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.

The Nationwide Mortgage Licensing System and Registry (NMLS) held its fifth annual NMLS User Conference and Training in San Antonio, Texas from February 26 through March 1, 2013. The Conference brought together state and federal mortgage regulators, industry professionals, compliance companies, top law firms, and education providers to learn about the latest developments in mortgage supervision and to discuss pressing issues confronting the industry.

The first day of the Conference included the bi-annual NMLS Ombudsman Meeting, which provided an opportunity for NMLS users to raise issues concerning the NMLS, state and/or federal regulation. NMLS Ombudsman Timothy Siwy, Deputy Secretary of Non-Depository Institutions with the Pennsylvania Department of Banking, presided over the meeting, in which specific questions submitted by industry representatives were addressed. Several of the submitted questions focused on the new Uniform State Mortgage Loan Originator (MLO) Exam or Uniform State Test (the UST) of which 24 agencies have already adopted. Concerns were raised by the regulators as some state statutes require that a state’s specific laws be tested as a pre-requisite of MLO licensure. Others, such as regulators from California and Utah, had concerns that MLOs would not adequately learn state specific laws and regulations prior to licensure.  In light of these concerns, industry representatives indicated that the UST is only the first step in licensure, and continuing education requirements, monitoring, and examinations would also serve as opportunities to ensure MLOs are well-versed in applicable state specific licensing laws and regulations.

Other areas of focus included NMLS’s expansion to include non-mortgage licenses, such as payday lender and pawn broker licenses. Some industry representatives voiced concern that approval of a license via the NMLS now carries with it an image of legitimacy with the public and expanding licensure to non-mortgage, less regulated industries could undermine that image. Regulators responded that the NMLS is a tracking mechanism—a way for regulators to track licensees state-to-state and industry-to-industry—not an independent licensing credential.

Full details regarding the specific issues submitted for comment, as well as accompanying exhibits, will be available on the NMLS Website, Ombudsman Page.  A recording of the Ombudsman Meeting should be posted to the NMLS Resource Center in the near future.

The remaining days of the Conference covered Read more…

On March 7, Nebraska enacted two bills intended to amend and clarify requirements for installment loan brokers, payday lenders, mortgage bankers, and mortgage loan originators (MLOs). The first, LB 279, makes nonsubstantive clarifications to the definition of a “loan broker” and narrows the exemption for accountants to certified public accountants only. The bill also authorizes the Nebraska Department of Banking and Finance to share examination reports and other confidential information with the CFPB and other state regulators. The second, LB 290, removes many mortgage licensing requirements previously applicable to individuals and separately identifies MLO duties. Those duties include providing notification to the Department (i) within 10 days of events such as bankruptcy, criminal indictments, and suspension/revocation proceedings; and (ii) within 30 days of certain changes, including changes of employer and address. The bill also allows firms to electronically submit certain required reports and provides that the 120-day period for calculating abandonment of a license application runs from the date the Department sends the applicant electronic notice of  deficient items. By state rule, both bills take effect three months after the end of the state’s legislative session, which scheduled to conclude May 30, 2013.

On February 20, Virginia enacted HB 1803, which conforms Virginia law to federal SAFE Act regulations, as recommended by the Virginia Housing Commission. The bill (i) expands the definition of a mortgage loan originator to include an individual who represents to the public that he can or will take an application for, or offer or negotiate the terms of, a residential mortgage loan, (ii) exempts from licensing requirements any individual acting as a loan originator in financing the sale of his or her own residence, (iii) specifies conditions under which an attorney engaged in mortgage loan origination activities is exempt from licensing requirements, (iv) removes the definition of “federal banking agencies”, and (v) defines the term “employee.”

Recently, the Virginia State Corporation Commission adopted regulations proposed by the Bureau of Financial Institutions to clarify that individuals engaged in the business of a loan processor or underwriter, who do not otherwise engage in mortgage broker activities, are not mortgage brokers subject to state licensing requirements. The final rule also (i) broadens the scope of prohibited activities for licensees, (ii) establishes requirements for licensees’ outsourcing of loan processing and underwriting, (iii) requires licensees to update its NMLS loan originator sponsorship information following changes in originator status, (iv) adds a definition for “refinancing” that includes any loan modification, and (v) expands the Bureau’s enforcement authorities. The amended regulations took effect January 28, 2013.

