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Financial Services Law Insights and Observations

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  • Mississippi Revises State Mortgage Licensing Law

    Lending

    On April 6, Mississippi Governor Phil Bryant signed into law SB 2504, which reenacts and amends the Mississippi S.A.F.E. Mortgage Act. Among other things, the legislation (i) revises licensure and continuing education requirements for mortgage loan originators; (ii) modifies books, accounts, and records storage and filing requirements; (iii) ensures timely and accurate mortgage licensee reporting in the Nationwide Mortgage Licensing System and Registry (NMLS); and (iv) specifically provides that “[f]ailure to file accurate, timely, and complete reports on the [NMLS] may result in a violation of this chapter, resulting in a civil penalty.”

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  • Indiana Passes House Bill to Amend the Indiana Code

    Lending

    On March 21, Indiana Governor Mike Pence signed H.B. 1181, which makes various revisions to Indiana laws concerning, among other things, (i) first mortgage lien lenders; (ii) persons licensed under the Uniform Consumer Credit Code; (iii) exempt threshold amounts for credit; and (iv) debt management companies. Various sections of the bill are effective immediately, while others will take effect July 1, 2016.

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  • GA Department of Banking and Finance Enters into Consent Order with Mortgage Lender and Owner

    Lending

    On October 21, the Georgia Department of Banking and Finance (the Department) announced a consent order with a South Carolina-based mortgage lender and its individual owner to resolve a Notice of Intent to Revoke Annual License and an Order to Cease and Desist. The Department alleged that the individual and the company violated the Georgia Residential Mortgage Act by (i) making false statements or misrepresentations to the Department; (ii) making false statements and misrepresenting material facts in mortgage loan documents; (iii) operating an unapproved branch with an unapproved branch manager; (iv) failing to perform the appropriate background checks on covered employees; and (v) transacting business with an unlicensed person who was not exempt from licensing requirements. Under the terms of the Order, the individual is prohibited from (i) applying for a Georgia mortgage loan originator, mortgage broker, or mortgage lender license; (ii) serving as a director, officer, or any other equivalent role for a Georgia mortgage broker or lender; and (iii) acting as a branch manager for a Georgia branch of a Georgia licensed mortgage broker or lender. In addition, the lender must pay $29,000 to the Department and $1,000 to the State Regulatory Registry, LLC to support the NMLS. The lender also must surrender its license from the Department.

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  • Nevada Assembly Passes Legislation Relating to Mortgage Lending and Servicing Regulation, Licensing and Fees

    Consumer Finance

    On June 9, Governor Brian Sandoval (R-NV) signed into law AB 480, which revises existing law concerning the licensing and regulation of escrow agents and escrow agencies.  The law also authorizes a wholesale lender from outside the state to operate in Nevada as a mortgage broker or mortgage banker, and increase fees related to those roles.  Further, the bill requires the Commissioner of Mortgage Lending to prescribe by regulation the requirements for licensing, regulation and discipline of mortgage servicers.  Specific sections of the bill – 101.3, 101.7, and 103 – are effective immediately, while others become effective January 1, 2016.

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  • GA Department of Banking and Finance Orders Florida Mortgage Lender to Shut Down for Unlicensed Lending Activities

    Consumer Finance

    On April 8, the Georgia Department of Banking and Finance issued an Order to Cease and Desist (Order) to a Florida-based mortgage lender. The lender allegedly engaged in residential mortgage origination, brokering, and/or lending activities without having a valid license or the appropriate exemption from the state’s licensing requirements in violation the Georgia Residential Mortgage Act. The Order is final 30 days from the issuance date, but the Department can rescind the Order if, within that 30 day period, the company provides adequate documentation showing that it is either properly licensed or qualifies for exemption.

