[Federal Register: July 28, 2010 (Volume 75, Number 144)]
[Rules and Regulations]
[Page 44655-44708]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy10-24]
[[Page 44655]]
-----------------------------------------------------------------------
Part IV
Department of the Treasury
Office of the Comptroller of the Currency
-----------------------------------------------------------------------
Federal Reserve System
Federal Deposit Insurance Corporation
Department of the Treasury
Office of Thrift Supervision
-----------------------------------------------------------------------
Farm Credit Administration
National Credit Union Administration
-----------------------------------------------------------------------
12 CFR Part 34, 208, 211, et al.
Registration of Mortgage Loan Originators; Final Rule
[[Page 44656]]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 34
[Docket ID OCC-2010-0007]
RIN 1557-AD23
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 211
[Docket No. R-1357]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 365
RIN 3064-AD43
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563
[Docket No. 2010--0021]
RIN 1550-AC33
FARM CREDIT ADMINISTRATION
12 CFR Part 610
RIN 3052-AC52
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 741 and 761
RIN 3133-AD59
Registration of Mortgage Loan Originators
AGENCY: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
Treasury (OTS); Farm Credit Administration (FCA); and National Credit
Union Administration (NCUA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The OCC, Board, FDIC, OTS, FCA, and NCUA (collectively, the
Agencies) are adopting final rules to implement the Secure and Fair
Enforcement for Mortgage Licensing Act (the S.A.F.E. Act). The S.A.F.E.
Act requires an employee of a bank, savings association, credit union
or Farm Credit System (FCS) institution and certain of their
subsidiaries that are regulated by a Federal banking agency or the FCA
(collectively, Agency-regulated institutions) who acts as a residential
mortgage loan originator to register with the Nationwide Mortgage
Licensing System and Registry, obtain a unique identifier, and maintain
this registration. The final rule further provides that Agency-
regulated institutions must: require their employees who act as
residential mortgage loan originators to comply with the S.A.F.E. Act's
requirements to register and obtain a unique identifier, and adopt and
follow written policies and procedures designed to assure compliance
with these requirements.
DATES: This final rule is effective on October 1, 2010. Compliance with
Sec. ----.103 (registration requirement) of the final rule is required
by the end of the 180-day period for initial registrations beginning on
the date the Agencies provide in a public notice that the Registry is
accepting initial registrations.
FOR FURTHER INFORMATION CONTACT:
OCC: Michele Meyer, Assistant Director, Heidi Thomas, Special
Counsel, or Patrick T. Tierney, Senior Attorney, Legislative and
Regulatory Activities, (202) 874-5090, and Nan Goulet, Senior Advisor,
Large Bank Supervision, (202) 874-5224, Office of the Comptroller of
the Currency, 250 E Street SW., Washington, DC 20219.
Board: Anne Zorc, Counsel, Legal Division, (202) 452-3876, Virginia
Gibbs, Senior Supervisory Analyst, (202) 452-2521, and Stanley Rediger,
Supervisory Financial Analyst, (202) 452-2629, Division of Banking
Supervision and Regulation, Board of Governors of the Federal Reserve
System, 20th and C Streets, NW., Washington, DC 20551.
FDIC: Thomas F. Lyons, Examination Specialist, (202) 898-6850,
Victoria Pawelski, Senior Policy Analyst, (202) 898-3571, or John P.
Kotsiras, Financial Analyst, (202) 898-6620, Division of Supervision
and Consumer Protection; or Richard Foley, Counsel, (202) 898-3784, or
Kimberly A. Stock, Counsel, (202) 898-3815, Legal Division, Federal
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC
20429.
OTS: Charlotte M. Bahin, Special Counsel (Special Projects), (202)
906-6452, Vicki Hawkins-Jones, Special Counsel, Regulations and
Legislation Division, (202) 906-7034, Debbie Merkle, Project Manager,
Credit Risk, (202) 906-5688, and Rhonda Daniels, Senior Compliance
Program Analyst, Consumer Regulations, (202) 906-7158, Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552.
FCA: Gary K. Van Meter, Deputy Director, Office of Regulatory
Policy, (703) 883-4414, TTY (703) 883-4434, or Richard A. Katz, Senior
Counsel, or Jennifer Cohn, Senior Counsel, Office of General Counsel,
(703) 883-4020, TTY (703) 883-4020, Farm Credit Administration, 1501
Farm Credit Drive, McLean, VA 22102-5090.
NCUA: Regina Metz, Staff Attorney, Office of General Counsel, 703-
518-6561, or Lisa Dolin, Program Officer, Division of Supervision,
Office of Examination and Insurance, 703-518-6360, National Credit
Union Administration, 1775 Duke Street, Alexandria, VA 22314-3428.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Requirements
The S.A.F.E. Act,\1\ enacted on July 30, 2008, mandates a
nationwide licensing and registration system for mortgage loan
originators. Specifically, the Act requires all States to provide for a
licensing and registration regime for mortgage loan originators who are
not employed by Agency-regulated institutions within one year of
enactment (or two years for States whose legislatures meet biennially).
In addition, the S.A.F.E. Act requires the OCC, Board, FDIC, OTS and
NCUA,\2\ through the Federal Financial Institutions Examination Council
(FFIEC), and the FCA to develop and maintain a system for registering
mortgage loan originators employed by Agency-regulated institutions.
The S.A.F.E. Act specifically prohibits an individual from engaging in
the business of residential mortgage loan origination without first
obtaining and maintaining annually: (1) A registration as a registered
mortgage loan originator and a unique identifier if employed by an
Agency-regulated institution (Federal registration), or (2) a license
and registration as a State-licensed mortgage loan originator and a
unique identifier.\3\
[[Page 44657]]
The S.A.F.E. Act requires that Federal registration and State licensing
and registration must be accomplished through the same online
registration system, the Nationwide Mortgage Licensing System and
Registry (Registry).
---------------------------------------------------------------------------
\1\ The S.A.F.E. Act was enacted as part of the Housing and
Economic Recovery Act of 2008, Public Law 110-289, Division A, Title
V, sections 1501-1517, 122 Stat. 2654, 2810-2824 (July 30, 2008),
codified at 12 U.S.C. 5101-5116. Citations in this Supplementary
Information section are to the ``S.A.F.E. Act'' by section number in
the public law.
\2\ The OCC, Board, FDIC, OTS, and NCUA are referred to both in
the S.A.F.E. Act and in this rulemaking as the ``Federal banking
agencies.''
\3\ If the Secretary of Housing and Urban Development (HUD)
determines that any State fails, within the statutorily prescribed
timeframe, to establish a licensing regime that meets the
requirements of the S.A.F.E. Act, the Secretary is required to
establish a system for the licensing and registration of mortgage
loan originators in that State. S.A.F.E. Act at section 1508. See
HUD proposed rule implementing this requirement at 75 FR 66548 (Dec.
15, 2009). HUD has reviewed the model legislation developed by the
Conference of State Bank Supervisors and the American Association of
Residential Mortgage Regulators to assist States in meeting the
minimum requirements of the S.A.F.E. Act and found it to meet these
requirements. See 74 FR 312 (Jan. 5, 2009) and http://www.hud.gov/
offices/hsg/ramh/safe/cmsl.cfm.
---------------------------------------------------------------------------
In connection with the Federal registration, the Agencies at a
minimum must ensure that the Registry is furnished with information
concerning the mortgage loan originator's identity, including: (1)
Fingerprints for submission to the Federal Bureau of Investigation
(FBI) and any other relevant governmental agency for a State and
national criminal history background check; and (2) personal history
and experience, including authorization for the Registry to obtain
information related to any administrative, civil, or criminal findings
by any governmental jurisdiction.\1\ On June 9, 2009, the Agencies
issued a notice of proposed rulemaking to implement these requirements
for Agency-regulated institutions.\2\
---------------------------------------------------------------------------
\1\ S.A.F.E. Act at section 1507(a) (12 U.S.C. 5106(a)).
\2\ 74 FR 27386 (June 9, 2009).
---------------------------------------------------------------------------
B. Implementing the Requirements for Federal Registration
The Conference of State Bank Supervisors (CSBS) and the American
Association of Residential Mortgage Regulators (AARMR) have developed
and maintain a Web-based system, the Nationwide Mortgage Licensing
System (NMLS), for the State licensing of mortgage loan originators in
participating States.\3\ Mortgage loan originators in these States
electronically complete a single uniform form (the MU4 form). The data
provided on the form is stored electronically in a centralized
repository available to State regulators of mortgage companies, who use
it to process license applications and to authorize individuals to
engage in mortgage loan origination, as well as for other supervisory
purposes.
---------------------------------------------------------------------------
\3\ The NMLS system is owned and operated by the State
Regulatory Registry LLC (SRR), which is a limited-liability company
established by CSBS and the American Association of Residential
Mortgage Regulators as a subsidiary of CSBS to develop and operate
nationwide systems for State regulators in the financial services
industry. SRR has contracted with the Financial Industry Regulatory
Authority (FINRA) to build and maintain the system. FINRA operates
similar systems in the securities industry. More information about
this system is available at http://www.stateregulatoryregistry.org.