On January 16, the CSBS announced that a new national mortgage loan originator (MLO) test with a uniform state component will be available on April 1, 2013. The 2009 SAFE Act requires that MLOs pass a test in order to obtain a state originator license through the NMLS. Since adoption of the SAFE Act, the test has been comprised of two parts: a national component and a state-specific component. The new test administered by the NMLS is meant to streamline the licensing process for originators seeking to obtain licenses in multiple states. Twenty state agencies will no longer require a state-specific test component as of April 1, 2013, with four more states removing the requirement on July 1, 2013. The NMLS posted additional details about the test, including costs and enrollment eligibility.

Last month, Ohio enacted a bill, S.B. 333, to allow the Division of Financial Institutions to offer a transitional loan originator license to assist an originator licensed by another state to transition to employment with an Ohio-regulated firm. The new license allows a transitioning out-of-state originator to originate loans on a temporary basis—120 days—while the originator completes the requirements of obtaining a state-issued annual license. A transitioning originator must have a sponsor that meets certain criteria and must pay a fee as set by the state regulator. In addition, the law directs the state regulator to adopt regulations allowing an originator from a federally regulated institution to obtain a temporary state license after federal law is changed to allow such transitional licenses. The CFPB has interpreted current federal law to prohibit such transitional licenses.

On November 1, the NMLS issued a reminder that the renewal period for state-licensed entities and individuals runs from November 1, 2012 through December 31, 2012. The NMLS also provided a Renewal Handbook to guide users in the renewal process, as well as state-specific renewal FAQs, and deadline and fees charts.

On September 26, the NMLS published a portfolio of targeted system enhancements scheduled for release on October 22, 2012. The release will include (i) credit report enhancements, (ii) updates to the federal registry disciplinary actions reporting pursuant to the SAFE Act, (iii) renewal enhancements, and (iv) other general system enhancements. One such enhancement would require federally registered mortgage loan originators to provide certain disciplinary action information related to any disclosure questions they answered in the affirmative.

On September 7, California enacted Assembly Bill 2666, which updates and clarifies portions of the state’s Residential Mortgage Lending Act and Finance Lenders Law to parallel federal implementation of the SAFE Act. The bill requires licensing of individuals who engage in the business of a mortgage loan originator, and sets forth exemptions for employees of nonprofit organizations and government employees. The bill also clarifies requirements for subsidiaries of depository institutions owned and controlled by federally regulated depository institutions, and addresses the validity of certain NMLS records.

On September 6, the Montana Department of Administration published final rules governing mortgage servicers. In 2011, Montana enacted House Bill 90, which made numerous revisions to the Montana Mortgage Broker, Mortgage Lender, and Mortgage Loan Originator Licensing Act concerning the licensing and regulation of mortgage servicers. The bill also updated licensing and other requirements for brokers, lenders and originators. The new regulations implement these amendments, addressing mortgage servicer (i) quarterly reporting requirements, (ii) record keeping requirements and electronic record keeping rules, (iii) renewal application deadlines, and (iv) escrow fund requirements. The final rules also amend existing regulatory definitions and other provisions impacting all mortgage licensees. The adopted regulations largely track the proposed versions, with the exception of changes made in response to comments or to address technical issues.

Recently, the Washington State Department of Financial Institutions finalized two rulemakings to amend existing regulations and adopt new regulations under the Consumer Loan Act and the Mortgage Broker Practices Act. The final rules make numerous changes impacting mortgage and other consumer lenders, including with regard to licensing and reporting. For example, the amendments to the Consumer Loan Act regulations (i) add requirements and prohibitions relating to force-placed insurance, (ii) clarify licensing exemptions for consumer lenders and mortgage originators, and (iii) add new provisions addressing the activities of servicers and third party residential mortgage loan modification services. The amendments under the Mortgage Broker Practices Act include some of the changes made under the Consumer Loan Act and, among other things (i) revise the definition of mortgage broker, (ii) require approval from the Department for an individual to work as a designated broker for more than one licensee, and (iii) clarify application of loan originator requirements to inactive licensees. All of the changes take effect on November 1, 2012.