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Maryland’s SAFE Act Conforming Legislation and the Transition

to NMLS

This presentation contains currently-available information regarding the Commissioner's transition

to the NMLS.  It may be updated as necessary and should not be relied upon as legal advice.

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Topics of Discussion

• Nationwide Mortgage Licensing System • SAFE Legislative Framework• NMLS Demonstration• Maryland Process - Transitioning to

NMLS

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Section 1

Nationwide Mortgage Licensing System

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NMLS Description

• Nationwide state-supervised licensing system• Similar to other industries -

Securities Investment advisors

• Custom for mortgage industry• Two primary goals:

– Uniform mortgage application for every agency– Comprehensive licensing and supervisory repository

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NMLS Description

• NMLS launched on 1/2/2008 with 7 states

• 26 state agencies as of March 2008

• 9 more scheduled in 2009 including MD

• NMLS currently tracking:– Over 12,000 companies– Over 11,000 branches– Over 55,000 loan originators

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Alaska

Texas(OCCC & SML)

Utah

Montana

California(DFI, DOC

& DRE)

Arizona

Idaho

Nevada

Oregon

Iowa

ColoradoKansas

Wyoming

New Mexico

Missouri

Minnesota

Nebraska

Oklahoma

South Dakota

Washington

Arkansas

North Dakota

Louisiana

Hawaii

IllinoisOhio

Florida

GeorgiaAlabama

Wisconsin

Virginia

Indiana(DFI &SOS)

Michigan

Mississippi

Kentucky

Tennessee

Pennsylvania

NorthCarolina

SouthCarolina

WestVirginia

New Jersey

Maine

New York

Vermont

Maryland

New Hampshire

Connecticut

Delaware

Massachusetts

Rhode Island

CSBS/AARMR Nationwide Mortgage Licensing System

Puerto Rico

(DFI & DRE)

States currently using NMLS

States to join NMLS in 2009

States to join NMLS in 2010

District of Columbia

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NMLS Objectives

• Streamline the licensing process– Efficient and standardized process leveraging technology– Centralized record for multi-jurisdictional entities

• Enhance supervision– Uniform loan originator and lender records– Seamless visibility / coordination among states

• Increase consumer protection– Industry accountability

– Reduced fraud

– Access to license and sanction data

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Significant Infrastructure Commitment

• NMLS at launch: $4.4 million• 2008: $4.0 million• 2009 $6.8 million

– Testing– Education– Criminal Background Checks– Credit reports– Consumer access

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System Overview

www.stateregulatoryregistry.org/nmls

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Single License File

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1. Company Identifying Information(Name, Address, Contacts)

2. License Jurisdiction(s)

3. Legal Status

8. Disclosure Questions

Schedule ADirect Owners and Executive Officers

(ties to Question 4)

Schedule BIndirect Owners

(ties to Question 4)

FORM MU1

5.-7. Business Activities

4. Control Information

1. Company Identifying Information(Name, Address, Contacts)

2. License Jurisdiction(s)

3. Legal Status

8. Disclosure Questions

Schedule ADirect Owners and Executive Officers

(ties to Question 4)

Schedule BIndirect Owners

(ties to Question 4)

FORM MU1

5.-7. Business Activities

4. Control Information

MAApproved

RIDenied

• All regulators share the same electronic MU filing

• Each regulator makes their own licensing decisions and controls their own license information.

X

NYApproved-Deficient

Individual State Licensing

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Section 2

SAFE Legislative Framework

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Federal SAFE Legislation

• Housing & Economic Recovery Act of 2008 – Signed by President Bush on July 30, 2008– Reforms GSE (Freddie and Fannie) regulation – Modernizes the Federal Housing Administration– Promotes private-sector loan workouts to prevent

foreclosure

– Licensure of all loan originators (Title V)

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Federal SAFE Legislation

• All mortgage loan originators must be– Meet minimum standards– Be licensed or registered

Financial institutions Registration through bank regulatory agencies

Non banks Licensing through states on NMLS

• Extended to mortgage lenders outside federal law

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Key SAFE Participants

SAFE MortgageLicensing

Act

STATE REGULATORYAGENCY

US DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

MORTGAGE LOANORIGINATORS AND

LENDERS

NATIONWIDE MORTGAGELICENSING SYSTEM

& REGISTRY

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Federal Mandate for States

• All states must have a system of licensing for loan originators by July 31, 2009

• System must meet SAFE definitions and minimum standards, that include:– Licensing loan originators through NMLS– Criminal and credit background check– Education– Testing

Maryland Legislation – SB 269Meets SAFE requirements*

Includes several provisions to facilitate transition

* Clarifying guidance from HUD is being obtained regarding (1) individual servicer licensing; (2) testing for current licensees; and applicability to manufactured housing

