr. Lawsky specifically addressed concerns about ancillary services offered by nonbank mortgage servicer affiliates—e.g. vacant property inspections, short sales marketed through online auctions, foreclosure sales, and debt collection. He asserted that such arrangements put borrowers and investors at risk of becoming “fee factories” and promised to expand DFS’s investigation of ancillary services. Though not reflected in the excerpts released by the DFS, Mr. Lawsky also previewed changes intended to streamline the DFS’s application process for mortgage originator licenses and branch locations in an effort to reduce burden on licensees and improve processing times.
Recently, the Missouri Division of Finance announced that all mortgage company and branch licenses issued through the Division will transition to the Nationwide Mortgage Licensing System (NMLS). All currently licensed companies must transition their licenses to the NMLS by October 1, 2014, and effective June 2, 2014, new company license applicants must request licensure through the NMLS. The NMLS will host a transition training webinar on June 5, 2014 for all currently licensed mortgage companies.
On April 1, Utah enacted SB 332, which amends the Utah Residential Mortgage Practices and Licensing Act, the Real Estate Licensing and Practices Act, and the Real Estate Appraiser Licensing and Certification Act to establish a procedure for the voluntary surrender of a license issued under each of those acts. The bill clarifies the scope of what it means to be engaged in the business of residential mortgage loans under the Utah Residential Mortgage Practices and Licensing Act, and includes numerous other amendments to the other two Acts. The changes take effect May 13 2014.
On March 31, in an enforcement action with potential implications for a range of financial service providers, the New York State Department of Financial Services (DFS) announced that an insurance holding company agreed to pay a $50 million civil fine to resolve allegations that two of its subsidiaries conducted unlicensed insurance business in the state, and that one of the subsidiaries made false representations about those activities. The Manhattan District Attorney’s Office (DA) announced that the company agreed to resolve a parallel criminal investigation by entering into a deferred prosecution agreement and disgorging $10 million in profits. Read more…
On March 24, Virginia Governor Terry McAuliffe signed SB 118, which, effective July 1, 2014, will permit transitional licensing of mortgage loan originators (MLO). The bill grants the State Corporation Commission (SCC) authority to issue temporary MLO licenses to certain MLOs licensed in other states. The SCC will only issue a transitional MLO license to applicants it determines (i) have never had a mortgage loan originator license revoked by any governmental authority; (ii) have not been convicted of, or pled guilty or nolo contendere to a felony during a defined period prior to the date of the application; (iii) have become registered through, and obtained a unique identifier from, the Nationwide Mortgage Licensing System and Registry; and (iv) are employed by a person licensed by the SCC as a mortgage lender or mortgage broker. Further, any transitional MLO license issued by the SCC will expire on the earlier of (i) the date the SCC issues or denies a Virginia MLO license for the applicant; or (ii) 120 days from the date the transitional MLO license was issued. Also notable, is that the bill allows the SCC to issue transitional licenses to MLOs from federally regulated institutions who transition employment to a Virginia mortgage bank, but only after federal law is changed to allow such transitional licenses. The CFPB has interpreted federal law to prohibit such transitional licenses.
Over the past week, Virginia Governor Terry McAuliffe signed several bills impacting banks and certain consumer finance providers. The first bill, HB 358 repealed a state law that that barred out-of-state banks from opening de novo branches in Virginia unless the bank’s home state provided reciprocal access to Virginia banks. The change will allow out-of-state banks to establish branches in Virginia on the same basis as state-chartered banks. A second banking bill, HB 1062, provides that an existing statutory provision requiring the Virginia State Corporation Commission to ascertain that certain minimum capital stock requirements are met prior to issuing a certificate of authority to a bank does not apply to the Commission’s issuance of such a certificate to a bank holding company or to a resulting bank in connection with certain types of mergers involving the holding company and its subsidiary bank. A third bill, HB 69, amends state law to expand the types of services that may be provided under an extended motor vehicle service contract and to authorize the Board of Agriculture and Consumer Services to designate additional services that may be provided under an extended service contract. The bill also provides that extended service contracts are not insurance subject to state regulation as such. The above approved bills will take effect on July 1, 2014. Finally, the Governor has not yet approved a bill passed by the General Assembly, HB 954, which would permit the State Corporation Commission to issue transitional mortgage loan originator licenses.
