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Financial Services Law Insights and Observations

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  • South Dakota requires mortgage licensees to register branches

    On July 1, the South Dakota Division of Banking began accepting mortgage branch registration applications via NMLS. Previously, the division did not require branches of South Dakota mortgage lender licensees, mortgage brokerage licensees, or non-residential mortgage lender licensees to be registered in this fashion. 

    The NMLS description of the registration provides that it is required for any branch of a South Dakota mortgage lender licensee, mortgage brokerage licensee, or non-residential mortgage lender licensee that “for valuable consideration, originates, sells, or services mortgages, or holds himself, herself, or itself out as a person who, for valuable consideration, originates, sells, or services mortgages.”

    Licensees have until December 31, 2021 (more than 17 months) to register their applicable branches. No items are required outside of NMLS regarding the application. However, branch managers must be licensed as South Dakota mortgage loan originators, which could take several months to coordinate.

    Licensing Mortgages NMLS State Issues

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  • Missouri amends mortgage broker licensing requirements

    On July 6, the Missouri governor signed SB 599, which, among other things, modifies the state’s mortgage broker licensing requirements. Specifically, the legislation (i) provides that a prelicensing education course that is completed by an applicant will not satisfy the state’s education requirement if the course precedes an application “by a certain period” as established by the Nationwide Multi-State Licensing System and Registry (NMLSR); (ii) requires persons with various financial relationships with a business applicant for a residential mortgage loan broker license to furnish fingerprints to the NMLSR for submission to the FBI and any other authorized government entity for a background check; and (iii) allows the Director of the Division of Finance to waive the requirement that residential mortgage loan brokers maintain at least one full-service office in the state of Missouri for persons “exclusively engaged in the business of loan processing or underwriting,” or providing mortgage loan servicing. The legislation is effective August 28.

    Licensing State Issues State Regulator Mortgages Mortgage Broker Mortgage Servicing Underwriting State Legislation

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  • Louisiana requires licensing for virtual currency businesses

    On June 13, the Louisiana governor signed HB 701, which provides for the licensing and regulation of virtual currency businesses in the state. Subject to certain exceptions, the bill establishes licensing and registration requirements, and, among other things, (i) authorizes reciprocity of licensure with other states; (ii) specifies that licensee applications must be submitted through the Nationwide Multi-State Licensing System; (iii) adds provisions related to licensee examinations; (iv) outlines licensee surety bond requirements “based on the nature and extent of risks in the applicant’s virtual currency business model”; (v) provides the state’s office of financial institutions with enforcement authority; and (vi) prohibits licensees from engaging in unfair, deceptive, or fraudulent practices. The act is effective August 1.

    Licensing State Issues Virtual Currency Fintech

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  • Texas amends residential MLO application procedures

    On May 1, the Texas Finance Commission adopted amendments related to application procedures for regulated residential mortgage loan originators (MLO). The amendments are intended to reduce costs for residential MLOs and to ensure consistency with current licensing procedures and processes. Among other things, the amendments lower MLO application and annual renewal fees from $300 to $200, and implement statutory changes from HB 1342 (enacted last year) related to criminal background checks for residential MLOs. Specifically, the amendments (i) repeal a provision that allowed for the “denial, suspension, or revocation for any offense occurring in the five years preceding the application”; (ii) add provisions requiring an agency to consider the correlation between the element of a crime and a licensed occupation’s duties and responsibilities; and (iii) remove language related to letters of recommendation provided on behalf of an MLO applicant. The amendments are effective as of May 7.

    Licensing State Issues State Regulator MLO Texas

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  • Delaware check seller and money transmitter license required to transition to NMLS by June 15

    On April 15, NMLS published a Delaware Check Seller and Money Transmitter License requirements checklist for a new application, amendment, surrender, and license transition to NMLS. Per Delaware’s recent mandate, as detailed in APPROVED’s post from April 7, new license applicants and existing licensees will be required to use NMLS beginning April 15, 2020. All existing licensees have until June 15, 2020 to submit their license transition requests through NMLS.

