QUESTION
I heard there is a bill pending before Congress related to
transitional licensing for Mortgage Loan Originators (“MLOs”). What does the bill propose to do and what is
its current status?
ANSWER
Under the Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (the “SAFE Act”), MLOs employed by non-banks must be licensed in
every state in which they originate loans. State licensing requirements are
much more arduous than federal registration requirements in that they generally
require pre-licensing and continuing education, a testing component, and
criminal and financial background checks. Meanwhile, MLOs working for banks are
exempt from individual state licensing requirements and may originate loans in
any state provided they are employed by a federally-insured institution and
register in the Nationwide Multistate Licensing System & Registry (“NMLS”).
Non-bank industry professionals have been advocating for a
form of transitional authority to originate mortgages since the enactment of
the SAFE Act. Transitional licensing would allow a MLO employed by a bank to
move to a non-bank mortgage lender and maintain a valid license to originate
residential mortgage loans for a period time while the MLO completes state
licensing requirements. Many industry professionals have argued that
transitional licensing would allow for a more level playing field in that it
would permit non-banks to more easily recruit MLOs. Specifically, MLOs would be
more willing to transition from bank to non-bank employment since their
livelihood would not be disrupted and they would be able to continue to
originate loans and receive compensation during the transition
period.
Currently, H.R. 2121 – SAFE Transitional Licensing Act of
2015 (“H.R. 2121”) is pending before Congress.
Introduced in April, 2015, this bill proposes to amend the SAFE Act by
requiring states to issue a temporary license for 120 days to registered MLOs
(1) moving from a financial institution to a state-licensed non-bank
originator, or (2) moving interstate to a state-licensed loan originator in
another state. These individuals
would be able to continue originating loans during this time period when they
move to a non-depository lender or to a new state.
Recently, H.R. 2121 has made significant headway. In
particular, on March 2, 2016, the bill was sent to Committee for review. The House Financial Services Committee
unanimously approved the bill, which means it will advance to the next step in the law making process, which is
the House floor. The Mortgage Bankers Association (“MBA”) has been a big
proponent of the bill since inception. Its grassroots advocacy arm, the
Mortgage Action Alliance (“MAA”), has been issuing Calls-to-Action to its
members urging them to contact their representatives in support of the bill.
Most recently, the MAA issued another Call-to-Action on March 16, 2016
advocating for broader support of the bill in order to ensure that it is
considered by the full House.
Michael Barone
Executive Director/Lenders Compliance Group
Director/Legal & Regulatory Compliance
