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Financial Services Law Insights and Observations

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  • Texas approves temporary authority to act as a registered mortgage loan originator

    State Issues

    On June 10, the Texas governor signed SB 2330, which provides, among other things, for a federally-registered mortgage loan originator (MLO) who does not hold a state license to have temporary authority to act as a state-licensed MLO for a period not to exceed 120 days while their state MLO license application is pending. Subject to certain conditions, a federally-registered MLO who becomes employed by an entity that is licensed or registered in Texas for mortgage loan origination may temporarily act as a state-licensed  MLO in the state before their license is issued for up to 120 days if (i) the individual was registered in the Nationwide Mortgage Licensing System and Registry as a loan originator within one year of the state application; or (ii) is licensed by another state or governmental jurisdiction to engage in mortgage loan origination. The bill is effective on November 24.

     

    State Issues Mortgage Licensing Licensing Mortgages State Legislation NMLS

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  • Illinois amends Residential Mortgage License Act

    State Issues

    On May 10, the Office of the Illinois Secretary of State published in the Illinois Register a notice by the Department of Financial and Professional Regulation of adopted amendments to certain parts of its Residential Mortgage License Act. In general, the amendments impact independent loan processor licensing as well as residential mortgage loan bond and advertising requirements. Specifically, an independent loan processing entity must employ one or more licensed mortgage loan originators (MLO) to be in compliance with the Act’s supervision and instruction requirements. In addition, any advertisement appearing in the state by a licensee concerning residential mortgage loans must clearly and conspicuously include the following: (i) the Nationwide Multistate Licensing System and Registry (NMLS) Consumer Access homepage; and (ii) a licensee’s unique NMLS identifier. If a MLO is advertised, licensees are also required to include the MLO employee’s individual NMLS unique identifier, in addition to listing the licensee’s NMLS unique identifier. Furthermore, licensees are prohibited from including a NMLS unique identifier in any advertisement related to “activities other than residential mortgage lending or brokering” unless certain criteria are met. The amendments became effective immediately.

    State Issues State Legislation Mortgages Licensing Mortgage Origination NMLS

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  • New Hampshire amends licensing requirements for nondepository mortgage bankers, pawnbrokers

    State Issues

    On May 15, the New Hampshire governor signed HB 649 to, among other things, amend the state licensing requirements for nondepository mortgage bankers, brokers, and servicers, as well as pawnbrokers and moneylenders. Specifically, licensing applicants must file with the banking commissioner a written verified application through the Nationwide Multistate Licensing System and Registry (NMLS) using the NMLS form, or by providing all the same information required on the application using the NMLS. Applicants must also file a statement of net worth. Finally, HB 649 defines what constitutes a “significant event” pertaining to a licensee’s practices with respect to consumer credit, small loans, debt adjustments, and money lending. The act became effective immediately.

    State Issues State Legislation Licensing Non-Depository Institution NMLS

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  • NMLS issues “temporary authority” licensing guidelines for MLOs

    Federal Issues

    On April 4, the Nationwide Multistate Licensing System (NMLS) issued a set of guidelines and FAQs clarifying federal SAFE Act amendments created by the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), to establish “temporary authority” provisions for mortgage loan originators (MLOs). According to the guidelines, temporary authority to act as a loan originator while completing state-specific licensing requirements is granted to: (i) qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company; and (ii) qualified state-licensed MLOs seeking to be licensed in another state. The guidance expands upon temporary authority eligibility requirements; disqualification criteria; and the length of time MLOs may operate under temporary authority.

    The guidelines also emphasize that “any MLO operating under temporary authority is subject to the requirements of the federal SAFE Act, and all applicable laws of the application state, to the same extent as if that MLO was a state-licensed loan originator licensed by the state.” MLOs will be able to apply for a license and become eligible for temporary authority on November 24.

    Federal Issues NMLS Licensing Mortgage Origination EGRRCPA SAFE Act

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  • New Mexico amends financial lending licensing requirements

    State Issues

    On April 2, the New Mexico governor signed HB 584, which amends the Collection Agency Regulatory Act and the Motor Vehicle Sales Finance Act to, among other things, require sales finance companies obtain a license to conduct business in the state. The bill outlines licensing requirements for such companies. State and national banks authorized to do business in the state are not required to obtain a license under the Motor Vehicle Sales Finance Act, “but shall comply with all of its other provisions.” Under HB 584, the Director of the Financial Institutions Division of the Regulation and Licensing Department may utilize the Nationwide Multistate Licensing System and Registry (NMLS) or other entities designated by the NMLS in order to receive and process licensing applications. The Director is also granted the authority to issue and deny licenses.

    HB 584 also amends definitions used within the state’s Mortgage Loan Originator Licensing Act, and outlines provisions related to (i) licensing, registration, renewal, and testing requirements; (ii) certain exemptions; (iii) the issuance of temporary licenses to out-of-state mortgage loan originators who are both licensed through the NMLS and complete the mandatory education and testing requirements; and (iv) continuing education requirements. HB 584 also grants the Director the authority to establish rules for licensing challenges; “deny, suspend, revoke or decline to renew a licenses for a violation of the New Mexico Mortgage Loan Originator Licensing Act”; and impose civil penalties for violations.