    Please see the full requirements for transitioning the license to NMLS here

    Licensing State Issues Money Service / Money Transmitters NMLS

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  • Delaware directs check sales and money transmitter licensees to use NMLS

    The Delaware Office of the State Bank Commissioner issued a directive that, beginning on April 15, all Chapter 23, Sale of Checks and Transmission of Money Licensees are advised to use the Nationwide Mortgage Licensing System for applications, renewals, surrenders and amendments.

    Licensing NMLS Covid-19 State Issues Money Service / Money Transmitters

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  • NMLS updates temporary policy for reporting deadlines

    On March 30, the NMLS Policy Committee amended its temporary policy for submitting reports in NMLS. Instead of the original 60-day deadline extension, the committee encourages regulators to be lenient and not take administrative action if reports are filed within 30 days of the placement of the license item (based on the standard due date). This appears to provide greater flexibility to agencies utilizing NMLS to deviate from the initial extended deadline.

    Click here to read the full update.

    Licensing State Issues State Regulator NMLS Covid-19

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  • NMLS extends deadline for reports and SAFE MLO test enrollment

    On March 25, in response to the Covid-19 pandemic, the NMLS Policy Committee extended the deadline for certain reporting obligations satisfied through NMLS, and the enrollment window for taking the SAFE MLO test.

    Companies required to submit financial statements, the Mortgage Call Report, and the Money Services Businesses Call Report will have an additional 60 days from pre-established deadlines to submit such reports. Individuals will have the testing window on their test appointments extended 180 days.

    The NMLS Resource Center has been updated with additional resources to provide updates on state agency operating status. In addition, the NMLS Policy Committee is encouraging states to accept documentation electronically that otherwise may have been required in hard copy.

    The full announcement can be found on the NMLS Resource Center.

    Licensing Mortgage Licensing NMLS Mortgage Origination Mortgages MLO Money Service / Money Transmitters Call Report Covid-19

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  • New York requires regulated institutions to submit Covid-19 response plans by April 9

    The New York Department of Financial Services (DFS) has created a webpage providing information for industry and regulated entities.

    On March 12, the New York Superintendent of Financial Services issued an order providing that regulated entities may temporarily relocate an authorized place of business and close any of their branch offices or locations if adversely affected by Covid-19 upon prompt written notice and compliance with the law, among other things.

    On March 10, the New York State Department of Financial Services issued several industry letters related to the novel coronavirus known as “COVID-19.” Two of those letters require responses from New York regulated institutions no later than April 9, 2020. Responses must be submitted via e-mail to banking.covid19@dfs.ny.gov.

    In one letter, the NYSDFS encourages New York licensed lenders, among others, to evaluate how they may assist businesses that have been adversely impacted by COVID-19. Specifically, it suggests that such lenders consider easing new loan terms and waiving late fees, among other measures. Further, the NYSDFS explains that reasonable and prudent efforts to provide assistance to affected businesses are “consistent with safe and sound banking practices as well as in the public interest.”

    In another letter, the NYSDFS requires New York regulated institutions to provide a response on the institution’s plans to manage the potential financial risk stemming from COVID-19. According to the letter, the plans should include, at a minimum, an assessment of the following:

    • Credit risk ratings of the customers, counterparties, and business sectors impacted by COVID-19.
    • Credit exposure to customers, counterparties, and business sectors impacted by COVID-19 arising from lending, trading, investing, hedging, and other financial transactions, including any credit modifications, extensions, and restructurings (including capitalizations of interest).
    • Scope and size of credits adversely impacted by COVID-19 that currently are in, or potentially may move to, non-performing/delinquent status, including consideration of stress testing and/or sensitivity analysis of loan portfolios and the adequacy of loan loss reserves.
    • Valuation of assets and investments that may be, or have been, impacted by COVID-19.
    • Overall impact of COVID-19 on earnings, profits, capital, and liquidity (including impact on loan-to-deposit ratio) of the institution.
    • Reasonable and prudent steps to assist those adversely impacted by COVID-19 (such as those described in the letter referenced immediately below).

