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Licensees Face Legislation, State Actions & SAFE

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As states adopt local and federal mortgage licensing legislation and implement criminal background checks, the Nationwide Mortgage Licensing System is holding a user conference in California. A mortgage company that was operating without a license in Michigan has been shut down.

As of Jan. 1, the Washington Department of Financial Institutions adopted a number of revisions to its regulations implementing the Consumer Loan Act and the Mortgage Broker Practices Act, Patton Boggs LLP reported. The Consumer Loan Act’s surety bond requirements have been updated so that the penal sum on each surety bond will be tied to a licensee’s origination volume. Licensees will need to determine whether their surety bond meets applicable bonding requirements annually by March 1.

In addition, any individual who services mortgage loans for entities that are exempt from the Consumer Loan Act will be required to be licensed as a mortgage loan originator.

Kenneth and Doyle Financial is accused by the Michigan Office of Financial and Insurance Regulation of operating as a fake mortgage company, a Feb. 4 announcement indicated. The company was attempting to gather personal data from unknowing loan prospects. A cease-and-desist order was issued against the Detroit firm on Feb. 2.

“Following numerous consumer complaints, the Office of Financial and Insurance Regulation conducted an investigation and found that Kenneth was not licensed under the state’s Mortgage Brokers, Lenders and Servicers Licensing Act,” the statement said.

NMLS is holding its second annual NMLS User Conference & Training for regulatory and industry system users. The event started yesterday at the Rancho Bernardo Inn in San Diego and runs until tomorrow. The $895-conference “provides an invaluable exchange of information among System users on issues that affect their organization’s use of NMLS.”

NMLS recently implemented its online criminal background check functionality, Patton Boggs reported. The online procedure requires a completed criminal background check request and a fee of as much as $49.

The Washington, D.C.-based law firm also reported that the U.S. Department of Housing and Urban Development published a long-awaited proposed rule implementing the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 — or S.A.F.E. Under the proposal, originators in all states are required to be compliant by the end of this year.

“By and large, the proposed rule is consistent with HUD’s S.A.F.E. act-related commentary on model state law and its frequently asked questions, both of which are posted on HUD’s S.A.F.E. Mortgage Licensing Act page,” Patton Boggs said. “Despite some fairly significant opposition from industry members, trade groups and even CSBS/AARMR, HUD is sticking to its position that employees of servicers (and others) who work on loan modifications, except those working exclusively under the Making Home Affordable Program, must be licensed as loan originators.”

In a Dec. 15, 2009, news release, Federal Housing Administration Commissioner David Stevens called the S.A.F.E. act “an important step in returning integrity and accountability to the residential mortgage loan market.”

Patton Boggs said that it is creating a comprehensive S.A.F.E. act matrix with detailed information about related legislation as well as an overview of implementing regulations adopted by each of the 50 states and Washington, D.C.

The Illinois Department of Financial and Professional Regulation announced that as of Jan. 4, mortgage brokers and mortgage bankers in the state will need to utilize the national registry for license applications and renewals. Originators will be required to have a complete NMLS record by March.

“We expect this new regulatory framework to greatly enhance our supervision of the mortgage industry,” Brent Adams, secretary of financial and professional regulation, said in the statement.

NMLS is required under the S.A.F.E. act.

Idaho’s Consumer Finance Bureau issued a Jan. 25 statement indicating the launch of NMLS Consumer Access — a searchable Web site where prospective borrowers can access data on state-licensed mortgage companies, branches and originators. Idaho said it is among 45 state regulators operating the registry, and all 50 states and four territories are expected to be on board by the end of this year.

Idaho reported 953 mortgage company offices are licensed in the state, while 3,684 individual mortgage originators are licensed.

A Feb. 2 press release from the Pennsylvania Banking Department indicated consumers in that state can now search for data about licensees in that state online at or Pennsylvania said it was among the founding NMLS states.

The Department of Commerce in Ohio said in December that Division of Financial Institutions started utilizing NMLS on Jan. 4. Ohio Gov. Ted Strickland signed the Ohio SAFE Act on July 17, 2009.

In New Hampshire, loan originators were required to be licensed through the NMLS as of April 1, 2009. The state also now requires that applicants take 20 hours of education, pass a state exam and be sponsored by a company that has an approved New Hampshire filing on the NMLS.

As of Dec. 31, 2009, renewing originators were required to complete fingerprinting, a criminal background check and a credit investigation, according to the state. But a delay in NMLS facilities means these requirements won’t be in effect to sometime this year.

The implementation of NMLS in New Hampshire has resulted in a decline from 2,665 loan officers on record before Dec. 31 to just 1,296 after, according to The Telegraph.

Connecticut’s Department of Banking also advised consumers about NMLS Consumer Access. The department said Title V of the Housing and Economic Recovery Act of 2008, the S.A.F.E. act, requires that consumers be provided easy access to federal and state records about the employment history of state licensed and federally registered originators.

House bill 1141, introduced into Colorado’s state legislature last month, would require mortgage firms and loan originators to register with the Colorado Division of Real Estate, the Denver Business Journal reported. Among benefits to the state will be the ease with which it can investigate out-of-state companies that hire unlicensed originators.

The Mortgage Bankers Association recently touted that courses offered by its CampusMBA are NMLS approved. In addition, the curriculum at CampusMBA’s School of Mortgage Banking I has been approved to meet the 20 hour pre-licensing requirement.

Lenders One Mortgage Cooperative reported in December that originators working for its 150 members have completed more than 6,300 classes — including those required under the S.A.F.E. act.

Mortgage lenders, servicers and originators are required to be licensed as of Jan. 1 in South Carolina as a result of the South Carolina Mortgage Lending Act, Patton Boggs said. Licensees must apply through the NMLS by April 30. In addition, all loan processors and underwriters acting as independent contractors for licensed entities must be licensed as mortgage loan originators.

Patton Boggs also said that the South Carolina Licensing of Mortgage Brokers Act will, as well as the lending act, will be administered through the NMLS.

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