Are states making any changes to their licensing requirements in the wake of COVID-19?
In recent days, many state agencies have issued communications/guidance to licensees regarding temporary changes or adjustments to licensing requirements in response to the COVID-19 situation. For example, some states are temporarily waiving requirements for licensed entities to have a physical office open to the public during posted business hours. Others have suspended requirements that would prevent licensed loan originators from working from home or out of another remote location. However, not all state agencies have made or communicated changes, and the changes that have been made vary from state to state and may be subject to change, depending on how the current situation unfolds.
To help lenders stay informed the NMLS has begun tracking these changes as part of its COVID-19 resource page. The document, which is being updated on an on-going basis, can be found here.
What questions should lenders ask their vendors to assess the potential impact of coronavirus on service level/operations?
With concerns surrounding COVID-19 (a.k.a. coronavirus) intensifying, many companies have instituted domestic travel bans, which could impact the delivery of some services to lenders, such as on-site audits. Companies are also preparing for the possibility that employees will need to work remotely in the event that mandatory quarantines are required to slow the spread of infection. To assess how the response to conronavirus could impact service levels, lenders should ak their vendors the following questions:
- What steps is your organization taking to monitor the situation?
- Where is your workforce located geographically, and how will the coronoavirus impact each of your locations?
- Does your organization have a telecommute policy in place, and if so, what does it entail? If not, what procedures is your organization putting in place in the event that telecommuting becomes necessary?
- Do you anticipate disruption in your own supply chain? If yes, how will it impact your ability to provide uninterrupted support, services or products to us?
- Will government-imposed travel ban restrictions impede your ability to provide uniterrupted support, services or products to us? If yes, please provide an explanation.
- How are you addressing key person dependencies in your organization, and is cross-training included in that plan?
- What is your organization’s disaster recovery plan in regards to IT and network infrastructure?
- Has your organization conducted a service level risk assessment, and if so, how are you assessing those risks?
For additional information on how organizations should respond internally to coronavirus concerns, visit https://www.cdc.gov/coronavirus/2019-ncov/.
Did Texas amend its requirements with regard to pre-qualifications and pre-approvals?
Yes. On November 1, 2019, the TX Finance Commission adopted amendments regarding its conditional pre-qualification and conditional loan approval forms.
The amendments are meant to clarify when to use the forms and to make the content of the forms more uniform. Specifically, the amendments explain that there is no requirement to issue a written confirmation of conditional pre-qualification or conditional loan approval. However, in the event a mortgage lender does issue such written notifications to a consumer, it must utilize the appropriate prescribed form or an alternate form that includes all of the information found on the prescribed form. Further, with regard to the pre-qualification form, the amendments are also meant to help emphasize to mortgage applicants that the form is not a loan approval or commitment to lend.
The amendments and requirements to use the amended forms become effective May 1, 2020.
Updated Conditional Approval Letter
As a residential mortgage servicer in New Jersey, what do I need to know about the Mortgage Servicing Licensing Act?
In a recent bulletin, the New Jersey Department of Banking and Insurance (the “Department”) provided guidance on the Mortgage Servicers Licensing Act (the “Act”), which became effective on July 28, 2019. The Act requires non-bank mortgage companies servicing residential mortgage loans secured by property in New Jersey to become licensed as mortgage servicers unless exempt. Notably, the Act exempts companies licensed as Residential Mortgage Lenders or Correspondent Residential Mortgage Lenders under the New Jersey Residential Mortgage Lending Act. However, such entities must maintain the supplemental surety bond, fidelity bond and errors & omissions insurance coverage applicable to mortgage servicing. Calculations for required insurance policy amounts are based on the dollar volume of New Jersey residential mortgages serviced.
The bulletin indicated that beginning January 13, 2020, mortgage servicers must submit license applications through the Nationwide Multistate Licensing System & Registry (“NMLS”). The Department plans to begin issuing mortgage servicer licenses on or after April 13, 2020. Entities currently conducting business as mortgage servicers in New Jersey will be permitted to continue to do so provided they submit a Mortgage Servicer License application by April 13th. Entities that are not currently operating as mortgage servicers in New Jersey, that have been denied licensure by the Department, or that fail to submit an application between January 13 and April 13, 2020 and are not otherwise exempt from licensure will be prohibited from acting as a mortgage servicer in New Jersey until the Department issues a Mortgage Servicer License to them.