---------------------------------------------------------------------------
The Federal banking agencies, through the FFIEC, and the FCA are
working with CSBS to modify the NMLS so that it can accept
registrations from mortgage loan originators employed by Agency-
regulated institutions. This modified registry will be renamed the
Nationwide Mortgage Licensing System and Registry. The existing NMLS
was not designed to support the Federal registration of Agency-
regulated institution employees, who are not required to obtain
additional authorization from the appropriate Federal agency to engage
in mortgage loan origination activities that are permissible for an
Agency-regulated institution. Accordingly, the system must be modified
to accommodate the differences between the requirements for State
licensing/registration and Federal registration. It also must be
modified to accommodate the migration of an individual between the
State licensing/registration and the Federal registration regimes or
the dual employment of an individual by both an Agency-regulated
institution and a non-Agency-regulated institution.\1\ Furthermore, the
S.A.F.E. Act requires new enhancements to the current system, such as
the processing of fingerprints and public access to certain mortgage
loan originator data. These modifications and enhancements require
careful analysis and raise complex legal and system development issues
that the Agencies are addressing both through this rulemaking and
through consultation with the CSBS and the SRR. The OCC, on behalf of
the Agencies, has entered into an agreement with the SRR that will
provide for appropriate consultation between the Agencies and the
Registry concerning Federal registrant information requirements and
fees, system functionality and security, and other operational matters.
The issuance of this final rule establishing the requirements for
Federal registrants will enable the Agencies and SRR to complete
modifications that will enable the system to accept Federal
registrations. As described in the SUPPLEMENTARY INFORMATION section of
the proposed rule, the Agencies will publicly announce the date on
which the Registry will begin accepting Federal registrations, which
will mark the beginning of the period during which employees of Agency-
regulated institutions must complete the initial registration process.
When fully operational, mortgage loan originators and their Agency-
regulated institution employers are expected to have access to the
Registry, seven days a week, to establish and maintain their
registrations.\1\
---------------------------------------------------------------------------
\1\ The Agencies note that some employees of Agency-regulated
institutions also may be subject to the State licensing and
registration regime. For example, employees who act as mortgage loan
originators for a bank and a nondepository subsidiary of a bank
holding company that is not a subsidiary of a depository institution
would be subject to both the Federal and State regimes.
\1\ Pursuant to section 1503(11) of the S.A.F.E. Act (12 U.S.C.
5102(11)), Agency-regulated institutions and their employees who are
acting within the scope of their employment with the Agency-
regulated institutions are not subject to State licensing or
registration requirements for mortgage loan originators.
---------------------------------------------------------------------------
II. Overview of the Proposal and Public Comments
The proposed rule required individuals employed by Agency-regulated
institutions who act as mortgage loan originators and who do not
qualify for the de minimis exception set forth in the proposal to
register with the Registry, obtain unique identifiers, and maintain
their registrations through updates and renewals. The proposal also
directed Agency-regulated institutions to require compliance with these
requirements, and to adopt and follow written policies and procedures
to assure such compliance. The S.A.F.E. Act does not require the
Registry to screen or approve registrations received from employees of
Agency-regulated institutions and the Registry will not do so. Instead,
the Registry will be the repository of, and conduit for, information on
those employees who are mortgage loan originators at Agency-regulated
institutions. Pursuant to Sec. Sec. ----.104(d) and (h) of the
proposed rule, it would be the responsibility of each Agency-regulated
institution to establish reasonable procedures for confirming the
adequacy and accuracy of employee registrations as well as to establish
a process for reviewing any criminal history background reports
received from the Registry.
The proposal provided for a 180-day period within which to complete
initial registrations after the Registry is capable of accepting
registrations from employees of Agency-regulated institutions. During
this period, employees of Agency-regulated institutions would not be
subject to sanctions if they originate residential mortgage loans
without having completed their registration.
The Agencies received over 140 different comment letters from
financial institutions and holding companies, trade associations,
Federal government agencies, a training company, and individuals. A
number of Agency-regulated institutions objected to the registration
requirement in general, suggesting that the registration
[[Page 44658]]
requirement should not be applied to them because they were not
involved in the abuses that led to the enactment of the S.A.F.E. Act.
In addition, many of these commenters found the registration
requirement overly burdensome, especially as they are subject to
regular examinations by the Agencies and they already closely supervise
the activities of their employees.
Many commenters raised concerns related to the proposed de minimis
exception from the registration requirement. Under the proposed de
minimis exception, a mortgage loan originator would not have to
register if he or she acted as a mortgage loan originator for five or
fewer loans and the Agency-regulated institution employs mortgage loan
originators who, while excepted from registration pursuant to the
individual exception, in the aggregate acted as mortgage loan
originators in connection with 25 or fewer residential mortgage loans.
Commenters suggested raising the mortgage loan originator and
institution loan limits or eliminating one of the limits. Community
bank trade associations were particularly concerned that the narrowness
of the exception would exclude most community banks. Some commenters
suggested that the exception should be tied to an asset-based threshold
in the range of $250 million to $1 billion.
Most commenters objected to having employees who engage in loan
modifications or assumptions register under the rule, noting that these
activities are fundamentally different than the mortgage loan
origination process in that loan modifications and assumptions: (1) Are
loss mitigation activities, not loan originations; (2) provide loan
modification or assumption personnel little to no discretion in
negotiating the terms and conditions of any changes; and (3) are
outside of the Congressional intent and the plain language of the
S.A.F.E. Act.
While some commenters found the 180-day initial registration period
adequate, a number of commenters suggested alternative periods ranging
up to one year. Some trade associations and institutions supported
staggering registration periods in order to reduce system demands and
to tailor an implementation schedule to the particular capacities of an
institution or group of institutions, as long as the implementation
period would still be 180 days for each institution.
A number of commenters also raised issues related to the provision
of fingerprints to the Registry. Commenters asserted that it was not
appropriate to have an age limit on fingerprints as they tend not to
change; that the Registry should be able to accept fingerprints in a
variety of formats, such as paper and scanned digital prints; and that
Agency-regulated institutions should be permitted to use existing
channels to process fingerprints.
Many commenters expressed privacy and security concerns regarding
the types of personal information that mortgage loan originators would
have to provide to the Registry and the ability of the public to have
Internet access to such information.
Trade associations and large Agency-regulated institutions
overwhelmingly requested that the Registry accommodate batch processing
of registrations in order to reduce the costs and burden of data input,
reduce errors, and efficiently register bank employees.
The Agencies have modified the proposal to take into account many
of these comments. A detailed discussion of these comment letters and
the Agencies' responses to them appears in the section-by-section
description of the final rule that follows.\1\
---------------------------------------------------------------------------
\1\ In addition to the changes described in this Supplementary
Information section, the Agencies have replaced the cites in the
proposed rule to sections of the S.A.F.E. Act with cites to the
relevant provisions in the U.S. Code.
---------------------------------------------------------------------------
III. Section-By-Section Description of the Final Rule
Section ----.101--Authority, Purpose, and Scope
The Agencies adopt paragraphs (a) and (b) of Sec. ----.101 as
proposed.\2\ Paragraph (a) identifies the authority for this rule as
the S.A.F.E. Act.\3\ Paragraph (b) states that this rule implements the
S.A.F.E. Act's Federal registration requirements, which apply to
individuals who originate residential mortgage loans. This provision
also describes the objectives of the S.A.F.E. Act, which are derived
from section 1502 of the Act (12 U.S.C. 5101).
---------------------------------------------------------------------------
\2\ Because each Agency's proposed rule will amend a different
part of the Code of Federal Regulations, but will have similar
numbering, relevant sections are cited as ``Sec. ----.'' followed
by a number, unless otherwise noted.
\3\ The Board and the OCC note that the authority in paragraph
(a) of their respective rules supplements their authority to
implement the S.A.F.E. Act, for example, Section 11 of the Federal
Reserve Act (12 U.S.C. 248(a)) for the Board and section 5239A of
the Revised Statutes (12 U.S.C. 93a) for the OCC.
---------------------------------------------------------------------------
As in the proposal, paragraph (c)(1) of Sec. ----.101 of the final
rule identifies the specific entities that employ individual mortgage
loan originators--entities referred to in this SUPPLEMENTARY
INFORMATION section as Agency-regulated institutions--and that also are
covered by this rule. Under the S.A.F.E. Act, a mortgage loan
originator must be Federally-registered if that individual is an
employee of a depository institution, an employee of any subsidiary
owned and controlled by a depository institution and regulated by a
Federal banking agency, or an employee of an institution regulated by
the FCA.\1\ Section 1503(2) of the S.A.F.E. Act (12 U.S.C. 5102(2))
provides that ``depository institution'' has the same meaning as in
section 3 of the Federal Deposit Insurance Act (FDI Act),\2\ and
includes any credit union. As we noted in the proposal, the definition
of ``depository institution'' in the FDI Act and in the S.A.F.E. Act
does not include bank or savings association holding companies or their
non-depository subsidiaries. Employees of these entities who act as
mortgage loan originators are not covered by the Federal registration
requirement and, therefore, must comply with State licensing and
registration requirements.
