Last week the American Association of Residential Mortgage Regulators (AARMR) hosted its 27th annual regulatory conference in Tampa, Florida. Over 300 attendees gathered to exchange information relating to the licensing, supervision, and regulation of the residential mortgage industry. Here are some of the highlights from the conference:
NMLS 2.0 — What’s on Your Wish List?
By far the hottest topic was “NMLS 2.0,” an effort to modernize the existing Nationwide Multistate Licensing System (NMLS) introduced in 2008. The NMLS, which was built for mortgage lending licenses, also applies to other types of consumer lenders. Modernization entails rebuilding the system, not just selected upgrades, to meet anticipated future needs for usability, enhanced functionality, and expansion for use by collection agencies, money transmitters, and installment lenders licensed through NMLS. Initial modernization discussions addressed account management, entity affiliation and application submission, and maintenance. While the overhaul is expected to be complete in 2018, that may be overly optimistic.
Meanwhile, the State Regulatory Registry LLC (SRR), which formally administers the NMLS, has expressed its commitment to consider input from both regulator and industry users of the system as the modernization development continues. If you have been thinking that a single sign-on to assist in the management of multiple accounts, a customizable user role template to assist in the management of your organization users, a more streamlined sponsorship process, or an employment history that is linked to sponsorship for an automated update of your record is on your list of must haves, let us know – we are active participants in the NMLS industry development working group (IDWG), and we frequently submit comments to SRR regarding proposed functional changes to the NMLS.
Both the state and the federal regulators at the AARMR conference discussed frequent findings in their examinations. Across the country, regulators saw (i) failures in timely filing of advance change notices, (ii) unapproved records storage locations, (iii) property owners who were locked out of their homes even when actively working with the servicer, and (iv) deficiencies in compliance systems. In addition, regulators are starting to look not only at the licensee’s compliance with the individual rules and regulations, but at its ability to test and audit technology-based processes, quickly identify issues, and implement a resolution process.
Regulators also expressed concerns about licensees’ assessment of risks presented by reliance on vendors. Many state regulators are requiring more oversight (including auditing) of certain vendors by the licensee. Regulators warned that a licensee could be penalized for the inappropriate actions of certain vendors, even if the vendor is regulated and examined by another agency.
States Regulators Consider CFPB Rules
Consumer Financial Protection Bureau (CFPB) Deputy Assistant Director Brown discussed the final mortgage servicing rules under the Real Estate Settlement Procedures Act (Regulations X) and Truth in Lending Act (Regulation Z). That rule addresses loss mitigation, early intervention, and periodic statements. It also addresses successors in interest, debtors in bankruptcy, and borrowers who send a cease communication request under the Fair Debt Collection Practices Act (FDCPA).
Simultaneously, the CFPB issued an interpretive rule to clarify the interaction of the FDCPA and certain mortgage servicing rules in Regulations X and Z. The interpretive rule provides safe harbors from liability for servicers : (1) communicating about the loan with confirmed successors in interest; (2) providing the written early intervention notice required by Regulation X to a borrower who has invoked the cease communication right; and (3) responding to a borrow-initiated communication concerning loss mitigation after the borrower has invoked a cease communication right.
Given what we hear from state regulators, do not be surprised if many of the CFPB’s rules find their way into state law.
(Mayer Brown’s Consumer Financial Services Review addressed the CFPB’s final mortgage servicing rules and its FDCPA interpretation here.)
Account Executive Licensing?
The NMLS Ombudsman session included a lively discussion of whether individual account executives of wholesale mortgage lenders must be licensed as mortgage loan originators. After a detailed description of the activities performed by these account executives, a few state regulators recommended licensing, but affirmed that it was not required. Several state regulators declined to respond categorically, but warned that an individual could “step over the line” and be considered a mortgage loan originator if he or she discusses loan terms with the consumer.
Generally, states have adopted the SAFE Act definition of a “mortgage loan originator,” and unless exempt, an individual is required to be licensed if he or she takes a residential mortgage loan application and offers and negotiates the terms of a residential mortgage loan for compensation or gain. As account executives or similar persons perform their duties, they should be aware of whether they are performing those mortgage loan originator activities, regardless of their current professional title.
Keisha Whitehall Wolf served as the Acting Deputy Commissioner for the Maryland Office of the Commissioner of Financial Regulation before joining Mayer Brown.