Has your financial institution registered with the Nationwide Mortgage Licensing System and Registry (NMLSR) yet?  Have your residential mortgage loan originators (MLOs) registered yet?  The deadline for MLOs to register and to continue to originate residential mortgage loans is fast approaching – July 29, 2011.

The Secure and Fair Enforcement for Mortgage Licensing Act (the S.A.F.E. Act) requires an employee of a financial institution who acts as a residential mortgage loan originator to register with the NMLSR, obtain a unique identifier, and maintain this registration.  Registration began on January 31, 2011 and runs through July 29, 2011.  MLOs not registered during that time will no longer be permitted to continue to originate residential mortgage loans until they complete the registration requirements.

A “mortgage loan originator” is an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain.  The term does not include an individual who is not a mortgage loan originator and who performs purely administrative or clerical tasks on behalf of an individual who is a mortgage loan originator.

“Administrative or clerical tasks” means: (1) the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry; and (2) communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.

A “residential mortgage loan” is any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.   In addition, the rule specifically includes refinancings, reverse mortgages, home equity lines of credit, and other first and second lien loans secured by a dwelling.  The definition does not include loans for business, commercial, or agricultural purposes that use a “dwelling” as collateral.

Financial institutions have the responsibility to adopt policies and procedures appropriate to their operations prior to the registration of its employees.  By now institutions should have policies and procedures that address the following:

• a process for identifying which employees of the institution are required to be registered mortgage loan originators;
    
• a process to inform all employees of the institution who are mortgage loan originators of the registration requirements of the S.A.F.E. Act and be instructed on how to comply with these requirements and procedures, including registering as a mortgage loan originator prior to engaging in any mortgage loan origination activity;
    
• procedures to comply with the unique identifier requirements;
    
• reasonable procedures for confirming the adequacy and accuracy of employee registrations, including updates and renewals, by comparison with the institution’s records contained in the institution’s personnel files;
    
• reasonable procedures and tracking systems for monitoring compliance with registration requirements and procedures, such as by maintaining appropriate records;
    
• periodic independent testing of the institution’s policies and procedures for compliance with the S.A.F.E. Act and for such testing to be conducted by institution personnel or by an outside party on an annual basis;
    
• provide for appropriate disciplinary action against any employee who fails to comply with the registration requirements of the S.A.F.E. Act or the related policies and procedures of the institution, including prohibiting such employees from acting as mortgage loan originators or other appropriate disciplinary actions;
    
• a process for reviewing the criminal history background reports on employees received from the FBI through the Registry, taking appropriate action consistent with applicable law and rules with respect to these reports, maintaining records of these reports, and documenting any action taken with respect to such employees consistent with applicable recordkeeping requirements, if any; and
    
• procedures designed to ensure that any third party with which it has arrangements related to mortgage loan origination has policies and procedures to comply with the S.A.F.E. Act, including appropriate licensing and/or registration of individuals acting as mortgage loan originators.  Financial institutions should monitor third- party entities’ compliance with these policies and procedures.

The NMLSR website provides registration instructions for federal institutions and its employees, as well as a new FAQ.  The process is easy but time consuming.  If you haven’t started the process yet, now is the time to start.

By: Lorraine Williams, CRCM, CRP, CAMS
Director, Research & Development