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CFPB Bulletin Supports Uniform State Test for Mortgage Loan Originators
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.
CSBS Seeks Comment on NMLS Licensing Forms, Mortgage Call Report
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.
NMLS Proposes Uniformed Authorized Agent Reporting Processing Fee
On March 20, the NMLS proposed a processing fee to support a uniform and automated method for state-licensed money transmitters to report information concerning authorized agents/delegates to NMLS participating state agencies. The proposal notes that as of March 2013, 10 state agencies manage their money transmitter licenses through NMLS and an additional 20 agencies intend to do so by the end of 2014. The NMLS proposes to support that functionality through a fee of no more than fifty cents ($.50) per active agent/delegate location, assessed once per year, based on the number of all active agent/delegate locations as of a certain date. Money transmitter licensees with less than 100 active agent/delegate locations reported through NMLS will not be assessed a fee. The fee, which is distinct from and independent of fees or assessments required by state agencies, would be charged starting in 2014. The NMLS seeks comments on the proposal by April 19, 2013.
Special Alert: Report on 2013 NMLS Annual Conference
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 various federal and state regulatory rule implementation, updates for industry, and a look ahead at new initiatives and changes to the NMLS (please refer to the NMLS Conference Agenda, which also includes copies of presentations). Specifically, various sessions covered the following topics, among others:
- The collaboration of the CFPB and state regulators to level the playing field between banks and non-banks with respect to enforcing regulations and conducting examinations. David Liken, the Deputy Director of Supervision and Enforcement with the CFPB, explained that Dodd Frank contemplated a partnership between state regulators and the CFPB, which includes information sharing and joint examinations. The CFPB plans to provide state regulators with training conducted by CFPB personnel at no cost to state regulators.
- The future of the NMLS which includes a goal to initiate three system releases/ enhancements per year. 2013-2014 will include launching an advance change notice function, electronic surety bond management, and a requirement for annual volume reports for non-mortgage entities.
- The state of financial supervision, in particular, concerns about industry diversity and cooperation between state and federal agencies to leverage their resources to address emerging issues and trends in the financial market.
- Regulation of debt collectors as the “larger participant” rule giving the CFPB supervisory authority over debt collectors was issued in October 2012 and took effect on January 2, 2013. The CFPB has started looking at collection practices of creditors when the creditor collects in its own name and through third party collectors.
In addition, the Conference covered major changes to the NMLS and also included a presentation from the CFPB summarizing the CFPB’s final rules:
- Advance Change Notification—The NMLS will launch its Advance Change Notice functionality that will allow licensees to provide notice electronically to NMLS participating states of proposed changes to the company and its branches, including, but not limited to: name changes, address changes, and change of control. The initial roll out of this functionality is slated for June 2013.
- Money Services Regulator Panel—A Money Services Regulator Panel, which included Stephanie Newberg, Deputy Commissioner of the Texas Department of Banking, and Deb Bortner of the Washington Department of Financial Institutions, discussed the benefits and challenges associated with the addition of money services licenses to the NMLS. The NMLS has provided money services business with a streamlined system to apply for licenses and keep regulators updated on license changes; however, licensees continue to struggle with certain aspects of the system (e.g., transmission of materials via the NMLS and confusion with completing certain control person and direct and indirect owner forms, given varying state interpretations).
- The New System of Dual Regulatory Supervision—A panel, which included Charlie Fields, Director, Non-Depository Entities Division, North Carolina Office of the Commissioner of Banks, Calvin Hagins, Program Manager, Supervision, Fair Lending & Enforcement with the CFPB, and various industry representatives, discussed the coordinated efforts of state regulators and the CFPB to conduct licensee examinations. The panel focused on (1) examination selection criteria—i.e., how the Multi-State Examination Committee or CFPB may decide to examine an entity, (2) factors weighed by the Multi-State Examination Committee when deciding whether to join CFPB in an examination, (3) CFPB examination process—i.e., CFPB’s preference to collect date on-site while processing and analyzing data off-site, and (4) encouraging entities to engage in “self-regulation” and “self-review.”
- 2013 Mortgage Final Rules Overview—Kelly Thompson Chochran, Assistant Director for Regulations of the CFPB summarized several recently issued CFPB rules, which are expected to be implemented in the next year, including: the Ability-to-Repay / Qualified Mortgages Final Rule, the Mortgage Servicing Final Rule, and the Loan Originator Compensation, HOEPA, Escrows, and Appraisal Final Rule.
BuckleySandler recently issued detailed summaries of the CFPB rules.
For more information about NMLS, visit the NMLS Resource Center, About NMLS.
State Law Update: Virginia Amends Broker Licensing Rule
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.
CSBS Announces Implementation Date for National Mortgage Loan Originator Test
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.
NMLS Publishes 2013.1 Release Portfolio
On December 21, the NMLS announced that NMLS Release 2013.1 is planned for March 18, 2013. As summarized in the Release Portfolio, the updated systems will (i) allow state agencies to invoice licensees for various fees, (ii) provide money transmitters the ability to submit periodic reports regarding authorized agents, (iii) allow state regulators to adopt the newly created Uniform State Test Component in lieu of existing State-specific Test Components to satisfy the SAFE Test State Component Requirement, and (iv) display through NMLS Consumer Access self-reported disciplinary actions for federally registered mortgage loan originators.
NMLS Announces 2013 Annual Conference
On December 18, the NMLS announced that its fifth Annual Conference and Training will be held February 26 – March 1, 2013, in San Antonio, Texas. The Conference allows companies that manage financial services licenses or registration through NMLS to hear directly from state and federal policymakers regarding the NMLS system and regulatory and compliance developments.
NMLS Issues Annual Renewal Reminder
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.
Oklahoma Transitions Money Transmitter Licensing to NMLS
On October 1, Oklahoma began transitioning state-licensed money transmitters to the NMLS. Existing and new licensees must create a company record in the NMLS and begin using the system for new licenses and renewals. The NMLS has issued instructions for new applications as well as company transition requests. Because the Oklahoma State Banking Department cannot receive electronic payments, licensees still must mail fee payments to the Department with a copy of the new or renewal application.