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Federal Mandates for NMLS

• Establish protocols for issuing unique ID #

• Process criminal background checks

• Approve pre-licensure and continuing education courses

• Develop national test for loan originators

• Develop mortgage call report

• Provide public access to licensing data

• Process consumer complaints

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• On April 14, 2009, Governor O’Malley signed SB 269 into law bringing Maryland into compliance with SAFE

• Legislation will become effective July 1, 2009

• From a structural perspective, SB 269 seeks to – Maintain underlying structure and elements of MD mortgage licensing laws to

retain integrity of features that do not conflict with the Federal SAFE Act

– Integrate key elements necessary to meet SAFE Act requirements

– Minimize disruption to mortgage industry in the transitional period

Maryland SAFE Act LegislationSenate Bill 269

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Key Elements for Originators

Terms - 1 term

- December 31st Expiration

- Shift from staggered, 2 year licensing

in process

Definitions - Residential Real Estate

- Mortgage Loan

- Registered Loan Originator

- Retains “owner occupied” residential

1-4 focus / NOT investment properties

- LOs with depositories participate through federal agencies

Criminal Background Check

- Total prohibition for conviction

involving fraud, dishonesty,

breach of trust, money

laundering- Prohibition for other felony

conviction within 7 years- Total prohibition for prior

revocation (inc. other state)

- Current prohibition for felony

conviction for fraud, theft of forgery

only if WITHIN 10 years

- Currently, Commissioner discretion for

other felonies- Currently evaluation of revocations

within discretion of Commissioner

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Education - 20 hours of pre-licensing education

- 8 hours of continuing ed

- Current law allows 3 years of

experience OR 40 hours of pre-

licensing education- Currently 20 hours every 2

years

Testing - NMLS approved testing - As available (likely 1/10)

Financial Responsibility

- Financial responsibility must be demonstrated and new credit report submitted with NMLS application

- Denial may not be based solely on any one of credit score, bankruptcy, foreclosure, debt from divorce or medical expenses

- Currently, no explicit qualification in law previously – “good moral character and general fitness” for originators

Key Elements For Originators

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Key Elements For Originators

Surety Bond - SAFE creates requirement for

originators- Can be met at employer (lender) level

- Functionally parallel to current

MD law

Other - Non-active status for LO between

employers (notice requirement)

- Non-SAFE element - Frequent issue in current

market

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Transition Timeline NMLS

– 1/1/09 - New / renewal license expiration shifts to 12/31/09

– 5/11/09 - NMLS Portal opens for MD licensees

– 6/30/09 - Last day for using MD system alone for MO and

ML licenses (applications received well prior)

– 7/1/09 - New / renewal license applications approved

through NMLS by MD

- New / renewal licenses expire on 12/31/10

– 1/1/10 - NMLS Federal / MD test and fingerprinting open

– 12/31/10 - License transition complete

18 Month Transition

Licensing through NMLS

Pre-Transition

Licensing Solely through

MD System

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Section 3

Transitioning to NMLS

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Transition Timeline NMLS

– 1/1/09 - New / renewal license expiration shifts to 12/31/09

– 5/11/09 - NMLS Portal opens for MD licensees

– 6/30/09 - Last day for using MD system alone for MO and

ML licenses (applications received well prior)

– 7/1/09 - New / renewal license applications approved

through NMLS by MD

- New / renewal licenses expire on 12/31/10

– 1/1/10 - NMLS Federal / MD test and fingerprinting open

– 12/31/10 - License transition complete

18 Month Transition

Licensing through NMLS

Pre-Transition

Licensing Solely through

MD System

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Current Mortgage Loan Origination Professionals in MD

Current Licensees(Expiration After 6/30/09

New Licensees(De Novo)

New Licensees(Exempt at 6/30/09)

NOT an employee of bank or subsidiary?

What Does This Mean for You?

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What Does This Mean for Originators?

