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.
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.
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.
On October 11, the State Regulatory Registry (SRR) proposed changes to (i) the uniform NMLS company, branch, and individual licensing forms developed by state regulators and used by all states through NMLS and (ii) the NMLS Mortgage Call Report (MCR). The proposal incorporates public comments received following an initial April 2013 proposal. The proposed licensing form changes would, among other things, (i) allow a company to designate more than one branch manager within an industry, (ii) revise business activity on company and branch forms, and (iii) collect other trade names on company and branch forms by agency and not by state. Changes to the NMLS licensing forms and certain changes to the format of the MCR are expected to be implemented in March 2014. The proposal notes that given expected changes to HMDA reporting requirements, the SRR will propose substantive changes to the MCR in 2014 with an expected implementation timeframe in 2015. Comments on the proposed changes are due by November 11, 2013.
On October 1, the Conference of State Bank Supervisors announced that five additional state agencies have implemented the new national SAFE MLO test, bringing the total number of participating state agencies to 35. The new test, which was announced in January and launched in April, includes a uniform state component to replace the state-specific component in adopting states.
The Utah Division of Real Estate recently published amendments to provisions of the Residential Mortgage Practices and Licensing Rules. The changes (i) remove the term “principal” from references to “principal lending manager” in conformity with the description used by the National Mortgage Licensing System, (ii) modify certain requirements for schools providing licensure-related courses, and (iii) impose a requirement that licensees annually complete a division-approved course on Utah law.
On August 26, the Washington State Department of Financial Institutions announced that it issued a statement of charges against a company that accepts and transmits mortgage payments on behalf of homeowners in the state, alleging that the company (i) violated state licensing requirements by failing to obtain the required license as a money transmitter, (ii) misled consumers about the company’s affiliation with their lender, servicer, or a government agency and how often payments would be transmitted, and (iii) falsely represented the amount of interest borrowers would save by having the company make payments.
On July 1, the CSBS announced that ten additional state agencies will use the new National SAFE MLO test. Twenty state agencies adopted the test when it initially was introduced in April 2013. The uniform test combines both the national and state testing requirements of the SAFE Act, replaces the separate, state-specific tests for the states that adopt it, and streamlines the license application process for mortgage loan originators (MLOs) seeking licenses in multiple states. The CSBS reports that an additional five state agencies are scheduled to adopt the test by the start of 2014.
On May 24, Texas enacted SB 1004, which reorganizes and simplifies the state’s mortgage licensing regime. Under current law, mortgage loan originators who are employed by mortgage bankers are licensed under separate sections of the code, which together contain six individual types of licenses. Each of these licenses require the same set of qualifications, however, an originator licensed under one chapter must get a separate license to be qualified under the other chapter, and vice versa. SB 1004 creates a single license type for mortgage origination, which will enable a qualified individual to originate for a mortgage company or a mortgage banker, so long as the individual meets the statutory licensure requirements. The bill makes numerous other revisions relating to the regulation of residential mortgage loan originators, residential mortgage loan companies, mortgage bankers, and residential mortgage loan servicers and raises the fee cap for license applications and renewals. The changes become effective on September 1, 2013.
On May 20, the CFPB issued Bulletin 2013-05, which clarifies that the Uniform State Test (UST) developed by the NMLS may constitute a qualified written test under the federal SAFE Act for state-licensed mortgage loan originators if the UST covers all required areas, including state laws and regulations. The Bulletin further explains that a separate test for each state covering the particular laws and regulations of that state plus a National Test Component developed by the NMLS may also meet the qualified written test requirement under the SAFE Act.
On May 9, Indiana enacted HB 1081, which makes numerous changes to the state’s consumer lending, licensing, and banking laws. Among those changes, the bill increases the threshold loan amounts under various definitions in the Uniform Consumer Credit Code, including “consumer credit sale,” “consumer loan,” and “consumer related loan.” With regard to mortgage originator licensing, the bill (i) revises the surety bond requirements for creditors and entities exempt from licensing that employ a licensed mortgage loan originator, (ii) prohibits an unlicensed individual or an unlicensed organization to act as a closing agent in a first lien mortgage transaction, and (iii) empowers the Department of Financial Institutions (DFI) to investigate any licensee or person that the DFI suspects is operating without a license or in violation of the First Lien Mortgage Lending Act. The bill provides additional guidelines for filing an article of dissolution of a bank, trust company, or a building and loan association. It also makes changes to the certain powers of banks and trust companies. In addition, the bill make numerous amendments related to debt management companies, lead generators, and other consumer financial service providers, and revises requirements for money transmitter licensing by, for example, authorizing the DFI to designate the NMLS for licensing purposes.
Earlier this month, the CSBS sought comment on potential revisions to (i) the uniform NMLS company, branch, and individual licensing forms and (ii) the quarterly NMLS Mortgage Call Report. The forms create a national standard of information collection for entities licensed through NMLS, while the quarterly call reports provide comprehensive and uniform information concerning the financial condition of licensed mortgage companies, their mortgage loan activities, and the production information of their mortgage loan originators. The state regulators are seeking comment on, among other things, potential improvements to form changes made in 2012. With respect to the call reports, the state regulators are seeking input on (i) the definition of “application” in the call report, (ii) criteria to be used when determining which companies file the different versions of the report, (iii) whether any policies, requirements, data fields, or definitions should be amended, and (iv) which aggregate call report data should be publicly reported. Comments are due by June 11, 2013.
Tennessee Makes Minor Changes to Mortgage Licensing Rules. On April 11, Tennessee enacted HB 160, a bill that makes certain minor changes to the state’s mortgage licensing law. The bill removes current licensing exemptions for (i) a person who owns a vacant tract of real property which the person subsequently subdivides and sells the tracts, regardless of the number of individual tracts sold and the number of ultimate purchasers of such tracts of real property, and (ii) a person or agent engaged solely in commercial real estate lending or who provides financing on property which is not intended to be owner-occupied by the person receiving the financing. The bill continues to allow licensed real estate brokers to include in any contract, mortgage terms agreed upon by the parties without having to obtain mortgage licenses, but clarifies that such communications cannot include the offering or negotiating of any terms of a residential mortgage loan. The changes took effect immediately.
Kansas Increases Mortgage Interest Rate Cap. On April 4, Kansas enacted SB 52, which increases the maximum annual interest rate for certain mortgages from 1.5 percentage points to no more than 3.5 percentage points above a specified monthly floating rate set by Freddie Mac.
On March 13, Idaho enacted HB 10, a bill to amend the licensing provisions of the Idaho Residential Mortgage Practices Act. The bill (i) provides a license exemption for individuals who originate mortgages on behalf of federal, state, or local government housing agencies, (ii) removes language inconsistent with federal interpretation of the SAFE Act relating to an exclusion from the definition of “mortgage loan originator,” and (iii) makes it a prohibited practice for a person to violate license-related testing or education procedures. The bill also authorizes the director to subpoena records related to unlicensed activity by any person and also clarifies licensing exemptions for Idaho attorneys and accountants. By state rule, the law is set to take effect on July 1, 2013.