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Financial Services Law Insights and Observations


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  • Montana Amends Mortgage Licensing Requirements


    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


    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


    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


    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; for mortgage brokers or applicants, the address is; for mortgage loan servicers or applicants, the address is; and for mortgage loan originators or applicants, the address is
    • 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,, 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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  • Maryland Expedites Licensing For Certain Mortgage Loan Originators


    On May 15, Maryland Governor Martin O’Malley signed SB 1091, which expedites mortgage loan originator licensing in that state by requiring the Commissioner of Financial Regulation to waive the state’s criminal history records check for any applicant who was employed as a registered mortgage loan originator within 45 days before the date of application for a Maryland license. The change takes effect October 1, 2014. The bill is less sweeping than the version initially introduced, which would have allowed the Commissioner to issue transitional licenses to individuals licensed under the laws of another state.

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  • New York DFS Superintendent Promises Scrutiny Of Nonbank Servicer Affiliates, Previews Originator Licensing Changes


    On May 20, New York DFS Superintendent Benjamin Lawsky spoke during the Mortgage Bankers Association’s National Secondary Market Conference and extended his recent focus on nonbank mortgage servicers. As detailed in excerpts from the remarks he delivered, Mr. Lawsky specifically addressed concerns about ancillary services offered by nonbank mortgage servicer affiliates—e.g. vacant property inspections, short sales marketed through online auctions, foreclosure sales, and debt collection. He asserted that such arrangements put borrowers and investors at risk of becoming “fee factories” and promised to expand DFS’s investigation of ancillary services. Though not reflected in the excerpts released by the DFS, Mr. Lawsky also previewed changes intended to streamline the DFS’s application process for mortgage originator licenses and branch locations in an effort to reduce burden on licensees and improve processing times.

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  • Missouri Division Of Finance Transitions Mortgage Company Licensing To NMLS


    Recently, the Missouri Division of Finance announced that all mortgage company and branch licenses issued through the Division will transition to the Nationwide Mortgage Licensing System (NMLS). All currently licensed companies must transition their licenses to the NMLS by October 1, 2014, and effective June 2, 2014, new company license applicants must request licensure through the NMLS. The NMLS will host a transition training webinar on June 5, 2014 for all currently licensed mortgage companies.

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  • Utah Amends Mortgage Licensing Act


    On April 1, Utah enacted SB 332, which amends the Utah Residential Mortgage Practices and Licensing Act, the Real Estate Licensing and Practices Act, and the Real Estate Appraiser Licensing and Certification Act to establish a procedure for the voluntary surrender of a license issued under each of those acts. The bill clarifies the scope of what it means to be engaged in the business of residential mortgage loans under the Utah Residential Mortgage Practices and Licensing Act, and includes numerous other amendments to the other two Acts. The changes take effect May 13 2014.

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  • New York DFS Obtains Substantial Settlement In Licensing Enforcement Action

    Consumer Finance

    On March 31, in an enforcement action with potential implications for a range of financial service providers, the New York State Department of Financial Services (DFS) announced that an insurance holding company agreed to pay a $50 million civil fine to resolve allegations that two of its subsidiaries conducted unlicensed insurance business in the state, and that one of the subsidiaries made false representations about those activities. The Manhattan District Attorney’s Office (DA) announced that the company agreed to resolve a parallel criminal investigation by entering into a deferred prosecution agreement and disgorging $10 million in profits.

    The DFS and the DA claim that their coordinated investigations revealed that the subsidiaries used New York-based sales representatives to solicit insurance business for the companies and their affiliates, and to directly sell insurance products in New York to multinational companies, notwithstanding representations to the contrary from the companies. However, the authorities allege, neither company was licensed to conduct business in the state, and both companies used sales representatives who were not licensed as insurance brokers or agents in New York.

    In addition, the DFS and the DA assert that one of the subsidiaries, while operating under the control of a different parent company, intentionally misrepresented to the New York State Insurance Department (one of the DFS’s predecessor agencies) that the subsidiary did not solicit business in New York and that its New York staff did not engage in such activities. At the time, in seeking an opinion as to whether it was required to obtain a license, the company asserted that its New York operations were limited to “back office” operations not subject to licensing requirements.

    The civil fine in this action is substantially larger than fines typically imposed with regard to state licensing violations in other financial services industries. Notably, the large fine was imposed even after the companies agreed to cooperate in an ongoing investigation of the two subsidiaries’ former parent company. Also significant, the disgorgement order equates to two years’ worth of profits earned in connection with the alleged unlicensed activity. The holding company also agreed to certain restrictions on its business and that of the two subsidiaries pending full compliance with state law.

    The DFS is the principal financial industry regulator in the state of New York, with jurisdiction over banks; mortgage lenders, brokers and servicers; consumer lenders; money transfer businesses; insurance companies; and others.

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  • Virginia Enacts Transitional Mortgage Licensing Bill


    On March 24, Virginia Governor Terry McAuliffe signed SB 118, which, effective July 1, 2014, will permit transitional licensing of mortgage loan originators (MLO). The bill grants the State Corporation Commission (SCC) authority to issue temporary MLO licenses to certain MLOs licensed in other states. The SCC will only issue a transitional MLO license to applicants it determines (i) have never had a mortgage loan originator license revoked by any governmental authority; (ii) have not been convicted of, or pled guilty or nolo contendere to a felony during a defined period prior to the date of the application; (iii) have become registered through, and obtained a unique identifier from, the Nationwide Mortgage Licensing System and Registry; and (iv) are employed by a person licensed by the SCC as a mortgage lender or mortgage broker. Further, any transitional MLO license issued by the SCC will expire on the earlier of (i) the date the SCC issues or denies a Virginia MLO license for the applicant; or (ii) 120 days from the date the transitional MLO license was issued. Also notable, is that the bill allows the SCC to issue transitional licenses to MLOs from federally regulated institutions who transition employment to a Virginia mortgage bank, but only after federal law is changed to allow such transitional licenses. The CFPB has interpreted federal law to prohibit such transitional licenses.

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