Federal Compliance Update

The U.S. Congress previously enacted the Economic Growth, Regulatory Relief and Consumer Protection Act which amended the SAFE Act to provide a temporary authority for registered mortgage loan originators to originate mortgage loans at a state licensed mortgage company. The Consumer Financial Protection Bureau (“CFPB”) recently issued an interpretive rule to address screening and training requirements for loan originators operating with such temporary authority.  Both of these provisions are effective November 24, 2019.

 

FEDERAL ECONOMIC GROWTH, REGULATORY RELIEF AND CONSUMER PROTECTION ACT S. 2155

 

Additional provisions of this bill were discussed in our memorandum dated June 18, 2018.

 

Employment Transition of Loan Originators

“Application state” means a state in which a registered loan originator or a state licensed loan originator seeks to be licensed.

 

“State-licensed mortgage company” means an entity that is licensed or registered under the law of any state to engage in residential mortgage loan origination and processing activities.

 

Temporary Authority to Originate Loans for Loan Originators Moving from a Depository Institution to a Non-Depository Institution

 

Upon becoming employed by a state licensed mortgage company, an individual who is a registered loan originator will be deemed to have temporary authority to act as a loan originator in an application state for the period described below if the individual:

  • Has not had:
    • An application for a loan originator license denied; or
    • A loan originator license revoked or suspended in any governmental jurisdiction;
  • Has not been subject to, or served with, a cease and desist order:
    • In any governmental jurisdiction; or
    • By the Consumer Financial Protection Bureau (“CFPB”);
  • Has not been convicted of a misdemeanor or felony that would preclude licensure under the law of the application state;
  • Has submitted an application to be a state-licensed loan originator in the application State; and
  • Was registered in the Nationwide Mortgage Licensing System and Registry (“NMLS”) as a loan originator during the 1-year period preceding the date on which the information required for application is submitted.

 

The period described in this paragraph begins on the date on which an individual described above submits the information required for application and ends on the earliest of the date:

  • On which the individual withdraws the application to be a state-licensed loan originator in the application state;
  • On which the application state denies, or issues a notice of intent to deny, the application;
  • On which the application state grants a state license; or
  • That is 120 days after the date on which the individual submits the application, if the application is listed on NMLS as incomplete.

 

Temporary Authority to Originate Loans for State-Licensed Loan Originators Moving Interstate

 

A state-licensed loan originator is deemed to have temporary authority to act as a loan originator in an application state for the period described below if the state-licensed loan originator:

  • Meets the following requirements:
    • Has not had:
      • An application for a loan originator license denied; or
      • A loan originator license revoked or suspended in any governmental jurisdiction;
    • Has not been subject to, or served with, a cease and desist order:
      • In any governmental jurisdiction; or
      • By the CFPB;
    • Has not been convicted of a misdemeanor or felony that would preclude licensure under the law of the application state;
    • Has submitted an application to be a state-licensed loan originator in the application State; and
    • Was registered in NMLS as a loan originator during the 1-year period preceding the date on which the information required for application is submitted.
  • Is employed by a state-licensed mortgage company in the application state; and
  • Was licensed in a state that is not the application state during the 30-day period preceding the date on which the information required for application was submitted in connection with the application submitted to the application state.

 

The period described in this paragraph begins on the date on which the state-licensed loan originator submits the information required for application in connection with the application submitted to the application state and ends on the earliest of the date:

  • On which the state-licensed loan originator withdraws the application to be a state-licensed loan originator in the application state;
  • On which the application state denies, or issues a notice of intent to deny, the application;
  • On which the application state grants a state license; or
  • That is 120 days after the date on which the state-licensed loan originator submits the application, if the application is listed on NMLS as incomplete.

 

Applicability

 

Any person employing an individual who is deemed to have temporary authority to act as a loan originator in an application state is subject to the requirements of the SAFE Act and to applicable state law to the same extent as if that individual was a state-licensed loan originator licensed by the application state.

 

Any individual who is deemed to have temporary authority to act as a loan originator in an application state and who engages in residential mortgage loan origination activities is subject to the requirements of the SAFE Act and to applicable state law to the same extent as if that individual was a state-licensed loan originator licensed by the application state.

 

84 FEDERAL REGISTER 63791

 

The CFPB has issued an interpretive rule to address whether the screening and training requirements for organizations employing loan originators are the same for those loan originators operating with temporary authority.  The CFPB concludes that a loan originator organization is not required to comply with such requirements in the case of a loan originator operating with temporary authority because the state will perform the screening and training as part of its review of the individual’s application for a state loan originator license.

 

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Diane Jenkins

Director, National Mortgage Compliance Practice Group

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