On July 28, 2010, the federal agencies issued final rules requiring residential mortgage loan originators (MLO) who are employees of national and state banks, savings associations, Farm Credit System institutions, credit unions, and certain of their subsidiaries (agency-regulated institutions) to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).
An MLO as an individual who: (i) takes a residential mortgage loan application; and, (ii) offers or negotiates terms of a residential mortgage loan for compensation or gain.
Excluded from the registration requirement are individuals engaged in modifications and assumptions, since those transactions do not result in the extinguishing of an existing loan and the replacement with a new loan.
The SAFE Act does not require employees of mortgage loan servicers to be licensed as MLOs; indeed, the Dodd-Frank Wall Street Reform and Consumer Protection Act excludes servicers, providing in its separate definition of "mortgage originator" under the Truth in Lending Act that those persons, among others, do not include servicers and their employees, agents, or contractors.
The newly created Consumer Financial Protection Bureau (CFPB) will be assuming HUD's role of determining whether states have met the SAFE Act's minimum requirements, and undoubtedly the CFPB will clarify whether the SAFE Act requires employees of mortgage loan servicers to be licensed as originators.
As part of this registration process, MLOs must furnish to the Nationwide Mortgage Licensing System and Registry (Registry) information and fingerprints for background checks. The SAFE Act generally prohibits employees of agency-regulated institutions from originating residential mortgage loans unless they register with the registry.
The agencies' final rules establish the registration requirements for MLOs employed by agency-regulated institutions and requirements for these institutions, including the adoption of policies and procedures to ensure compliance with the SAFE Act and the final rules.
Importantly, the agencies anticipate that the Registry could begin accepting federal registrations as early as January 28, 2011.
Employees of agency-regulated institutions must not register until the agencies instruct them to do so. The agencies will provide an advance announcement of the date when the registry will begin accepting federal registrations, beginning on the date the Agencies provide in a public notice that the Registry is accepting initial registrations, and agency-regulated institutions and their applicable employees will have 180 days from that date to comply with the initial registration requirements.
Final Rule Effective: October 1, 2010.
If you have any questions about this matter or would like assistance with mortgage compliance, please contact Jonathan Foxx, Managing Director.
Registration of Mortgage Loan Originators (MLO)
- Registration requirement. Each employee of a national bank who acts as a mortgage loan originator must register with the Registry, obtain a unique identifier, and maintain this registration in accordance with the requirements of the final rule.
- Implementation period for initial registration. An employee of a national bank who is a mortgage loan originator must complete an initial registration with the Registry pursuant to the final rule within 180 days from the date that the OCC provides in a public notice that the Registry is accepting Registrations.
- Employees previously registered or licensed through the Registry. In general. If an employee of a national bank was registered or licensed through, and obtained a unique identifier from, the Registry and has maintained this registration or license before the employee becomes subject to the final rule at this bank, then the registration requirements of the SAFE Act and the final are deemed to be met, provided that certain conditions are met.
Policies and Procedures
- A national bank that employs one or more MLOs must adopt and follow written policies and procedures designed to assure compliance with the final rule.
- Policies and procedures must be appropriate to the nature, size, complexity, and scope of the mortgage lending activities of the bank, and apply only to those employees acting within the scope of their employment at the bank.
Use of Unique Identifier
- A national bank shall make the unique identifier(s) of its registered mortgage loan originator(s) available to consumers in a manner and method practicable to the institution.
- A registered mortgage loan originator shall provide his or her unique identifier to a consumer:
1. Upon request;
2. Before acting as a mortgage loan originator; and
3. Through the originator's initial written communication with a consumer, if any, whether on paper or electronically.
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Registration of Mortgage Loan Originators - Final Rule
Federal Register, Vol. 75, No. 144, 44656-44708, (7/28/10)
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