• Current originator licensees– NMLS entry at renewal – 18 month transition (you may transition early)

– Education / bonding / background check requirements met by 12/31/10

– Testing subject to HUD guidance

– Continuing education within past 5 years will meet NMLS pre-licensing requirement

• New originator licensees - previously exempt mortgage originators– Interim license allows current activities

– Interim license application must be received by 7/31/09 or full de-novo licensing

– Key requirements (education, background check, bonding, testing) must be satisfied to lift restrictions and must be obtained by 7/31/10

• New originator licensees – de-novo– NMLS entry at initial licensing

– Full compliance required at outset

– Testing deferred until NMLS test is available

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Licensees

• Licenses with expiration dates on or after July 1, 2009• Transition AT EXPIRATION (you may transition early)• New license will expire Dec. 31, 2010 (up to 18 months)• Key requirements -

Education 20 hrs of pre-licensing education may be satisfied with 20 hrs of continuing ed. within past 5 years

Bonding Employee of licensed mortgage lender may satisfy with employer bond

Fingerprinting FBI / state – NMLS not yet operationalImplementation delayed to 1/1/10

Testing Federal / MD test not yet availableImplementation delayed to 1/1/10 Not required until HUD provides guidance

Current Originator Licensees

LO holding a MD Mortgage Originator license on 7/1/09 must comply with these requirements for NMLS licensing by 12/31/10

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Current Originator Licensees

1) Initiate MU4 on NMLS (after consultation with employer)

2) Complete MU4 and related tasks on NMLS

3) Pay NMLS processing fee - $30 annually / $60 if prior to 12/31/09

4) Proceed to MD website for -

(i) Association with lender done on MD website (all lenders not on NMLS until end of transition (12/31/10)

(ii) Payment of MD license fee - $225 annually - pro-rated for duration by MD

Current Licensees

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NMLS Transitioning / Sponsorship Application

NMLS Transitioning / New License Checklist Requirements

1. This application process is for

Renewing mortgage lenders - who are currently licensed by the State of Maryland and who are transitioning to NMLS AT RENEWAL.

Fees – Renewing licensees will need to pay the Maryland license fee through this website. Your license will expire on 12/31/2010 and you will be charged a pro-rated fee for this period. As the NMLS system cannot accommodate pro-rated fees, Maryland will process your payment through this website. I f you are a new mortgage lender licensee, all fees are assessed directly through the NMLS.

ALL mortgage loan originators (new and renewing) – who are transitioning to NMLS at renewal OR obtaining a new license.

Sponsorship- All mortgage loan originators will use this application to complete their sponsorship requirement by identifying their employer or certifying the employer’s exempt status.

Fees – Renewing licensees will need to pay the Maryland license fee through this website. Your license will expire on 12/31/2010 and you will be charged a pro-rated fee for this period. As the NMLS system cannot accommodate pro-rated fees, Maryland will process your payment through this website. I f you are a new mortgage originator licensee, all fees are assessed directly through the NMLS.

2. You should begin this Application AFTER you have completed the process for new or currently licensed mortgage lender or mortgage loan originators on the NMLS and have obtained an NMLS Identification Number (“NMLS ID”) .

3. Please be aware that NMLS information is downloaded to Maryland on the next business day. Please allow 1-2 business days after the submission of your NMLS application before proceeding.

Note:

Please be sure to have a valid MasterCard/Visa/Discover credit card before proceeding if you are transitioning at renewal. Please be sure to have your assigned NMLS ID to login.

Begin Transition / Sponsorship Application

What Happens When on MD Website – Current MLO

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NMLS Transitioning / Sponsorship Application

Mortgage Loan Originator

Step 2: Applicant I nformation License Information (display only)

I have a United States home address

Address: 111 CHARLESBROOKE RD.

City: BALTIMORE

State: Maryland

Zip Code: 21212-

0000

I have a home address outside the United States

Address:

Home Phone Number: 410-

377-

8519

What Happens When on MD Website – Current MLO

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NMLS Transitioning / Sponsorship Application

Mortgage Loan Originator

Step 3: Applicant I nformation Review Personal I nformation

Name: ERIC J OSEPH BRANHAM

Address: City, State Zip:

111 CHARLESBROOKE RD. BALTIMORE, MD 21212-0000

Home Phone Number: 410-377-8519

Cell Phone Number: 410-409-1057

EBRANHAM@PRIMERES.COM

Business I nformation Office Location

You must provide your employment statement (PDF) reflecting the new information before your new license will be approved. Note: I f you are applying as a new Mortgage Loan Originator and your employer is exempt from the Maryland Mortgage Lender license, please enter Registration Number 979797 as your office location.