---------------------------------------------------------------------------
\1\ Agency-regulated institutions and their employees acting
within the scope of their employment are subject only to the Federal
registration requirements of the S.A.F.E. Act as implemented by the
Agencies through this rulemaking, even if registration in the State
system is available before Federal Registration. In consultation
with the Agencies, CSBS/SRR are modifying the Registry so that it
can accept registrations from employees of Agency-regulated
institutions. An employee of an Agency-regulated institution may be
engaged in activities outside the scope of his or her employment at
an Agency-regulated institution that subject that employee to State
licensing and registration requirements, such as dual employment at
a non-Agency-regulated institution.
\2\ Section 3 of the FDI Act defines ``depository institution''
as any bank or savings association. The term ``bank'' in section 3
of the FDI Act means any national bank, State bank, Federal branch,
and insured branch and includes any former savings association. The
term ``savings association'' means any Federal savings association,
State savings association, and any corporation other than a bank
that the FDIC and the OTS jointly determine to be operating in
substantially the same manner as a savings association. 12 U.S.C.
1813.
---------------------------------------------------------------------------
With respect to the OCC, this rule applies to national banks,
Federal branches and agencies of foreign banks, their operating
subsidiaries, and their employees who are mortgage loan originators.\3\
For the Board, this rule applies to member banks of the Federal Reserve
System (other than national banks); their respective subsidiaries that
[[Page 44659]]
are not functionally regulated within the meaning of section 5(c)(5) of
the Bank Holding Company Act, as amended (12 U.S.C. 1844(c)(5)); \1\
branches and agencies of foreign banks (other than Federal branches,
Federal agencies and insured State branches of foreign banks);
commercial lending companies owned or controlled by foreign banks; \2\
and their employees who act as mortgage loan originators. For the FDIC,
this rule applies to insured State nonmember banks (including State-
licensed insured branches of foreign banks) and their subsidiaries
(except brokers, dealers, persons providing insurance, investment
companies, and investment advisers) and their employees who are
mortgage loan originators. For the OTS, this rule applies to savings
associations and their operating subsidiaries, and their employees who
are mortgage loan originators. For the FCA, this rule applies to FCS
institutions that originate residential mortgage loans under sections
1.9(3), 1.11 and 2.4(a)(2) and (b) of the Farm Credit Act of 1971, as
amended (12 U.S.C. 2017(3), 2019, and 2075(a)(2) and (b)), and their
employees who are mortgage loan originators.\3\ For the NCUA, this rule
applies to credit unions and their employees who are mortgage loan
originators. Because non-Federally insured credit unions generally are
not Federally regulated institutions, special registration conditions
apply to them as discussed below.
---------------------------------------------------------------------------
\3\ The S.A.F.E. Act's definition of depository institution
includes Federal branches of foreign banks but not Federal agencies
of foreign banks. Federal agencies are authorized by sections
1(b)(1) and 4(b) of the International Banking Act of 1978 (12 U.S.C.
3101(b)(1) and 3102(b)) and 12 CFR 28.11(g) and 28.13(a)(1) of the
OCC's regulations to lend money, which would include originating
mortgage loans, subject to the same duties, restrictions, penalties,
liabilities, conditions, and limitations that would apply to a
national bank. Thus, the Federal registration requirements apply to
Federal agencies of foreign banks to the extent the registration
requirements apply to national banks.
\1\ The S.A.F.E. Act, by its terms, applies the Federal
registration requirements to employees of a subsidiary that is owned
and controlled by a State member bank and regulated by the Board.
For purposes of the scope of the Board's rules, these subsidiaries
are described as those that are not functionally regulated within
the meaning of section 5(c)(5) of the Bank Holding Company Act.
Subsidiary has the meaning given that term in section 2 of the Bank
Holding Company Act (12 U.S.C. 1841), as applied to State member
banks.
\2\ The Board notes that its final rule covers branches and
agencies of foreign banks (other than Federal branches, Federal
agencies, and insured State branches of foreign banks) and
commercial lending companies owned or controlled by foreign banks
pursuant to its authority under the International Banking Act (IBA)
(Chapter 32 of Title 12) to issue such rules it deems necessary in
order to perform its respective duties and functions under the
chapter and to administer and carry out the provisions and purposes
of the chapter and prevent evasions thereof. 12 U.S.C. 3108(a). The
Board notes that the IBA provides, in relevant part, that the above
entities shall conduct their operations in the United States in full
compliance with provisions of any law of the United States which
impose requirements that protect the rights of consumers in
financial transactions, to the extent that the branch, agency, or
commercial lending company engages in activities that are subject to
such laws, and apply to State-chartered banks, doing business in the
State in which such branch or agency or commercial lending company,
as the case may be, is doing business. 12 U.S.C. 3106a(1). Under the
Board's final rule, the above entities would be subject to the same
Federal registration requirements as Federal branches, Federal
agencies, and insured State branches of foreign banks, which are
covered in the OCC and FDIC rules, respectively.
\3\ Some FCS associations may not exercise their statutory
authority to make residential mortgage loans, and FCS banks no
longer engage in residential mortgage origination activities because
they have transferred their direct lending authority to their
affiliated associations. The FCA emphasizes that employees of FCS
banks and associations that do not engage in residential mortgage
loan origination activities are not subject to the registration
requirements of the S.A.F.E. Act and these regulations. The Federal
Agricultural Mortgage Corporation (Farmer Mac) is an FCS institution
that among other activities operates a secondary market for rural
residential mortgage loans. The FCA determines that Farmer Mac
employees are not subject to the registration requirements of the
S.A.F.E. Act and these implementing regulations because Farmer Mac
does not engage in mortgage loan origination activities for rural
residents. The Farmer Mac secondary market is modeled after Fannie
Mae and Freddie Mac, and the provisions of the S.A.F.E. Act do not
expressly apply to employees at Fannie Mae and Freddie Mac.
---------------------------------------------------------------------------
As discussed in Section II, a number of commenters objected to the
application of this registration requirement to employees of Agency-
regulated depository institutions because, in general, they are subject
to regular examinations, would be overly burdened by the registration
requirement, and already closely supervise the activities of their
employees. Some commenters noted that this registration requirement
would penalize them for the inappropriate actions of other lenders that
led to the enactment of the S.A.F.E. Act.
The Agencies note that the registration of mortgage loan
originators employed by Agency-regulated institutions is explicitly
required by the S.A.F.E. Act. The statute imposes a registration
requirement, rather than a licensing requirement, on the employees of
Agency-regulated institutions. The Agencies note that such institutions
(other than non-Federally insured credit unions) already are subject to
a Federal regime of examination and supervision. The S.A.F.E. Act does
not authorize the Agencies to create exceptions to the registration
requirement other than the de minimis exception described below.
Some credit union-related commenters discussed whether the final
rule should apply to credit union service organizations (CUSOs). The
NCUA notes that it answered these questions in a public legal opinion
letter 08-0843, dated October 8, 2008, available on NCUA's Web site,
http://www.ncua.gov. The S.A.F.E. Act treats employees of depository
institution subsidiaries the same as employees of the depository
institution, if the subsidiary is owned and controlled by the
depository institution and regulated by a Federal banking agency.\1\ In
the case of CUSOs, however, NCUA does not have direct regulatory
oversight or enforcement authority. Instead, NCUA regulation permits
Federal credit unions to invest in or lend only to CUSOs that conform
to the limits specified in the CUSO rule, 12 CFR Part 712.\2\ NCUA has
not, historically, asserted that CUSOs or their employees are exempt
from applicable State licensing regimes, and the S.A.F.E. Act does not
alter that approach. Nor do NCUA regulations have any applicability to
CUSOs owned by State-chartered credit unions.\3\ Accordingly,
individuals employed by CUSOs that engage in residential mortgage loan
origination activities, whether the CUSO is owned by a State or a
Federal credit union, would need to be licensed in accordance with
applicable State requirements.
---------------------------------------------------------------------------
\1\ Section 1503(7)(A)(ii) of the S.A.F.E. Act (12 U.S.C.
5102(7)(A)(ii)).
\2\ 12 CFR part 712.
\3\ In April 2008, the NCUA Board issued a proposed rule that
would extend some provisions of the CUSO rule to State-chartered
institutions. See 73 FR 23982 (May 1, 2008). The proposal has not
yet been finalized.