On January 24, the Washington State Department of Financial Institutions issued a clarification regarding an aspect of its mortgage originator rules and guidance. The Department previously advised that managers, including branch managers, must license individually as mortgage loan originators if they (i) take residential mortgage loan applications, negotiate the terms or conditions of residential mortgage loans, or hold themselves out as being able to conduct these activities; (ii) supervise loan processors or underwriting employees; or (iii) supervise licensed mortgage loan originators. The Department now states that (i) any manager or any person who takes a residential mortgage loan application in Washington, negotiates the terms or conditions of a residential mortgage loan on Washington property, or holds themselves out as being able to conduct those activities, must have a Washington MLO license, and that Washington licensed MLOs must work from a licensed location; (ii) any manager who directly supervises loan processor or underwriting employees must hold an MLO license, which can be from any state, and Washington licensed MLOs must work from a licensed location; and (iii) any manager who directly supervises Washington licensed MLOs must themselves hold a Washington MLO license and must work from a licensed location. For items (ii) and (iii) the Department states that it is looking for licensure of the day to day operational supervisors. Supervisory plans must be written and maintained as part of business books and records, and must include consideration of the location of the supervisor and employees supervised, the number of employees supervised, and the volume of work performed by the supervised employees.
On January 7, the CSBS announced that, as of January 1, four additional state or U.S. territorial agencies began using the National SAFE MLO test. With the addition of these four agencies—the Nevada Department of Business & Industry, the New Mexico Financial Institutions Division, the Puerto Rico Office of the Commissioner of Financial Institutions, and the U.S. Virgin Islands Division of Banking & Insurance—a total of 39 agencies are now using the test, which was announced last January and launched in April 2013. The test includes a uniform state component to replace the state-specific component in adopting states.
Recently, Georgia amended certain regulations related to mortgage loan originations, originators, and brokers. Effective November 29, 2013, borrowers are required to pay to the Department of Banking a $10 per loan fee if a loan is secured by a deed to secure debt, security deed, mortgage, security instrument, deed of trust, modification of a security deed, or other form or modification of a security interest. Further, any person who acts as the collecting agent at a closing of a mortgage loan transaction is liable for payment of the $10 fee, and the remittance of any such fees after the date on which they are due will subject the person to a late payment fee of $100 for each due date missed. The filing of a fee statement after the date on which it is due, even if no $10 fees were collected by the collecting agent during the applicable reporting period, will subject the person to a late filing fee of $100 for each due date missed. If the Department finds that a person has not, through negligence or otherwise, submitted $10 fees within six months of the due date, it may impose an additional $100 fine for failure to remit fees. Repeated failures to submit $10 fees may be grounds for revocation of license. In addition, the regulation amends the definition of “branch manager” to require that an individual be a licensed mortgage loan originator to be approved as a branch manager, and requires an affidavit verifying the lawful presence of every natural person that submits an application for a license as a mortgage broker or mortgage lender or a registration on behalf of an individual or company. Among other things, the rules also require applicants, registrants, and licensed mortgage brokers and mortgage lenders to keep the information on the NMLSR current and to make amendments within 10 days of the events necessitating change and adds an administrative fine of $1,000 per occurrence for failing to timely update information on the NMLSR.
On October 23, New York Governor Andrew Cuomo announced a $3 million penalty against a mortgage lender that the New York State Department of Financial Services (DFS) determined engaged in deceptive practices concerning interest rate charges and related conduct. The DFS identified the violations during a 2010 examination. The consent order states that the lender (i) collected loan discount fees from certain borrowers to reduce the initial rate but failed to provide the discounted rates, (ii) facilitated originations through unlicensed originators, (iii) conducted business with unlicensed entities and through unauthorized websites and unlicensed branches, (iv) conducted business through improper “affiliated business arrangements,” (v) failed to disclose loan origination information, (vi) failed to issue commitment agreements to certain borrowers, and (vii) failed to properly maintain books and records. The lender consented to the penalty, agreed to refund $427,155 of unearned loan discount fees to 270 borrowers, and agreed to submit a written compliance program within 120 days, submit quarterly compliance progress reports over a three-year period, and take other corrective actions. The consent order noted that in 2011 the company entered into a $3.1M settlement with HUD over similar alleged conduct.