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  • Georgia Banking Regulator Revokes License of Pennsylvania Mortgage Lender

    Consumer Finance

    On April 13, the Georgia Department of Banking and Finance (Department) entered into a Consent Order (Order) with a Pennsylvania-based mortgage lender and its owners for failing to file a timely application with the state regulator. Specifically, the Order was entered into with the lender to resolve a Notice of Intent to Revoke and proposed Orders to Cease and Desist for allegedly, among other things, allowing the acquisition of 10 percent or more of the ownership of a Georgia licensed entity without first filing an application with the Department, conducting business with an unlicensed person who is not exempt from licensing, employing a felon, and making false statements or misrepresenting material facts in mortgage loan documents. Under terms of the Order: (i) the lender must surrender its mortgage license and pay a $5,000 fine; (ii) one of its owners must surrender his MLO license, must pay two fines of $1,000 each to both the Department and the State Regulatory Registry, and is prohibited from being employed by a licensed Georgia mortgage broker or lender for five years; and (iii) another owner must contribute $1,000 to the State Regulatory Registry and is prohibited for five years from acquiring more than 10% voting shares of a Georgia licensed company. The Order also prohibits both aforementioned owners from: (i) applying for mortgage loan originator, mortgage broker, or mortgage lender licenses; (ii) serving as a director, officer or any other equivalent role for a Georgia licensee; and (iii) acting as a branch manager for a Georgia branch of a Georgia licensed mortgage broker or lender.

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  • Montana Amends Mortgage Licensing Requirements

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    On February 17, Governor Steve Bullock of Montana signed S.B. 98 into law, which amends the Montana Mortgage Act to clarify licensing requirements. Among other things, the revised Montana Mortgage Act (i) modifies education and experience requirements; (ii) revises the responsibilities of designated managers; (iii) allows reports and notices to be filed and delivered through the NMLS; and (iv) amends the licensing requirements for loan processors and loan underwriters.

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  • Oregon Amends Mortgage Licensing Rules

    Lending

    On September 16, the Oregon Department of Consumer and Business Services Division of Finance and Corporate Securities adopted a rule amending several sections of the Oregon Administrative Rules related to the licensing of mortgage loan originators. The amendment makes minor changes to sections related to (i) definitions; (ii) the license application process; (iii) criminal records check requirements; (iv) significant event and financial reporting requirements; (v) bonding calculations; and (vi) retention of advertising samples. In addition, the rulemaking added a new section that designates the filing of a report containing false or incorrect information as a practice subject to denial, suspension, or revocation of licensure. The amendment also clarifies the manner in which deposits into or withdrawals from a trust account of borrower funds must be documented. Finally, the amendment adjusts the amount of pre-licensing and continuing education required to obtain and maintain licensure. The amendments become effective on January 1, 2015.

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  • Louisiana Requires Mortgage Loan Servicers To Obtain License

    Lending

    On May 29, Louisiana Governor Bobby Jindal signed HB 807, which requires companies that service mortgage loans in the state to obtain a state license. The bill amends the state’s Residential Mortgage Lender Law to require a company to obtain a state license by June 30, 2015 if it collects or remits payment for another, or if it holds the right to collect or remit payments for another, of principal, interest, tax, insurance, or other payment under a mortgage loan. The bill subjects mortgage loan servicers to existing licensure requirements and establishes the process to be used to determine the amount of the surety bond mortgage loan servicers must obtain. Finally, the bill requires any individual who services mortgage loans (which, according to the Louisiana Office of Financial Institutions, includes individuals who modify mortgage loans) to register as a mortgage loan originator through the NMLS. The Louisiana Office of Financial Institutions is expected to issue guidance on the new law later this year.

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  • New York Announces Numerous Initiatives To Update Its Mortgage Licensing Processes, Rules, And Resources

    Lending

    On June 5, the New York Department of Financial Services (DFS) announced several changes to streamline the state’s mortgage licensing requirements and processes, and new mortgage-related resources. The DFS also is proposing additional changes to the state’s mortgage licensing regulations.

    Uniform State Test

    The DFS announced that it will adopt the Uniform State Test (UST) for mortgage loan originators (MLOs) effective September 2, 2014. The UST will replace the current state-specific test for New York. Further, any MLO that passed the UST even prior to the effective date will satisfy the testing requirements for MLOs in New York starting on September 2, 2014. Adoption of the UST will not change the current educational requirements for MLOs in New York.