Registration Number: 979797 EXEMPT

Business Location: EXEMPT MORTGAGE LENDER

00000-0000

Expiration Date: 01-01-9999

Work Phone Number: 000-000-0000

Work Fax Number: 000-000-0000

Employer/ Location Change Effective 07-20-2009

What Happens When on MD Website – Current MLO

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Previously Exempt

• Interim Mortgage Loan Originator license if AS OF 6/30/09– Employed by licensed mortgage lender that makes loans and doesn’t broker– Owns 25% or more interest in mortgage lender

• Application for interim license MUST be received by July 31, 2009• License will expire Dec. 31, 2010 (up to 18 months) BUT “Interim” status must be cleared by 7/31/10 (within 12

months)• Key requirements -

Education 20 hrs of pre-licensing education1 Year to ClearUnder Interim Status, licensee under same restrictions as under previous exemption

Bonding Employee of licensed mortgage lender may satisfy with employer bond

Fingerprinting FBI / state – NMLS not yet operationalImplementation delayed to 1/1/10

Testing Federal / MD test not yet available Implementation delayed to 1/1/10

New Originator Licensees Previously Exempt

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New Originator LicenseesPreviously Exempt

1) Initiate MU4 on NMLS (after consultation with employer)

2) Complete MU4 and related tasks on NMLS (by 7/31/09 for interim)

3) Pay ALL NMLS and MD fees on NMLS

- NMLS - $30 annually / $60 if prior to 12/31/09

- MD - $225 annually / $550 if prior to 12/31/09 and $100 investigation fee

4) Proceed to MD website for association with lender only (all lenders not on NMLS until end of transition (12/31/10)

New LicenseesPreviously Exempt

5) Identify prior exemption on Affidavit of Md MLO Activity

6) Clear background, bonding, education, testing by 7/31/10

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• Application any time after May 1, 2009 for approval after July 1, 2009• License will expire Dec. 31, 2010 (up to 18 months) • Key requirements -

Education 20 hrs of pre-licensing education

NO INTERIM STATUS All requirements are effective with testing subject to availability

Fingerprinting FBI and state fingerprint check thru MDNMLS portal not operational yet

Bonding Employee of licensed mortgage lender may satisfy with employer bond

Testing Federal / MD test not yet available Implementation as available

New Originator LicenseesDe Novo

New LicenseesDe Novo

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New Originator LicenseesDe Novo

New LicenseesDe Novo

1) Initiate MU4 on NMLS (after consultation with employer)

2) Complete MU4 and related tasks on NMLS

3) Pay ALL NMLS and MD fees on ON NMLS

- NMLS - $30 annually / $60 if prior to 12/31/09

- MD - $225 annually / $550 if prior to 12/31/09 and $100 investigation fee

4) Proceed to MD website for association with lender only (all lenders not on NMLS until end of transition (12/31/10)

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What Does This Mean for Lenders?

• Current lender licensees– NMLS entry at renewal – 18 month transition (you may transition early)

– Original / main office MUST be on NMLS for branch to transition – so Original / main office may need to transition early if existing branch expires or new branch is to be licensed prior to expiration of original / main office license

– Surety bond and net worth requirements as current

• New lender licensees– NMLS entry at renewal – 18 month transition (you may transition early)

– Original / main office MUST be on NMLS for new branch to be licensed through NMLS – original / main office may need to transition early for new branch to be licensed

– Surety bond and net worth requirements as current

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Current Lender Licensees

New LicenseesDe Novo

1) Initiate MU1 on NMLS

2) Initiate MU3 on NMLS – only after MU1 licensing completed*

3) Pay NMLS processing fee only ON NMLS Site

- NMLS – Main - $100 annually / $200 if prior to 12/31/09

- NMLS - Branch - $20 annually / $40 if prior to 12/31/09

4) Pay MD license fee on MD website - $1,000 annually - pro-rated for duration

*No branch office may be licensed through NMLS until the home/main office has transitioned.

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New Lender Licensees

New LicenseesDe Novo

1) Initiate MU1 on NMLS

2) Initiate MU3 on NMLS – only after MU1 licensing completed*

3) Pay ALL NMLS and MD fees on NMLS

- NMLS – Main - $100 annually / $200 if prior to 12/31/09

- NMLS - Branch - $20 annually / $40 if prior to 12/31/09

- MD - $1,000 annually / $2,000 if prior to 12/31/09

No branch office may be licensed through NMLS until

the home/main office has transitioned.

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Interim Changes

• Do NOT make changes to your license while completing the transition / renewal process

• If you need to make a change, transition / renew through the NMLS immediately and prior to expiration date

• The license expiration will be extended to December 31, 2010 expiration pursuant to the normal renewal process and a pro-rated fee will be charged

• Upon approval, you can implement the change through the NMLS directly

No interim changes may be processed through MD

Use NMLS AFTER license has transition / renewed

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• Communication has been and will be ongoing– Electronic newsletter– Webinars

• Emergency regulations in process to support implementation

More Information to Follow

http://www.dllr.state.md.us/finance/frnews/

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Advantages of NMLS

Single record for each company / originator

More efficient simpler multi-state licensing

Greater consistency in standards

Better technology and support–

Superior regulatory oversight- Unified, multi-state access

- Enhanced originator tracking

- More information – call reports etc.