    In a third letter, the NYSDFS requires New York regulated institutions to provide a response on the institution’s plans to manage the risk of disruptions to its services and operations caused by COVID-19. According to the letter, the plans should include, at a minimum, the following:

    • Preventative measures tailored to the institution’s specific profile and operations to mitigate the risk of operational disruption, which should include identifying the impact on customers and counterparts.
    • A documented strategy addressing the impact of the outbreak in stages, so that the institution’s efforts can be appropriately scaled, consistent with the effects of a particular stage of the outbreak, which includes an assessment of how quickly measures could be adopted and how long operations could be sustained under different stages of the outbreak.
    • Assessment of all facilities (including alternative or back-up sites), systems, policies, and procedures necessary to continue critical operations and services if members of the staff are unavailable for long periods or are working off-site, including an assessment and testing as to whether large scale off-site working arrangements can be activated and maintained to ensure operational continuity. This would also include an assessment and testing of the capacity of the existing information technology and systems in light of a potential increased remote usage.
    • An assessment of potential increased cyber-attacks and fraud.
    • Employee protection strategies, critical to sustaining an adequate workforce during the outbreak, including employee awareness and steps employees can take to reduce the likelihood of contracting COVID-19.
    • Assessment of the preparedness of critical outside-party service providers and suppliers.
    • Development of a communication plan to effectively communicate with customers, counterparties, and the public, and to deliver important news and instructions to employees, along with establishing forums for questions to be asked and addressed.
    • Testing the plan to ensure the plan policies, processes, and procedures are effective.
    • Governance and oversight of the plan, including identifying the critical members of a response team, to ensure ongoing review and updates to the plan, including the tracking of relevant information from government sources and the institution’s own monitoring program.

    DFS published a fourth industry letter to institutions engaged in virtual currency business activity setting forth guidance and a request for assurance to ensure that such regulated institutions have preparedness plans in place to address operational risk posed by Covid-19. In the guidance, DFS required every regulated institution to submit a response to DFS describing the plan of preparedness to manage the risk of disruption to its services and operations as soon as possible and no later than April 9, 2020 (30 days from the date of the guidance).

    Licensing State Issues State Regulators NYDFS Consumer Protection Covid-19

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  • West Virginia amends Safe Mortgage Licensing Act for MLOs

    On March 5, the governor of West Virginia signed HB 4353, which, among other things, amends the state’s Safe Mortgage Licensing Act as it relates to the issuance of mortgage loan originator (MLO) licenses. HB 4353 creates “a rational nexus requirement between prior criminal conduct and initial licensure decision making,” to guide commissioners or commissions with licensing authority. The law also details the consideration of past criminal conduct in the initial licensing of an MLO and eliminates offenses of “moral turpitude” from disqualifying an applicant from receiving a license, provided the crime does not have a “rational nexus” to MLO licensure.

    New provisions added to the license issuance section of the Safe Mortgage Licensing Act address disqualification from license issuance. Under the new law, the commissioner may not disqualify an applicant from initial licensure because of a prior criminal conviction unless the crime bears a rational nexus to MLO licensure, as determined by consideration of (i) the nature and seriousness of the crime; (ii) the passage of time since the commission of the crime; (iii) the “relationship of the crime to the ability, capacity, and fitness required to perform the duties and discharge the responsibilities of the profession or occupation”; and (iv) any evidence of the applicant’s rehabilitation. In addition, the law permits an individual with a criminal record who has not previously applied for licensure to “petition the commissioner at any time for a determination of whether the individual’s criminal record will disqualify the individual from obtaining a license.” The amendments take effect on May 19.

    Licensing State Issues State Legislation State Regulation Mortgages Mortgage Origination

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