---------------------------------------------------------------------------
Some commenters also asked whether non-Federally insured credit
unions must register with the Registry. NCUA's proposed rule applied to
Federally insured credit unions and their employees who are mortgage
loan originators but commenters requested NCUA include non-Federally
insured credit unions and their employees who are mortgage loan
originators in the scope of NCUA's final rule. The S.A.F.E. Act
requires the Agencies to develop and maintain a system for registering
employees of a depository institution, defined to include ``any credit
union.'' \4\ Consistent with the S.A.F.E. Act and in response to
comments, NCUA's final rule provides for a system for registering
employees of any credit union. NCUA's final rule applies to Federally
insured credit unions and their employees who are mortgage loan
originators and non-Federally insured credit unions and their employees
who are mortgage loan originators when certain conditions are met and
formal agreements reached.
---------------------------------------------------------------------------
\4\ Sections 1507(a)(1) and 1503(1) and (2) of the S.A.F.E. Act
(12 U.S.C. 5106(a)(1) and 5102(1) and (2)).
---------------------------------------------------------------------------
When drafting its final rule, NCUA considered that, with the
exception of non-Federally insured credit unions, entities covered by
the Federal registration system are subject to Federal oversight.
Entities subject to the Federal registration system are labeled
throughout the rule as ``Agency-regulated institutions.'' Unlike
Federal credit unions and Federally insured
[[Page 44660]]
State-chartered credit unions, non-Federally insured credit unions are
neither Federally insured nor subject to NCUA's oversight. In order for
non-Federally insured credit unions and their employees who are
mortgage loan originators to qualify for Federal registration, they
must be subject to oversight for purposes of compliance with NCUA's
rule. Therefore, due to the unique nature of non-Federally insured
credit unions compared with all other credit unions, NCUA is working
with State supervisory authorities in those States with non-Federally
insured credit unions to implement an oversight program to enable them
to participate in the Federal registration system.
The oversight program will require a State supervisory authority
seeking to allow non-Federally insured credit unions in its State to
participate in the Federal registration system to enter into a
memorandum of understanding (MOU) with NCUA. The MOU will need to
address various requirements such as, but not limited to: The
requirement for an applicable State supervisory authority to maintain
such an MOU to allow non-Federally insured credit unions and their
employees in its State to have continuous access to, and use of, the
registry; examination of the non-Federally insured credit unions'
compliance with the rule by either the State supervisory authority or
NCUA; non-Federally insured credit unions' payment of examination fees
and payment for any necessary Registry modifications; and enforcement
authority and penalties for non-Federally insured credit unions for
noncompliance. Any information provided by the Registry to the public
about a non-Federally insured credit union and its employees must
include a clear and conspicuous statement that the non-Federally
insured credit union is not insured by the National Credit Union Share
Insurance Fund.
If any State supervisory authority where non-Federally insured
credit unions are located fails to enter into or maintain an agreement
with NCUA for this registration process and oversight, the non-
Federally insured credit unions and their employees in that State
cannot register or maintain an existing registration under the Federal
system. They instead must use the appropriate State licensing and
registration system, or if the State does not have such a system, the
licensing and registration system established by the Department of
Housing and Urban Department (HUD) for mortgage loan originators and
their employees.\1\ In addition, NCUA's final rule requires that the
State supervisory authorities who seek to have non-Federally insured
credit unions in their States participate in the Federal registration
system enter into the applicable agreement with NCUA on or before the
date the Agencies provide in a public notice that the Registry is
accepting initial registrations.
---------------------------------------------------------------------------
\1\ HUD published its proposed rule to establish this system on
December 15, 2009. See 74 FR 66548.
---------------------------------------------------------------------------
Finally, NCUA acknowledges that, while it is an added requirement
for non-Federally insured credit unions to have their State supervisory
authorities enter into an agreement with NCUA, this is necessary to
have any oversight or enforcement authority at all over these entities.
Absent any agreement, non-Federally insured credit unions cannot
participate in the Federal registration system. They are not subject to
a Federal regime of examination and supervision, and are unlike any
other Agency-regulated depository institutions covered under this rule.
Therefore, they are subject to a different procedure to participate in
the same Federal registration system.
Section 1507 of the S.A.F.E. Act (12 U.S.C. 5106) requires the
Federal banking agencies to make such de minimis exceptions ``as may be
appropriate'' to the Act's registration requirements.\1\ Paragraph
(c)(2) of Sec. ----.101 of the proposed rule provided a de minimis
exception based on an individual's and, in the aggregate, an
institution's total number of residential mortgage loans originated in
a rolling 12-month period. Specifically, the proposal provided that the
registration requirements would not apply to an employee of an Agency-
regulated institution if, during the last 12 months: (1) The employee
acted as a mortgage loan originator for 5 or fewer residential mortgage
loans; and (2) the Agency-regulated institution employs mortgage loan
originators who, while excepted from registration pursuant to this
section, in the aggregate, acted as a mortgage loan originator in
connection with 25 or fewer residential mortgage loans.
---------------------------------------------------------------------------
\1\ See S.A.F.E. Act at sections 1507(c) (12 U.S.C. 5106(c)) (de
minimis exceptions), 1504(a)(1)(A) (12 U.S.C. 5103(a)(1)(A))
(requirement to register), 1504(a)(2) (12 U.S.C. 5103(a)(2))
(requirement to obtain a unique identifier). As discussed in the
Supplementary Information section of the proposed rule, the FCA has
authority under section 5.17(a)(11) of the Farm Credit Act of 1971,
as amended, 12 U.S.C. 2252(a)(11), to apply the de minimis exception
to FCS institutions. Section 5.17(a)(11) of the Farm Credit Act
authorizes the FCA to ``exercise such incidental powers as may be
necessary or appropriate to fulfill its duties. * * *'' In this
case, the FCA is exercising its incidental powers to fulfill the
requirement in the S.A.F.E. Act that it work together with the
Federal banking agencies to develop and maintain a system for
registering residential mortgage loan originators at Agency-
regulated institutions with the Registry. A coordinated and uniform
approach to the de minimis exception among the Agencies is
appropriate because it best fulfills the objectives of the S.A.F.E.
Act.
---------------------------------------------------------------------------
The Agencies received many, and varied, comments on this de minimis
exception. Most commenters supported an exception to the rule's
requirements. However, a majority of the commenters did not agree with
the proposal's formulation of this exception, nor did they agree on an
alternative. Specifically, some commenters requested that the Agencies
raise the threshold number of loans originated by an individual
mortgage loan originator and/or the institution so that more low-volume
originators would qualify for the exception. These commenters indicated
that, because of its narrowness, too few institutions would be able to
use the exception as proposed and others would unnecessarily register
employees solely to avoid accidental non-compliance with the rule.
Some, however, thought that the proposed threshold numbers were too
high, and could cause an institution to spread its originations over
numerous employees to avoid registration. Still others said that the
proposed de minimis exception would be fairer, and much easier to
apply, if the threshold limitation applied only to the employee or to
the institution, but not both. A Federal government agency commenter
found that the proposed definition of de minimis would make the rule
unduly burdensome on small community banks.
A number of commenters also suggested that the final rule base a de
minimis exception on a percentage of total loans or the total loan
volume made at each institution, instead of the number of loans. Some
trade associations and smaller institutions requested that the de
minimis exception be based on an institution's asset-size, with
suggestions ranging from the Home Mortgage Disclosure Act \1\ threshold
for institutions regulated by a Federal banking agency, currently set
by the Board at $39 million in assets,\2\ to $1 billion, which would be
consistent with exceptions for small institutions in other provisions
of law. Other commenters opposed an asset-based approach, with larger
Agency-regulated institutions noting that the exceptions should not be
structured to benefit only small institutions.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 2801 et seq.
\2\ See 12 CFR 203.2 (Regulation C).
---------------------------------------------------------------------------
Other commenters wanted the exception to be applied to institutions
[[Page 44661]]
with no prior history of mortgage origination fraud or to institutions
with good performance histories from previous supervisory examinations,
regardless of the number of loans originated. Some commenters also
suggested that the exception should apply only to individuals who do
not regularly or principally function as a mortgage loan originator.
Some commenters noted that the exception could instead be based on the
percentage of time an employee spends engaged in the origination of
residential mortgage loans.
The Agencies also received conflicting comments on whether to
aggregate a subsidiary's loans with the parent institution for
determining de minimis qualification. One commenter opposed such
aggregation, while another stated that an institution should be
required to aggregate its loan data with that of its subsidiaries so
that institutions could not ``game'' the system by creating new
subsidiaries each time a subsidiary approaches the de minimis limit.
Still other commenters pointed out that it would be very time consuming
and burdensome to game the de minimis limit--rendering gaming
opportunities essentially unrealistic.
Many commenters noted the complexity of the proposed exception. One
commenter stated that the de minimis exception would not have any
significant effect because the complexity of complying with it would
outweigh its benefits. Others noted that the proposed exception would
be difficult for an institution to monitor and maintain. Some
commenters appeared to misinterpret the proposed aggregate exception.