    Furthermore, HB 584 also amends the definitions used within the state’s Uniform Money Services Act and the Collection Agency Regulatory Act by listing licensing application requirements, and granting the Director the same authorities provided above.

    The amendments take effect July 1, 2019.

    State Issues State Legislation Consumer Lending Licensing Auto Finance Mortgages Mortgage Origination Money Service / Money Transmitters Debt Collection NMLS

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  • Minnesota clarifies definition of “sales finance company” for licensing purposes

    State Issues

    On April 5, the Minnesota Department of Commerce (Department) issued guidance clarifying the types of entities meeting the definition of “sales finance company” under Minnesota law for purposes of whether a license is needed to conduct business. The guidance requires “any company who purchases motor vehicle retail installment contracts from retail sellers located in Minnesota, and applies a finance charge,” to obtain a motor vehicle sales finance company license. Any company engaged in the business of a “sales finance company” is required to apply for and maintain a license under Minnesota law, regardless of whether the company has a physical presence in Minnesota or whether an in-state retail seller chooses to hold and collect retail installment contracts out-of-state.

    Completed applications by companies that purchase motor vehicle retail installment contracts are due to the Department by July 1. The license application requirement will only apply to those contracts entered into on or after July 1. Non-depository financial institution applicants must apply through the Nationwide Multistate Licensing System (NMLS).

    State Issues Auto Finance Licensing NMLS State Legislation

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  • CSBS agrees to implement recommendations from fintech advisory panel

    Fintech

    On February 14, the Conference of State Bank Supervisors (CSBS) agreed to implement specific recommendations from the CSBS Fintech Industry Advisory Panel. The Advisory Panel, which was formed in 2017 and consists of 33 fintech companies, works to “identify and remove unnecessary pain points in the multistate experience of fintechs and other nonbanks operating regionally or nationwide while improving financial supervision.” Of the 19 recommended actions by the Advisory Panel, CSBS supported 14, including: (i) creating a 50-state model law to license money services businesses; (ii) creating a standardized call report for consumer finance businesses; (iii) expanding the use of the Nationwide Multistate Licensing System across all license types; and (iv) building an online database of state licensing and fintech guidance. Recommendations related to small business lending were among the items saved for future action or implementation.

    Fintech State Issues CSBS Licensing NMLS

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  • NYDFS adds check cashing and virtual currency businesses to nationwide licensing system

    State Issues

    On October 1, NYDFS announced the commencement of the final phase of its initiative to manage the license application and regulation of all non-depository financial institutions operating in the state through the Nationwide Multistate Licensing System and Registry (NMLS). As such, NYDFS now allows financial services companies holding check casher and virtual currency business activity licenses to transition those licenses to NMLS. Additionally, companies applying for new licenses may now submit applications through NMLS. As previously covered in InfoBytes, licensed budget planners, sales finance agencies, money transmitter licensees, and mortgage providers have already made the transition to NMLS. 

    State Issues NYDFS NMLS Licensing Virtual Currency

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  • California governor approves revisions to Student Loan Servicing Act

    State Issues

    On September 14, the California governor approved AB 38 amending the state’s Student Loan Servicing Act (Act). The Act provides for the licensure, regulation, and oversight of student loan servicers by the California Department of Business Oversight (CDBO). Among other things, the amendments: (i) clarify the circumstances under which the Commissioner of the CDBO may deny a student loan servicer’s application; (ii) remove debt collectors of defaulted student loans from the definition of a “student loan servicer”; (iii) authorize the Commissioner to require license applicants and licensees to submit required filings with, and pay assessments to, the Commissioner through the Nationwide Multistate Licensing System and Registry; (iv) require the Commissioner to report violations of the Act “as well as other enforcement actions and information to the licensing system and registry to the extent that the information is a public record”; and (v) extend to 10 business days the time for a licensee to acknowledge receipt of a qualified written request from a borrower. The amendments also grant the Commissioner the authority to prescribe circumstances under which electronic records, including applications, financial statements, and reports, may be accepted.

    State Issues State Legislation Student Lending Student Loan Servicer Licensing NMLS

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  • Illinois updates Residential Mortgage License Act

    State Issues

    On August 14 and 10, the Illinois governor signed HB 4404 and SB 2615, which amend the Illinois Residential Mortgage License Act of 1987. Effective immediately, SB 2615, now Public Act 100-0795, requires, among other things, that mortgage loan advertisements in Illinois, whether print or electronic, reference the Nationwide Multistate Licensing System (NMLS) and Registry’s Consumer Access website, except where exempted by the Secretary of Financial and Professional Regulation.

    HB 4404, now Public Act 100-0851, provides that an entity that is engaged solely in independent loan processing through the sponsoring of individuals is considered exempt from the licensing requirements of the Residential Mortgage License Act but is required to annually apply through the NMLS for an exempt company registration for the purpose of sponsoring one or more licensed mortgage loan originators. The changes are effective immediately.

     

    State Issues Mortgages Mortgage Licensing Mortgage Advertising NMLS Licensing

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