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Financial Services Law Insights and Observations

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  • Kentucky Regulator Announces New Licensing Requirement for Mortgage Servicers

    State Issues

    On December 22, the Kentucky Department of Financial Institutions (the “Department”) issued a memorandum stating that master servicers and sub servicers are required to be licensed as mortgage loan companies under the Kentucky Mortgage Licensing and Regulation Act, unless they can document to the Department in writing that an exemption applies to them. The memorandum defines “master servicer” as “any entity or individual that owns the right to perform servicing of a mortgage loan. A master servicer typically reserves the legal right to either perform the servicing itself or to do so through a sub servicer.” The memorandum specifies that “[a] sub servicer does not own the right to perform mortgage servicing, but performs servicing on behalf of a master servicer, generally premised upon duties enumerated in a contract between the sub servicer and master servicer.” The licensing requirement is effective March 1, 2017.

    State Issues Mortgages Mortgage Licensing Mortgage Lenders

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  • State Regulatory Registry Proposes Policy Change Related to NMLS Public Comment Procedures

    Lending

    On August 30, the State Regulatory Registry LLC (SRR), a subsidiary of the Conference of State Bank Supervisors (CSBS) and the entity that operates the Nationwide Multistate Licensing System and Registry (NMLS), requested public comment on a proposal to adopt a formal policy that would govern procedures and processes for requesting comments on NMLS-related updates that impact outside parties. Proposed matters warranting public comment would include (i) major NMLS functionality updates; (ii) call report updates; (iii) impacts to NMLS usability; (iv) Uniform Form changes; and (v) fee changes. SRR proposes that the comment period for NMLS-related updates last for at least 60 days but no longer than 180 days unless, as determined by the SRR Senior Vice President of Policy, there is good cause for extending the comment period. Comments on SRR’s proposed policy change, which defines the roles and responsibilities of various persons and working groups that would be involved in considering proposed NMLS updates, are due by October 31, 2016.

    Mortgage Licensing NMLS CSBS SRR Licensing

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  • MA Division of Banks Releases 2015 Annual Report

    Lending

    Recently, the Massachusetts Division of Banks released its annual report for year-end 2015. The report provides a broad overview of the Division’s 2015 efforts related to, among other things, foreclosure relief, cybersecurity protection, mortgage and depository supervision, and corporate transactions. Notable 2015 updates outlined in the report include the Division (i) approving 24 new mortgage companies in 2015, which resulted in 497 mortgage brokers and lenders being licensed to do business in Massachusetts; (ii) expanding its coordination, cooperation, and participation with the CFPB, Multi-state Mortgage Committee, and the New England Regional Mortgage Committee through sharing information in concurrent examinations of non-depository mortgage entities; and (iii) increasing oversight of the financial industry’s information technology environment, including collaborating with the Conference of State Bank Supervisors to host an event for Massachusetts bankers about common cybersecurity situations. The report includes objectives for 2016, including such as implementing and enforcing “consumer protection laws and regulations while providing consumers the information they need to know their rights and make informed financial decisions.”

    CFPB Foreclosure Mortgage Licensing CSBS Privacy/Cyber Risk & Data Security

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  • Illinois Adopts National SAFE MLO Test

    Lending

    On June 1, the Conference of State Bank Supervisors announced that the Illinois Department of Financial and Professional Regulation (IDFPR) will now use the National SAFE Mortgage Loan Originator (MLO) Test with Uniform State Content, making it the 52nd state agency to adopt the test. Under the new process, Illinois licensees who pass the SAFE MLO Test with Uniform State Content no longer need to take an additional, state-specific test. IDFPR Secretary Bryan Schneider commented on the streamlined test process saying, “[b]y providing a more effective regulatory experience, we foster the creation of a regulatory environment conducive to strong economic growth and opportunity.”

    Mortgage Licensing CSBS SAFE Act

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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.”

    Mortgage Licensing NMLS Licensing

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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.

    Mortgage Licensing NMLS

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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.

    Mortgage Licensing Mortgage Origination NMLS

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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.

    Mortgage Licensing Mortgage Origination Wholesale Lending

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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.

    Mortgage Licensing Enforcement Mortgage Origination

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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.

    Mortgage Licensing Mortgage Origination NMLS Enforcement

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