The Agencies agree that the de minimis exception should be
simplified, and, in particular, that it should be structured so that it
may be utilized by an individual who does not regularly or principally
function as a mortgage loan originator employed by any Agency-regulated
institution, regardless of the size or loan volume of the institution.
Therefore, the final rule eliminates the aggregate exception and
includes only the first prong of the proposed de minimis exception,
which applies only to individuals. The final rule also provides that
this exception only applies if the employee has never before been
registered or licensed through the Registry.
Final Sec. ----.101(c)(2) thus provides that the registration
requirements of this section do not apply to an employee of an Agency-
regulated institution who has never been registered or licensed through
the Registry as a mortgage loan originator and who has acted as a
mortgage loan originator for 5 or fewer residential mortgage loans
during the last 12 months. In order to prevent manipulation of the
registration requirement by structuring this exception to apply to
multiple employees who each would not meet the exception's threshold
for registration, the final rule prohibits any Agency-regulated
institution from engaging in any act or practice to evade the limits of
the de minimis exception. The Agencies believe that replacing the
proposed institution limit with this anti-evasion prohibition is
appropriate and will discourage circumvention of registration
requirements without increasing an institution's administrative burden.
Monitoring compliance with the exception as revised should be less
burdensome for Agency-regulated institutions. In addition, in the
Agencies' view, this revised exception better balances the usefulness
of the exception to Agency-regulated institutions and their mortgage
loan originators with the consumer protection and fraud prevention
purposes of the S.A.F.E. Act. Although the final rule specifically
applies this anti-evasion provision to the de minimis exception,
Agency-regulated institutions must not engage in any act or practice to
evade any other requirement of the S.A.F.E. Act or this final rule.
The Agencies note that, as with the proposal, an employee must
register with the Registry prior to engaging in mortgage loan
origination activity that exceeds the exception limit. In addition, the
Agencies note that the de minimis exception contained in the final rule
is voluntary; it does not prevent a mortgage loan originator who meets
the criteria for the exception from registering with the Registry if
the originator chooses to do so or if his or her employer requires
registration.
The Agencies note that the Federal Housing Finance Agency (FHFA)
has directed Fannie Mae and Freddie Mac to require all mortgage loan
applications to include the mortgage loan originator's unique
identifier. For Agency regulated institutions, Fannie Mae and Freddie
Mac have announced that this requirement will apply to applications
dated on or after the date the Agencies require mortgage loan
originators to obtain unique identifiers.\1\ Agency-regulated
institutions should be aware of this requirement and any future
guidance that FHFA may issue to address the Agencies' implementation of
the Federal registration process, including the de minimis exception.
---------------------------------------------------------------------------
\1\ See FNMA LL 02-2009: New Mortgage Loan Data Requirements
(02/13/09); Fannie Mae Announcement 09-11, Mortgage Loan Data
Requirements Update (10/6/09) and Announcement 09-11, Mortgage Loan
Data Requirements Related FAQs (2/4/10); and Freddie Mac Single-
Family Seller/Servicer Guide Bulletin, No: 2009-27 (12/4/09). The
Agencies contemplate that the Registry will provide aggregate public
data on unique identifier information stored in the system to Fannie
Mae and Freddie Mac for compliance purposes.
---------------------------------------------------------------------------
The Agencies received a comment from one large financial
institution requesting that we clarify whether the failure of a
mortgage loan originator to register pursuant to this rulemaking has
any substantive impact on a mortgage loan made by an institution that
employs that originator. Neither the S.A.F.E. Act nor this final rule
provides that a mortgage loan originator's failure to register as
required affects the validity or enforceability of any mortgage loan
contract made by the institution that employs the originator.
A few commenters suggested that in addition to the registration
requirements, the final rule should impose educational and testing
requirements on mortgage loan originators, as the S.A.F.E. Act does for
State-licensed originators. The Agencies decline to impose such
requirements. The S.A.F.E. Act does not include educational or testing
requirements for mortgage loan originators employed by Agency-regulated
institutions. In addition, as noted previously, the statute imposes
different requirements on mortgage loan originators employed by Agency-
regulated institutions. The Agencies note that these institutions
already are subject to extensive Federal oversight, including regular
on-site examination of their mortgage lending activities.
Section ----.102--Definitions
Section ----.102 defines the terms used in the final rule. If a
term is defined in the S.A.F.E. Act, the Agencies generally have
incorporated the same definition in the final rule. The final rule also
includes other definitions currently used by the NMLS in order to
promote consistency and comparability, insofar as is feasible, between
Federal registration requirements and the States' licensing
requirements.
Annual renewal period. Proposed Sec. ----.102(a) required that a
mortgage loan originator renew his or her registration annually during
the annual renewal period and defined this period as November 1 through
December 31 of each year. This is the same annual renewal period
currently provided by the NMLS to mortgage loan originators regulated
by a State.
[[Page 44662]]
This time period for renewals generated many comments. A few
commenters suggested that the renewal period for Agency-regulated
institutions should be at a different time of year than for originators
regulated by a State. Others stated that the renewal period should be
based upon the original registration date or original hire date, noting
that a staggered registration process would be less burdensome for the
Registry. Another commenter suggested that the employing institution
determine its own renewal period for its employees. Still other
commenters requested that this renewal period be lengthened from 60 to
90 days.
The Agencies decline to change the dates for the annual renewal
period. As indicated above, the current system for originators
regulated by a State is configured for an annual renewal period from
November 1 through December 31. A different renewal period for
originators employed by Agency-regulated institutions would involve
functionality changes to the existing system, adding costs and
lengthening the implementation time. In addition, the Agencies note
that different renewal periods could cause confusion and added burden
to those originators who may work for both a State-regulated and
Agency-regulated institution or who may switch from a State-regulated
institution to an Agency-regulated institution during the year, and to
employers of such originators, as well as for institutions that control
both State- and Agency-regulated institutions. For these same reasons,
the Agencies also decline to increase the renewal period from 60 to 90
days. Therefore, the final rule retains the proposed renewal period of
November 1 through December 31 of each year.
Mortgage loan originator. The proposed definition of ``mortgage
loan originator'' was based on the definition of the term ``loan
originator'' included in the S.A.F.E. Act at section 1503(3) (12 U.S.C.
5102(3)). As defined by the S.A.F.E. Act, this term means 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: (1) Performs purely administrative or clerical
tasks on behalf of an individual who is a mortgage loan originator; (2)
performs only real estate brokerage activities (as defined in section
1503(3)(D) of the S.A.F.E. Act (12 U.S.C. 5102(3)(D)) \1\ and is
licensed or registered as a real estate broker in accordance with
applicable State law, unless the individual is compensated by a lender,
a mortgage broker, or other loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator; or (3) is
solely involved in extensions of credit related to timeshare plans, as
that term is defined in 11 U.S.C. 101(53D).\1\
---------------------------------------------------------------------------
\1\ The S.A.F.E. Act defines ``real estate brokerage activity''
to mean any activity that involves offering or providing real estate
brokerage services to the public, including: (i) Acting as a real
estate agent or real estate broker for a buyer, seller, lessor, or
lessee of real property; (ii) bringing together parties interested
in the sale, purchase, lease, rental, or exchange of real property;
(iii) negotiating, on behalf of any party, any portion of a contract
relating to the sale, purchase, lease, rental, or exchange of real
property (other than in connection with providing financing with
respect to any such transaction); (iv) engaging in any activity for
which a person engaged in the activity is required to be registered
or licensed as a real estate agent or real estate broker under any
applicable law; and (v) offering to engage in any activity, or act
in any capacity, described in clause (i), (ii), (iii), or (iv),
above. S.A.F.E. Act at section 1503(3)(D) (12 U.S.C. 5102(3)(D)).
Nothing in this rule would constitute an authorization for Agency-
regulated institutions to engage in real estate brokerage, or any
other activity, for which the institution does not have independent
authority pursuant to Federal or State law, as applicable.
\1\ ``Timeshare plan'' is defined in 11 U.S.C. 101(53D) as an
interest purchased in any arrangement, plan, scheme, or similar
device, but not including exchange programs, whether by membership,
agreement, tenancy in common, sale, lease, deed, rental agreement,
license, right to use agreement, or by any other means, whereby a
purchaser, in exchange for consideration, receives a right to use
accommodations, facilities, or recreational sites, whether improved
or unimproved, for a specific period of time less than a full year
during any given year, but not necessarily for consecutive years,
and which extends for a period of more than three years. A
``timeshare interest'' is that interest purchased in a timeshare
plan which grants the purchaser the right to use and occupy
accommodations, facilities, or recreational sites, whether improved
or unimproved, pursuant to a timeshare plan.
---------------------------------------------------------------------------
For purposes of the definition of mortgage loan originator, section
1503(3)(C) of the S.A.F.E. Act (12 U.S.C. 5102(3)(C)) defines
``administrative or clerical tasks'' to mean: (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. The proposal
included this definition as well, with one nonsubstantive difference--
the proposal used the phrase ``residential mortgage industry'' instead
of ``loan in the mortgage industry'' in the first prong of the
definition.