Violators of the law will be subject to civil penalties of up to $25,000 and can be charged with a third-degree crime.
I read something recently about changes to New York regulations related to reverse mortgages issued under FHA’s HECM program. What are the changes?
On December 6, 2019, Assembly Bill 5626 was signed into law by the governor and is set to take effect on March 5, 2020 (the “Act”). The Act places additional requirements on lenders and/or servicers who offer and/or service reverse mortgages under FHA’s HECM program in New York.
Most importantly, in order to make a HECM in New York, in addition to a mortgage lenders license, you’ll need a separate approval. There is no “grandfather” provision in the Act for current HECM lenders. The Act also prohibits a lender from engaging in any unfair or deceptive practices in connection with the marketing or offering of a HECM loan. Specifically, a lender shall not: (a) use the words “public service announcement” in any mailing, advertisement or writing; (b) use the words “government insured” or other similar language representing that HECM loans are insured, supported, and sponsored by any governmental entity in any mailing, advertisement or writing; or (c) represent that any such HECM is anything other than a commercial product.
In addition, the Act:
- Requires HECM lenders to provide supplemental consumer protection material (the content and form of which shall be specified by the Superintendent of Financial Services) with any HECM solicitation mailed to a physical address within New York.
- Requires HECM lenders to provide each applicant or potential applicant the telephone number and website address provided by HUD for the purpose of acquiring HECM counseling.
- Requires both the HECM lender and the borrower to be represented by an attorney at closing, and each party must have at least one attorney present to conduct the closing.
- Requires HECM lenders to provide a notice of duty of the borrower to pay certain property related expenses when equity in the property is low or depleted.
- Outlines various other servicing and foreclosure related requirements.
Noteworthy, compliance with the Act is a condition precedent to foreclosing on a HECM and the failure to comply is a “complete” defense to a foreclosure action.
There are many other requirements in the Act not discussed above. For a complete version of the Act, click here.
Does Georgia have specific requirements with regard to a mortgage loan originator (“MLO”) acting under Temporary Authority (“TA”)?
Yes, effective January 9, 2020 the Georgia Department of Banking and Finance (the “Department”) requires the following with regard to Temporary Authority:
- All advertisements mentioning a MLO’s ability to act as an MLO in GA must “clearly and conspicuously” disclose that the MLO is operating under Temporary Authority in the state, is not currently licensed in GA, and has a pending application with the Department, which may be granted or denied.
- A MLO purporting to operate under the TA must indicate “TAO,” “temporary authority to operate,” or a substantially similar designation next to the signature line on any document, application, or disclosure signed by the MLO in connection with any residential mortgage loan application, including but not limited to the negotiation of terms or the offering of a loan.
- Any MLO who qualifies to operate under TA must submit proof to the Department of enrollment in a class to satisfy GA’s MLO education requirements, as well as registering to take the test as required by O.C.G.A. § 7-1-1004(f). Such proof shall be submitted to the Department within thirty (30) days of receipt of the MLO’s application.
- Mortgage companies must maintain in their journal of mortgage loan transactions clear identification regarding when any MLO utilizes TA at any point in the application or loan process, as well as the final status of the MLO’s GA license application.
- Requires mortgage lenders and brokers sponsoring MLOs operating under TA to provide a written disclosure in at least 10-point bold-faced type to an applicant on the date the applicant signs an application or any disclosure, whichever occurs first. The disclosure must be signed by the applicant and must include the following language:
- “The Georgia Department of Banking and Finance requires that we inform you that our company is licensed but the mortgage loan originator responsible for your loan is not currently licensed by the Georgia Department of Banking and Finance. The mortgage loan originator has applied for a mortgage loan originator license with the Georgia Department of Banking and Finance. Federal law (
- ) authorizes certain mortgage loan originators to operate on a temporary basis in the state of Georgia while their application is pending. The Georgia Department of Banking and Finance may grant or deny the license. Further, the Georgia Department of Banking and Finance may take administrative action against the mortgage loan originator that may prevent such individual from acting as a mortgage loan originator before your loan closes. In such case, our company could still act as your broker or lender.”
This disclosure provision becomes effective April 1, 2020.