QUESTION
We are trying to determine if our clerical employees must register with the NMLS. As a small lender, we believe that NMLS only licenses loan officers because there is an exception for clerical staff.
Yet, when we read the NMLS website and review the SAFE Act, we get more confused.
Are clerical employees exempt from having to register with the NMLS?
And what about management employees doing administrative work – do they need to go through the NMLS?
ANSWER
Let’s be clear: the Nationwide Mortgage Licensing System and Registry (“Registry”) does not grant or deny license authority. Make sure you understand the role served by the Registry.
The Secure and Fair Enforcement for (SAFE) Mortgage License Act[i] requires states to enact individual loan originator licensing requirements, enact by law or regulation a system for licensing and registering loan originators meeting prescribed specifications, and join the Registry.
The Registry is maintained jointly by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).
All 50 states adopted the Registry, the record system for non-depository, financial services licensing or registration. It is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities managed through the Registry by state or territorial governmental agencies.
The federal banking agencies jointly enacted a similar system for the registration of individual loan originators on the Registry system for employees of (1) a depository institution, (2) employees of a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency, or (3) employees of an institution that the Farm Credit Administration regulates.[ii]
The Registry establishes protocols for assigning a unique identifier to each registered loan originator that will facilitate electronic tracking.[iii]
To understand the requirements for administrative and clerical employees, we begin with what tasks such employees perform. It is essential to begin with a description of the tasks (and functions) rather than specific titles because the tasks are dispositive in determining if an employee must comply with the Registry mandates.
Administrative or clerical tasks mean the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
Usually, when I define the tasks this way, I am asked if loan processors and underwriters fit within the “administrative or clerical” category.
The answer is, they may, if
(1) they are W-2 employees of a mortgage broker, mortgage lender, or institution that is regulated by one of the federal banking agencies,
(2) they are performing their duties at the direction and subject to the supervision of a state licensed or federally registered loan originator, and
(3) any communications they have with a consumer do not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates and terms.
Another common question is whether an independent contractor must comply with the Registry requirements. Loan processors and underwriters functioning as independent contractors must be state licensed or federally registered as loan originators and assigned a unique identifier.
Chairman & Managing Director
[i] 12 U.S.C. § 5101, et. seq.
[ii] On May 29, 2009, the Federal Banking Agencies (Federal Reserve Board, OCC, OTS, FDIC, NCUA and Farm Credit Administration) issued a joint notice of proposed rulemaking concerning implementation of the SAFE Mortgage Recovery Act. [74 Federal Register No. 109, p. 27386]
[iii] For more information, the CSBS provides https://www.csbs.org/nationwide-multistate-licensing-system