The Agencies included an appendix to the proposal that listed
examples of the types of activities the Agencies consider to be both
within and outside the scope of residential mortgage loan origination
activities. The final rule retains this appendix with certain changes
as discussed in this SUPPLEMENTARY INFORMATION section. Individuals who
receive ``compensation or gain'' as used in the definition of mortgage
loan originator and described in this appendix include individuals who
earn salaries, commissions or other incentive, or any combination
thereof.
The Agencies specifically requested comment on whether the
definition of ``mortgage loan originator'' should cover individuals who
modify existing residential mortgage loans, engage in approving loan
assumptions, or engage in refinancing transactions and, if so, whether
these individuals should be excluded from the definition. While a few
commenters believed the Agencies should cover individuals engaged in
such transactions, the majority of commenters on this issue stated that
this rulemaking should not cover these individuals. In general, they
indicated that mortgage loan modifications and assumptions are very
different from mortgage loan originations, and that employees engaged
in these transactions do not meet the S.A.F.E. Act's definition of
mortgage loan originator. Specifically, commenters indicated that these
employees neither accept residential mortgage loan applications nor
negotiate the terms of a new residential mortgage loan. Instead, they
renegotiate an existing loan with the goals of mitigating any loss to
the institution and, in the case of modifications, providing the
borrower with a more affordable payment option or other type of
modification, or, in the case of assumptions, replacing the party
responsible for repaying the mortgage loan. Many commenters indicated
that their employees who engage in modifications and assumptions do not
ever originate mortgage loans, and that modifications and assumptions
are performed in different departments of the institution. Many
commenters also noted that applying the S.A.F.E. Act's registration
requirements to employees engaged in loan modifications and assumptions
could significantly hamper loan modification efforts.
The determining factor in whether the S.A.F.E. Act applies to
residential mortgage loan-related transactions is whether the employee
engaged in the transaction meets the definition of ``mortgage loan
originator.'' In general, neither modifications nor assumptions result
in the extinguishment of an existing loan and the replacement by a new
loan, but rather the terms of an existing loan are revised or the loan
is assumed by a new obligor. Thus, Agency-regulated institution
employees
[[Page 44663]]
engaged in these activities typically do not take loan applications,
within the meaning of the S.A.F.E. Act. Therefore, the Agencies
conclude that the S.A.F.E. Act's definition of ``mortgage loan
originator'' generally would not include employees engaged in loan
modifications or assumptions because they typically would not meet the
two-prong test of this definition. However, if an employee engaged in a
transaction labeled a loan ``modification'' or ``assumption'' can be
found to meet the definition of ``mortgage loan originator,'' due to
the nature of the specific transaction in question, he or she would be
subject to the S.A.F.E. Act and this final rule. The substance of a
transaction, not the label attached to it, is determinative of whether
the Agency-regulated institution employee associated with it is a
mortgage loan originator for purposes of this rule. For example, the
Agencies believe that Agency-regulated institution employees engaged
solely in bona fide cost-free loss mitigation efforts that result in
reduced and sustainable payments for the borrower generally would not
meet the definition of ``mortgage loan originator.'' In this regard, it
should be noted that third parties involved in foreclosure prevention
activities for compensation or gain, although outside the scope of this
rulemaking, may be subject to licensing and registration pursuant to
State law.
The Agencies sought comment on whether the individuals who engage
in certain refinancing transactions, specifically cash-out refinancing
with the same lender, should be excluded from the definition of
residential mortgage loan originator. Some industry commenters did not
believe that such an exclusion was appropriate primarily because of the
nature of a refinancing as a new loan and the potential for consumer
abuse in these transactions. Other commenters also requested that we
exclude individuals engaged in refinancings from the final rule's
definition of mortgage loan originator, and that refinancings be
excluded from the final rule's definition of residential mortgage loan,
if the refinancing involves the same lender and the borrower obtained
no cash proceeds. We decline to make this change. Refinancings are new
loans, regardless of the lender, the loan terms, or proceeds, that
involve a new application and an offer or negotiation of new loan
terms. If an individual engaged in a refinancing transaction of a
residential mortgage loan meets the two prongs of the definition of
mortgage loan originator, he or she must comply with the requirements
of the S.A.F.E. Act and this final rule.\1\
---------------------------------------------------------------------------
\1\ Some commenters noted that the Agencies should require only
one mortgage loan originator for each mortgage loan. The Agencies
decline to take this approach because the S.A.F.E. Act defines a
mortgage loan originator according to the two-prong test set forth
in the statute.
---------------------------------------------------------------------------
Other commenters suggested that the Agencies exclude loan servicing
personnel from the requirements of this rulemaking. We decline to take
this suggested approach because the S.A.F.E. Act definition is based on
the activities of mortgage loan origination, rather than the job
classification of the individual. An individual, regardless of job
title, is a mortgage loan originator if he or she engages in the
activities of mortgage loan origination within the meaning of the
S.A.F.E. Act. For example, if a loan servicing employee of an Agency-
regulated institution mainly performs loan servicing activities but
also occasionally engages in residential mortgage loan origination,
that person is a mortgage loan originator, regardless of whether he or
she is called ``servicing personnel.'' On the other hand, for example,
as discussed above in connection with loan modifications, a loan
servicing employee engaged solely in bona fide cost-free loss
mitigation efforts which result in reduced and sustainable payments for
the borrower generally would not meet the definition of ``mortgage loan
originator.'' Loan servicing employees of Agency-regulated institutions
must comply with the registration requirements of the final rule if
they meet both prongs of the definition of ``mortgage loan
originator,'' unless they qualify for the de minimis exception under
Sec. ----.101(c)(2) of the final rule. Some commenters requested
clarification that, when a servicing employee of an Agency-regulated
institution works with a borrower to collect unpaid taxes or other
costs pursuant to a repayment or collection plan, the employee is not
acting as a mortgage loan originator under the Agencies' rules. The
Agencies agree that such activities would generally not meet the two-
prong test of this definition.
Some commenters asked the Agencies to explain whether the S.A.F.E.
Act and this rule apply to residential mortgage loan originations made
through an automated underwriting system, whereby an applicant inquires
about, applies for, and/or receives a decision on an application
electronically through an institution's Web site.\1\ Although some
institutions may choose to establish an automated system to collect
application information and make an initial decision on a loan
application, from a risk management and compliance perspective, an
institution is expected to set the system parameters and monitor system
output for compliance with various laws, regulations, and guidance on
an ongoing basis. Such institutions are expected to register employees
involved in that process who meet the definition of ``mortgage loan
originator,'' as appropriate. As indicated above, the Agencies note
that Fannie Mae and Freddie Mac are requiring all residential mortgage
loan applications dated on or after the compliance date for the unique
identifier requirement to include the mortgage loan originator's unique
identifier.\1\ Institutions should keep apprised of any future guidance
FHFA may issue to address this requirement.
---------------------------------------------------------------------------
\1\ Section 107(5)(A)(x) of the Federal Credit Union Act (12
U.S.C. 1757(5)(A)(x)) requires all loans to be approved by a credit
committee or loan officer. For all Federal credit unions, and to the
extent State-chartered credit unions operate under a similar State
law or regulation, the statutory and regulatory definition of
mortgage loan originator is met and the S.A.F.E Act does apply.
\1\ See footnote 26.
---------------------------------------------------------------------------
For the reasons discussed above, the final rule includes the
definition of ``mortgage loan originator'' as proposed, with one
technical change to the definition of ``administrative or clerical
tasks'' to make it identical to the definition of this term in section
1503(3)(C) of the S.A.F.E. Act (12 U.S.C. 5102(3)(C)).
Nationwide Mortgage Licensing System and Registry or Registry.
Section ----.102(c) of the proposed rule's definition of these terms is
based on the definition included in section 1503(5) of the S.A.F.E. Act
(12 U.S.C. 5102(5)). Specifically, these terms mean the system
developed and maintained by CSBS and the AARMR for the State licensing
and registration of State-licensed mortgage loan originators and the
registration of mortgage loan originators pursuant to section 1507 of
the S.A.F.E. Act (12 U.S.C. 5106). As explained above, CSBS and the
AARMR have established an online system, NMLS, that currently supports
the licensing and registration of mortgage loan originators regulated
by a State. The Agencies are working with CSBS to modify the NMLS to
support the registration of mortgage loan originators employed by
Agency-regulated institutions, and will rename this system the
Nationwide Mortgage Licensing System and Registry. The Agencies
received no comments on this definition and adopt it as proposed.
Registered mortgage loan originator. Pursuant to section 1503(7) of
the S.A.F.E. Act (12 U.S.C. 5102(7)), the proposed rule defined this
term to mean any individual who meets the definition
[[Page 44664]]
of mortgage loan originator, is an employee of an Agency-regulated
institution, and is registered pursuant to the requirements of this
rule with, and maintains a unique identifier through, the Registry.
