NMLS Final Rules Take Effect October 1, 2010
by Lindsay Sayre Kift, Esq.
Bankers Advisory Staff Attorney
On October 1, 2010 the final rule requiring the registration of Mortgage Loan Originators (MLOs) under the Secure and Fair Enforcement for Mortgage Licensing Act (the S.A.F.E. Act) takes effect.
During the week of August 9th, I had the opportunity to attend the American Association of Residential Mortgage Regulators (AARMR)’s 21st Annual Regulatory Conference in St. Louis, Missouri as lawmakers were finalizing this rule.
The conference consisted of various panel discussions and meetings regarding the current state of the industry. Specifically, representatives from AARMR, the State Regulatory Registry and the Conference of State Bank Supervisors (CSBS) discussed the goals and long-term objectives of the S.A.F.E. Act and the Nationwide Mortgage Licensing System (NMLS). The following is a summary, key points, and long-term objectives of the final rule.
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the Farm Credit Administration (FCA), and the National Credit Union Administration (NCUA) the joint final rule implementing the requirements of Section 1507 of the S.A.F.E. Act on July 28, 2010. The final rule requires an employee of an Agency-regulated institution who acts as a residential mortgage loan originator (MLO) to register with the NMLS. The MLO must also obtain a unique identifier and renew and maintain their registration. Furthermore, all Agency-regulated institutions are responsible for their employees’ compliance with these requirements and must adopt and follow written policies and procedures designed to assure compliance with these requirements.
Key Points
Definition of Mortgage Loan Originator – The determining factor for registration with the NMLS under the S.A.F.E. Act is based on the definition of the term ‘Mortgage Loan Originator.’ The final rule defines an MLO as “an individual who takes a residential mortgage application and offers or negotiates terms of a residential mortgage loan for compensation or gain.”
Federal Registration & State Licensing – The S.A.F.E. Act specifically prohibits an individual from engaging in the business of a residential mortgage loan origination without first obtaining and maintaining annually: (1) A federal registration as a registered mortgage loan originator and a unique identifier if employed by an Agency-regulated institution, or (2) a license and registration as a State-licensed mortgage loan originator and a unique identifier. The Federal registration and state licensing must be accomplished through the same online registration, the NMLS and Registry.
MLO Registration Deadline – Each Agency-regulated institution must register all MLOs within 180 days after the Registry is capable of accepting registrations. The NMLS estimates that this will begin as early as January 28, 2011. During the 180-day initial registration period, employees of regulated institutions would not be subject to sanctions if they originate residential mortgage loans without having completed their registration.
MLO Registration Requirements – Each MLO must furnish identifying personal information, including: (1) Fingerprints for submission to the FBI and any other relevant governmental agency for a State and national criminal history background check; and (2) personal history and experience, including authorization for a background check related to any administrative, civil or criminal findings.
NMLS Unique Identifier on Form 1003 (Residential Mortgage Application) – Effective with all residential mortgage applications taken after July 1, 2010, the FHFA requires NMLS identification numbers attached to each Form 1003 for both the LMO and the mortgage company.
Long Term Objectives – The S.A.F.E. Act is intended to improve the accountability of residential MLOs while also creating higher and more uniform standards through MLO background checks, education and training. Furthermore, the Act hopes to enhance consumer protection by reducing fraud and providing consumers with easily accessible information regarding an MLO’s professional background.
Lindsay is a Staff Attorney at Bankers Advisory and Director of Client Services. She is a graduate of Dickinson College in Pennsylvania and received her J.D. from New England School of Law. She holds bar admissions in Massachusetts and District of Columbia.
For information regarding Bankers Advisory’s services contact lindsay@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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