    Transitional Licensing

    Effective immediately, DFS is offering transitional licensing for MLOs currently licensed in other states and seeking licensure in New York. Specifically, individuals can now apply for a New York license prior to being employed with a New York licensed entity. This eliminates the previous delay in obtaining licensure until after one had been employed by such an entity, thus resulting in an inability to actually perform work in New York pending approval. Now, applicants can apply and have their application fully processed prior to being hired by a New York licensed entity so there is no delay in the ability to start working once hired and affiliated with the new employer.

    Revised Processes and New Resources

    The DFS also announced several changes to its practices and procedures, and new resources for industry participants.

    • Streamlined applications review process. The DFS has reorganized its internal workflows to eliminate excess layers of review of license applications and approvals. DFS also will now send a single letter to applicants identifying all items missing from an application package, which will reduce back-and-forth with the DFS and hopefully expedite application processing.
    • Dedicated Mailboxes to Answer Questions. The DFS has created encrypted inboxes dedicated to particular topics. This change is intended to remove the burden from licensees and applicants seeking the right person to answer a question. Instead, DFS will staff the inboxes and will find the appropriate person to answer a given question.  The DFS has committed to provide responses within one business day in most cases. For mortgage bankers or mortgage banker applicants, the address is mortgage.banker@dfs.ny.gov; for mortgage brokers or applicants, the address is mortgage.broker@dfs.ny.gov; for mortgage loan servicers or applicants, the address is mls@dfs.ny.gov; and for mortgage loan originators or applicants, the address is mlo@dfs.ny.gov.
    • Electronic Submissions. TheDFS will now accept all application materials at the four email addresses listed above and will acknowledge receipt of documents. Where the DFS needs originals of certain documents, it will accept online submission first, and the original can follow by mail. DFS is also accepting materials by secure file transfer and will soon be accepting materials through a secure online portal.
    • Elimination of “Placeholder Applications.” Effective immediately, an applicant for a mortgage license may no longer file a placeholder application. Instead, when an application is filed, the DFS will review it and write a letter in response identifying any missing information. The applicant will then have 30 days to address these missing items or the application will be deemed withdrawn and the fee forfeited.
    • Dedicated Webpage. A new section of the DFS website, www.dfs.ny.gov/mortgage, will serve as a comprehensive resource center. It includes (i) information regarding new proposed regulations; (ii) step-by-step directions on how to apply for a license to become a mortgage banker, mortgage broker, mortgage loan servicer, or mortgage loan originator; (iii) information about how and when to apply for a change of control of a regulated entity, and how to apply for a new branch location, and more; and (iv) links to updated forms.
    • New Guidebooks. The DFS announced that it soon will issue comprehensive guidebooks that help companies and individuals apply for and maintain a license. Thee guidebooks will be made available on the mortgage webpage.

    Additional Proposed Changes

    The DFS also proposed to amend in several ways the mortgage licensing provisions of the New York Code of Rules and Regulations (NYCRR) as well as several General Supervisory Policies and Procedures.

    The proposed changes would clarify the requirement that mortgage license applicants must have direct experience or several enumerated qualifications to obtain licensure. Specifically, the proposed regulations would require an applicant to demonstrate that “they are, or have in their employ, a qualifier who is a licensed mortgage loan originator” with the requisite qualifications and experience.

    The proposal also would provide for situations in which an applicant may have fewer than three executive officers. Specifically, with respect to mortgage banker applications, the proposed regulations would require personal information from either three executive officers, or if there are not three such officers, two officers and the compliance officer. With respect to mortgage broker applicants that do not have three such officers, personal and financial information would be required of all executive officers.

    The DFS also proposes to require applicants to submit, among other materials, business plans that outline marketing strategy, products, target markets and operating structure, as well as a compliance program summary and a fair lending plan. The regulations also would provide new treatment of incomplete applications, which under the proposal would be considered withdrawn after 30 days of failure to provide outstanding documents and information.

    The proposed regulations grant the superintendent authority to require applicants to attend, via phone or in person, a meeting for conferral of licenses and to review regulatory requirements associated with holding such licenses.

    Finally, the DFS proposes to repeal Part 413 of the NYCRR and Supervisory Procedure mb 106, which provide authority and establish the application process for mortgage brokers to act as FHA mortgage loan correspondents.

    Comments in response to the proposed regulations are due 45 days from publication in the State Register.

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