This definition is the same as that included in the S.A.F.E. Act,
except that the Agencies have modified it to apply only to individuals
registered pursuant to regulations issued by the Agencies. The Agencies
received no comments on this definition and adopt it as proposed.
Residential mortgage loan. As in section 1503(8) of the S.A.F.E.
Act, (12 U.S.C. 5102(8)), the proposal defined ``residential mortgage
loan'' as 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 (as defined in section
103(v) of the Truth in Lending Act (TILA) (15 U.S.C. 1602(v)) \1\ or
residential real estate upon which is constructed or intended to be
constructed a dwelling. In addition, the proposal specifically included
refinancings, reverse mortgages, home equity lines of credit and other
first and second lien loans secured by a dwelling in this definition in
order to clarify that originators of these types of loans are covered
by the rule's requirements.
---------------------------------------------------------------------------
\1\ TILA defines ``dwelling'' as a residential structure or
mobile home which contains one-to-four family housing units, or
individual units of condominiums or cooperatives. 15 U.S.C. 1602(v).
Board regulations and commentary include in this definition any
residential structure that contains one to four units, whether or
not that structure is attached to real property, and includes an
individual condominium unit, cooperative unit, mobile home, and
trailer, if it is used as a residence. See 12 CFR 226.2(a)(19)
(Regulation Z).
---------------------------------------------------------------------------
One commenter suggested that ancillary liens on an underlying
mortgage loan or liens taken to provide consumers with potential tax
advantages should not be considered residential mortgage loans. In
addition, another commenter asked that the definition of residential
mortgage loan include an exception to exclude seller-sponsored
financing of the sale of lender-owned property. The Agencies decline to
adopt these exclusions to the definition of ``residential mortgage
loan'' and adopt this definition as proposed. These types of loans
clearly fall within the statutory definition of ``residential mortgage
loans,'' and the S.A.F.E. Act makes no exceptions for these two
situations. We do clarify, however, that this definition does not
include loans for business, commercial, or agricultural purposes that
use as collateral property that meets the definition of a ``dwelling.''
As indicated in the SUPPLEMENTARY INFORMATION section to the
proposed rule, the FCA emphasizes that section 1503(8) of the S.A.F.E.
Act (12 U.S.C. 5102(8)) and Sec. ----.102(e) do not amend or supersede
sections 1.11(b) and 2.4(b) of the Farm Credit Act of 1971, as amended
(12 U.S.C. 2019(b) and 2075(b)), and their implementing regulation, 12
CFR 613.3030(c), which establish the purposes for which FCS
institutions may originate residential mortgage loans for eligible
rural home borrowers.
Unique Identifier. The proposed rule's definition of this term was
almost identical to that in section 1503(12) of the S.A.F.E. Act (12
U.S.C. 5102(12)). The Agencies received no comments on this definition
and adopt it as proposed. Specifically, the final rule defines ``unique
identifier'' to mean a number or other identifier that: (1) Permanently
identifies a registered mortgage loan originator; (2) is assigned by
protocols established by the Registry and the Agencies to facilitate
electronic tracking of mortgage loan originators, and uniform
identification of, and public access to, the employment history of and
the publicly adjudicated disciplinary and enforcement actions against
mortgage loan originators; and (3) must not be used for purposes other
than those set forth in the S.A.F.E. Act.
Other terms. The Agencies note that Sec. ----.103(d) of the
proposed and final rule uses the terms ``control'' and ``financial
services-related'' in the descriptions of the information that is
required of an employee who is a mortgage loan originator. These terms
are currently defined in the Web-based MU4 form collecting information
on State-licensed mortgage loan originators. In order to promote
consistency of the information collected for Agency-regulated and
State-licensed mortgage loan originators, the Agencies reiterate that
the MU4 form's definitions of those two terms also will be used in the
Web-based form collecting information on Agency-regulated mortgage loan
originators and, therefore have not defined them in this rulemaking.\1\
---------------------------------------------------------------------------
\1\ The Registry currently defines ``control'' as the power,
directly or indirectly, to direct the management or policies of a
company, whether through ownership of securities, by contract, or
otherwise. Any person that (i) is a general partner or executive
officer, including Chief Executive, Chief Financial Officer, Chief
Operations Officer, Chief Legal Officer, Chief Credit Officer, Chief
Compliance Officer, Director, and individuals occupying similar
positions or performing similar functions; (ii) directly or
indirectly has the right to vote 10% or more of a class of a voting
security or has the power to sell or direct the sale of 10% or more
of a class of voting securities; or (iii) in the case of a
partnership, has the right to receive upon dissolution, or has
contributed, 10% or more of the capital, is presumed to control that
company. The Registry's current definition of ``Financial services-
related'' means pertaining to securities, commodities, banking,
insurance, consumer lending, or real estate (including, but not
limited to, acting as or being associated with a bank or savings
association, credit union, Farm Credit System institution, mortgage
lender, mortgage broker, real estate salesperson or agent,
appraiser, closing agent, title company, or escrow agent).
---------------------------------------------------------------------------
A number of commenters requested that the Agencies define
``employee'' for purposes of this rulemaking to provide more clarity
regarding the individuals covered by the rule. Agency-regulated
institutions must have a process for identifying which employees of the
institution are required to be registered mortgage loan originators.\2\
As the Supreme Court has explained, ``where Congress uses terms that
have accumulated settled meaning under * * * the common law, a court
must infer, unless the statute otherwise dictates, that Congress means
to incorporate the established meaning of these terms * * *. In the
past, when Congress has used the term `employee' without defining it,
we have concluded that Congress intended to describe the conventional
master-servant relationship as understood by common-law agency
doctrine.'' \3\ Section 7.07(3)(a) of the Restatement (Third) of Agency
explains that ``an employee is an agent whose principal controls or has
the right to control the manner and means of the agent's performance of
work.'' \1\ The Agencies thus intend that the meaning of ``employee''
under the S.A.F.E. Act and this rule is consistent with the right-to-
control test under the common law agency doctrine. The Agencies note in
this regard that the IRS uses the common law right-to-control test as
its basis for classification of workers as employees.\2\ The result of
this test generally determines whether an institution files a W-2 or a
1099 for an individual. The Agencies therefore expect an Agency-
regulated institution would identify a mortgage loan originator as an
individual subject to this final rule if, following consideration of
the relevant facts, the institution determines that the individual is
an employee of the Agency-regulated institution.\3\
---------------------------------------------------------------------------
\2\ See Sec. ----.104(a).
\3\ Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 322-23
(1992) (citing Community for Creative Non-Violence v. Reid, 490 U.S.
730, 739-40 (1989) (other citations omitted).
\1\ Restatement (Third) of Agency Sec. 7.07(3)(a) (2006).
\2\ IRS Publication 1779; see also Form SS-8, Determination of
Worker Status for Purposes of Federal Employment Taxes and Income
Tax Withholding.
\3\ Agency-regulated institutions that are credit unions
sometimes rely upon volunteers to originate mortgage loans. The
right-to-control test under the common law agency doctrine likewise
applies to these credit unions. Credit union management establishes
the policies, procedures, and practices that volunteers use in
performing their functions. Therefore, these volunteers qualify as
employees of the Agency-regulated institution for purposes of the
S.A.F.E. Act and this rule.
---------------------------------------------------------------------------
[[Page 44665]]
Section ----.103--Registration of Mortgage Loan Originators
Section 1504(a) of the S.A.F.E. Act (12 U.S.C. 5103(a)) prohibits
an individual who is an employee of an Agency-regulated institution
from engaging in the business of a loan originator without registering
as a loan originator with the Registry, maintaining annually such
registration, and obtaining a unique identifier through the Registry.
As in the proposal and described more specifically below, Sec. --
--.103 of the final rule imposes the responsibility for complying with
these requirements on both the individual employee and the employing
institution. In addition, both the employee and the employing
institution must submit information to the Registry for each
registration to be complete. The Agencies note that an employee of an
Agency-regulated institution who is not actively engaged in residential
mortgage loan activity is not prohibited from registering with the
Registry.
Employee registration requirement. In general, Sec. ----.103(a)(1)
of the proposed rule required an employee of an Agency-regulated
institution who acts as a mortgage loan originator to register with the
Registry, obtain a unique identifier, and maintain his or her
registration. This section further provided that any employee who is
not in compliance with the registration and unique identifier
requirements set forth in the proposed rule is in violation of the
S.A.F.E. Act and this rule.\1\ The Agencies note that this registration
requirement would not apply if the employee qualifies for the de
minimis exception.
---------------------------------------------------------------------------
\1\ The OCC, Board, FDIC, and OTS have the authority to take
enforcement actions against their respective Agency-regulated
institutions and individual employees of those institutions who
violate the S.A.F.E. Act and this final rule, pursuant to 12 U.S.C.
