Montana Amends Loan Originator Licensing Requirements and Clarifies Various State Regulations
by: Nicole Legere
Introduction
The state of Montana’s Department of Administration (the Department) amended a number of requirements regarding the licensing of mortgage loan originators. These amendments are the result of the conforming of state licensing laws to those under the Nationwide Mortgage Licensing System (NMLS). In addition, the state also clarified important lending definitions, and set forth timelines for determining the abandonment of an application.
The Department also updated a number of incorrect citations which resulted from prior sections of statutes being repealed and added new servicer requirements. The overall effect is a streamlining of existing Montana state law.
These changes became effective March 1, 2014.
Loan Originator Requirements
The Department now requires an individual seeking a mortgage loan originator’s license to complete two hours of pre-licensing education with a specific focus on Montana state statutes and rules.
This change resulted from the adoption of the uniform state test which is required for all states that participate in the NMLS. The NMLS test focuses on the areas of law which are common to most states, and allows loan originators to transfer their licensure from state to state more easily. However, Montana law varies from other states in many ways, and loan originators must still be familiar with these differences.
Second, the state changed the methods by which a designated manager can prove three years of experience to include the “verification of active licensure as a mortgage loan originator in another state through NMLS.” The Montana Mortgage Act requires three years of experience as a mortgage loan originator prior to becoming a designated manager. There have previously been a number of different ways to prove this prerequisite.
The NMLS system maintains all the data concerning the dates on which an individual loan originator obtained licensure, and if this licensure has been active for the required three year time period. The Department of Administration found that allowing the use of the NMLS system is adequate, as it verifies all the required information.
Servicer Requirements
Lastly, reporting forms for mortgage servicers were updated so that servicers are now able to use both the Quarterly Statement for Mortgage Servicing Activity and the Mortgage Call Report (through NMLS).
Generally, a mortgage servicer licensee is required to compile and submit a report to the Department of Administration forty-five days after the end of each quarter. Servicers licensed through the NMLS are required to file the expanded Mortgage Call Report, and Montana’s acceptance of this report in lieu of the Quarterly Statement for Mortgage Servicing Activity lessens the burden on those servicers. Both reports will now be accepted in an attempt to allow servicers to choose to file the easier of the two reports.
Servicers not listed through NMLS as Fannie and Freddie Seller/Servicers (or a Ginnie Mae issuer) are not eligible to file the Mortgage Call Report, and will still need to file the Quarterly Statement for Mortgage Servicing Activity.
Clarification of Definitions
Two important definitions were clarified by the Montana amendments, the first of which concerns activities that result in the “origination of mortgage loan.” In clarifying the definition of mortgage loan origination, the amendment explains that origination does not include credit underwriting activities. However, this exclusion applies only so long as the credit underwriter does not communicate directly with the borrower about specific credit terms.
Credit underwriting activities include the analysis done by the mortgage underwriter to determine whether:
• 1) Credit should be extended to the borrower;
• 2) A loan meets the requirements for funding; or
• 3) A loan meets the criteria to be sold on the secondary market.
This amendment was the result of previous confusion over which activities qualified as origination activities, and is intended to prevent any further confusion.
Second, the Department addressed the definition of abandoned applications. A new amendment set forth specific deadlines by which an applicant must provide any required, but missing, documentation to keep the application from being deemed “abandoned.”
Under this amendment, an application is abandoned if “the applicant fails to provide the information requested by the department within 60 days of notification of the deficiencies to applicant by the department or December 31, whichever comes first.” The state found this deadline necessary to keep applications from remaining pending indefinitely. There was also concern from individuals in the industry that older applications could negatively affect employee workloads.
About the Author
Nicole Legere, J.D. is a Senior Regulatory Compliance Consultant at Bankers Advisory, Inc. She is a graduate of the University of Massachusetts at Amherst and earned her Juris Doctor at Roger Williams School of Law. Nicole is admitted to the Bar in Massachusetts and New York. She can be reached at nicole@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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