May 2008 Mortgage Licensing Update


With the housing crisis getting worse and the State legislators in session, we are seeing numerous laws being passed that effect the mortgage industry. There are so many that it’s hard to stay on top of them.

Most of these laws are geared toward heightened regulations on mortgage broker licensing and other states are approaching the issue with heightened regulations on mortgage lender’s underwriting guidelines. Consumer groups are urging for more laws, but many people are concerned that it may create a problem for consumers to be able to obtain credit if too many laws are passed.

Here is an update of most of the major laws effecting the mortgage industry:

FHA Licensing

US Congress is continuing to lag on any FHA Modernization Bill. Hopes of FHA Licensing becoming easier are slowly fading.

Maryland Bond Increase

MD surety bond increases are effective 6/1/08. Notices will be sent out soon. Bonds will need to be increased. It depends on loan volume.

Idaho Eliminates Loan Officer Bonding Requirement

Idaho loan officers no longer need to carry the $10K bond effective July 1, 2008. Notices should be sent out around May.

Michigan Enacts Law Requiring Loan Officer Registration

On April 2nd, 2008 H.B. 5288 was approved, which will require the registration of “loan officers.” Under these new laws, loan officers employed by licensees or registrants will be required to complete 24 hours of pre-licensure education (unless employed as a loan officer during 4 ½ of the previous five years) and pass an initial examination. Loan officers will also be required to complete six hours of continuing education each year. Loan officer registration will begin on January 1, 2009.

Note – Under the new rules, Michigan 1st bonds now needs to expire on 12/31 just like the MI 2nd in preparation for joining the NMLS. Many bond riders will need to be completed.

Indiana Enacts First Lien Mortgage Lending Act

On March 24, the “First Lien Mortgage Lending Act” (the “Act”) was approved as part of H.B. 1359. The Act requires the licensure of first-lien mortgage lenders and places requirements on a lender’s origination and servicing activities. Also, as part of new legislation, the Indiana Loan Brokers Act was amended to exclude first-lien mortgage lenders. The First Lien Mortgage Lending Act will become effective January 1, 2009.

Wisconsin Enacts Bill Removing Commercial Loans from Licensing Act

On April 7, Wisconsin Governor James Doyle signed S.B. 517. This Act amends the definition of “loan” under the Mortgage Bankers, Loan Originators and Mortgage Brokers Act (the “Act”). Currently under the Act, a “loan” is broadly defined to include loans made for commercial purposes. S.B. 517 narrows the definition of “loan” to mean “a loan for personal, family, or household purposes that is secured by a lien or mortgage, or equivalent security interest, on real property [consisting of 1 to 4 dwelling units, including individual condominium units] located in this state.” S.B. 517 will go into effect on April 22, 2008.

Mississippi Requires Mortgage Licensees to Use Multistate Licensing System

On April 7, 2008 S.B. 2605 became law, amending the Mississippi Mortgage Consumer Protection Law (MMCPL), Miss. Code Ann. §§ 81-18-1 et seq., to clarify the statute and require the use of a multistate licensing system. The new law requires any entity or individual licensed under the MMCPL to use the multistate licensing system for application, renewal, surrender and any other activity required by the Commissioner of the   Department  of Banking and Consumer  Finance . Finally, S.B. 2605 allows mortgage loan originators to work at any licensed location in Mississippi of the licensed company for which he/she works and creates a de minimis exemption from the MMCPL for persons who enter into no more than 12 residential mortgage loan transactions per calendar year. S.B. 2605 also requires individuals who own or acquire more than 10% of a licensed entity, down from 25%, to file an application for a license. S.B. 2605 became effective on April 7, 2008.

Massachusetts Loan Originator Applicants Must Complete 24 Hour Education Course

The Massachusetts Division of Banks (the Division) recently finalized and released Regulatory Bulletin 5.1-105 outlining the educational requirements that loan originator applicants must satisfy before securing licensure. Most notably, within 2 years of approval of individual licensure, Massachusetts loan originator applicants must complete an approved educational course consisting of at least 24 hours of classroom-based instruction. In addition, licensed loan originators must annually complete at least 8 hours of continuing residential mortgage lending education. Individuals are not required to fulfill the 24 hour course requirement if they (i) met the definition of mortgage loan originator prior to November 30, 2007, and (ii) apply for licensure prior to May 27, 2008. The Division instituted the new education requirements to ensure that applicants are knowledgeable about mortgage lending concepts, applicable law and regulations specific to the mortgage origination profession. We note that the Bulletin also outlines the requirements for a company seeking the Division’s approval of its mortgage loan origination educational courses.

NMLS First Quarter Operations are Successful

The Nationwide Mortgage Licensing System (NMLS), which is a government led licensing database, has concluded its first quarter of operations successfully. Events of note in the first quarter:

· Seven states with an estimated 83,144 licenses are participating on NMLS.

· MA Division of Banks is implementing its new loan originator licensing law through NMLS.

· Two states, Nebraska and Rhode Island, had transition deadlines during the first quarter. It is estimated that 78% of Nebraska company licensees and 74% of Rhode Island company licensees transitioned onto NMLS.

· Additional functionality was added to NMLS on March 31st that included data download capabilities for regulators and the first phase of reporting. The next release of the system is schedule for June 30th.

· The NMLS call center was instrumental in assisting licensees get onto and navigate through the system, handling an average of 400 calls a day.

NY Banking Department begins Company/Branch licensing on NMLS

Companies and sole proprietors that currently hold a NY Mortgage Broker Registration or a NY Mortgage Banker License, have from April 1, 2008 to September 1, 2008 to complete and submit through NMLS all necessary Form MU1s, Form MU2s and Form MU3s. Companies that have established their company record on NMLS can begin to submit licensing applications on behalf of their loan officers, as required under the New York law that went into effect on January 1st of this year.

Washington State DFI begins Consumer Loan Company Licensing on NMLS on May 1st

Companies holding a Washington State Consumer Loan Company License have from May 1, 2008 to September 1, 2008 to complete and submit through NMLS all necessary Form MU1s, Form MU2s, Form MU3s, and Form MU4s. WA-DFI will no longer accept Consumer Loan Company License applications via paper after April 18, 2008.

The following state agencies are expected to begin participating in NMLS in 2008.

May 1st

Washington Department of Financial Institutions (Consumer Loan Company Licenses)

July 1st

Connecticut Department of Banking

Louisiana Officer of Financial Institutions

Mississippi  Department  of Banking & Consumer  Finance 

New Hampshire State Banking Department

North Carolina Office of Commissioner of Banks

Vermont Department of Banking, Insurance, Securities, and Health Care Administrations

Washington Department of Financial Institutions (Mortgage Broker Licenses)

November 1st

Arkansas Securities Department

Indiana Department of Financial Institutions

Pennsylvania Department of Banking

Wyoming Division of Banking

Note: These lists are an indication of intent. Official announcements of participation will be made by each agency in a communication to each of their licensees.

Source by Steven Sheasby

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