1818. The FCA has authority to take enforcement actions against Farm
Credit System institutions and individual employees who violate the
S.A.F.E. Act and this final rule pursuant to Title V, Part C of the
Farm Credit Act of 1971, as amended, 12 U.S.C. 2261 et seq. The NCUA
has the authority to take enforcement actions against Federally-
insured credit unions and their employees who violate the S.A.F.E.
Act and this final rule under 12 U.S.C. 1786. For privately insured
credit unions, memoranda of understanding between NCUA and
applicable State supervisory authorities will establish enforcement
authority.
---------------------------------------------------------------------------
The Agencies did not receive substantive comments specifically on
this section and therefore adopt it as proposed.
Institution requirement. Proposed paragraph (a)(2) of Sec. --
--.103 provided that an Agency-regulated institution must require its
employees who are mortgage loan originators to register with the
Registry, maintain this registration, and obtain a unique identifier in
compliance with this final rule. This provision also prohibited an
Agency-regulated institution from permitting its employees to act as
mortgage loan originators unless registered with the Registry pursuant
to this final rule, after the applicable implementation periods
specified in Sec. Sec. ----.103(a)(3) and (a)(4)(ii) expire.
One commenter objected to this requirement as not being based on
statutory language. Although the S.A.F.E. Act does not contain the same
express prohibition as in the Agencies' proposed rule, determining the
scope of mortgage loan origination activities that subject an
individual or institution to the Act's requirements is well within the
Agencies' authority to implement the statute. The imposition of this
requirement on Agency-regulated institutions implements the purposes of
the S.A.F.E. Act and ensures Agency-regulated institutions and their
employees comply with all applicable laws. This commenter also stated
that this requirement would be difficult to enforce because an
employing institution may not know of the activities of its employees
outside of their scope of employment at that institution. We agree with
this commenter that the language in Sec. ----103(a)(2)(ii) should be
clarified so that an institution's oversight of a mortgage loan
originator applies only to the extent the originator is acting within
the scope of his or her employment at that institution. We therefore
adopt Sec. ----.103(a)(2)(ii) with this one change.
Implementation period for initial registrations. Proposed Sec. --
--.103(a)(3) provided a 180-day implementation period for initial
registrations beginning on the date the Agencies provide public notice
that the Registry is accepting initial registrations. The Agencies have
adopted this provision as proposed with one minor change to clarify
that the implementation period begins on the date that the Agencies
provide in their public notice, not the actual date of the public
notice. Pursuant to the proposal, an employee could continue to
originate residential mortgage loans without complying with the rule's
registration requirement before and during this 180-day period. After
this 180-day period expires, any existing employee or newly-hired
employee of an Agency-regulated institution who is subject to the
registration requirements would be prohibited from originating
residential mortgage loans without first meeting such requirements.
The Agencies specifically requested comment on whether this 180-day
implementation period would provide Agency-regulated institutions and
their employees with adequate time to complete the initial registration
process. The Agencies also inquired as to whether an alternative
schedule for implementation and initial registrations would be
appropriate, what such an alternative schedule should be, and whether,
and how, a staggered registration process should be developed.
The Agencies received many comments on this implementation period.
Some commenters supported a 180-day period. Others supported the
proposed 180-day implementation period provided that certain conditions
are met, such as excluding loan modification and mitigation employees
from the registration requirements, allowing batch processing,
simplifying the employer verification requirements, and immediate
confirmation of registration without delay for fingerprint or
background check results.
Other commenters, however, stated that the proposed 180-day
implementation period would not provide sufficient time to register the
large number of employees subject to the registration requirement,
properly train all employees, develop compliance policies, and program
and implement system controls. Many noted that a longer period would
prevent the Registry from being overwhelmed with registrations. Two
commenters, including one Federal agency, stated that additional time
will particularly benefit smaller financial institutions. Another
commenter indicated that the time, effort, and resources required to
meet new systems requirements can be extensive, and that a 180-day
implementation period for such major changes would be extremely
difficult for larger institutions. These commenters suggested an
implementation period of nine months to one year. One commenter stated
that each Agency should have the flexibility to grant additional time
to register in the event the Registry becomes backlogged or inundated
with a large volume of registrations. No commenter requested a shorter
implementation period.
The Agencies understand that Agency-regulated institutions and
their mortgage loan originator employees will face certain
implementation issues in complying with the registration requirements
established by this rulemaking. However, as indicated above, due to
various system
[[Page 44666]]
modifications and enhancements required to make the existing system
capable of accepting Federal registrants, the system is not expected to
be available to accept Federal registrations before January 2011. The
180-day implementation period will not begin until the system is
available to accept Federal registrations. This in effect provides
institutions with an implementation period longer than 180 days as
institutions and their employees can begin to implement the final
rule's requirements before the Registry is operational, i.e., develop
policies and procedures, train employees, gather information needed for
registration, and program and implement system controls before
registration is required. In addition, CSBS and SRR will provide
information to, and assist Agency-regulated institutions in preparation
for, registration during this period. The Agencies believe that this
additional time will provide mortgage loan originators, and the Agency-
regulated institutions that employ them, adequate opportunity to
prepare for the registration requirements. Any extension of the 180-day
implementation period provided in the final rule will only further
delay the registration of residential mortgage loan originators and, as
a result, the consumer protection benefits of the S.A.F.E. Act. In
addition, as described below, batch processing of at least some
information likely will be available, which should make the
registration process more efficient for both the institution and the
registering employee. For these reasons, the Agencies decline to
provide an implementation period longer than the proposed 180 days.
Many commenters indicated support for a staggered implementation
period. Some noted that this could be based on institution size, loan
origination volume, or employee qualifiers (such as birth date or last
name). Some of these commenters, however, noted that they would support
a staggered schedule only if it would provide a registration period of
equal length for all registrants. Other commenters supported a
staggered process that would give smaller institutions or institutions
that do not originate many residential mortgage loans the greatest
amount of time to comply with the requirements.
The Agencies agree that a staggered implementation process for
those institutions that prefer one would be useful. Such a process
would allow institutions to register their employees within specific
time periods during the implementation period with the assistance of
dedicated staff. Staggered registration would limit the number of
originators registering at any one time and spread the registration of
originators throughout the implementation period. Although such a
schedule mostly would benefit those institutions with the largest
number of mortgage loan originators, it also should enable the Registry
to accommodate all registrations in a more timely and efficient manner,
thereby benefiting all institutions. Accordingly, the Agencies will
work with CSBS and SRR to develop a staggered registration schedule for
institutions, in particular those that are estimated to have a large
number of mortgage loan originators subject to Federal registration,
that request such a schedule. This staggered process would occur within
the 180-day implementation period in order not to delay the
registration of mortgage loan originators and the ability of consumers
to fully utilize the Registry. Because institutions that request a
staggered registration process would have a dedicated period during
which to register within the 180-day period, registration burdens may
be eased for these institutions, lessening their need for the full 180-
day registration period. Details on this staggered approach will be
provided to applicable institutions when they have been finalized and
may include the availability of this dedicated staff prior to the start
of the registration period.
Special rule for previously registered employees. Under paragraph
(a)(4) of Sec. ----.103 of the proposed and final rule, properly
registered or licensed mortgage loan originators would not have to
register again with the Registry when they change employment by moving
from one Agency-regulated institution to another or from a State-
regulated institution to an Agency-regulated institution, regardless of
whether the change in employment is made voluntarily, through an
acquisition or merger of the employee's prior employer, or through a
reorganization where previously State-licensed mortgage loan
originators become subject to the registration requirements of Agency-
regulated institutions. Instead, the employee and employing institution
need only update information in the Registry and complete the required
authorizations and attestation.
Specifically, proposed paragraph (a)(4) of Sec. ----.103 provided
that if a new employee of an Agency-regulated institution had
previously registered with, and obtained a unique identifier from, the
Registry prior to becoming an employee of that institution and has
maintained that registration (or license, if previously employed by a
non-Agency-regulated institution), the registration requirements of
this final rule are deemed to be met provided that: (1) The employee's
employment information in the Registry is updated and the employee has
completed the required authorizations and attestation; (2) new
fingerprints of the employee are provided to the Registry for a
background check, except in the case of mergers, acquisitions or
reorganizations; (3) information concerning the new employing
institution is provided to the Registry pursuant to Sec. --
--.103(e)(1)(i), to the extent the institution has not previously met
these requirements, and Sec. ----.103(e)(2)(i); \1\ and (4) the
registration is maintained pursuant to the requirements of Sec. Sec.
----.103(b) and (e)(1)(ii) as of the date that the employee becomes
employed by the institution.
---------------------------------------------------------------------------
\1\ These provisions require: The institution's name; main
office address; IRS Employer Tax Identification Number; Research
Statistics Supervision Discount (RSSD) number; identification of the
institution's primary Federal regulator; contact information for
individuals at the institution for Registry purposes; applicable
subsidiary information, and confirmation that it employs the
registrant. Information regarding an institution's RSSD number is
available from the Board.
---------------------------------------------------------------------------
Some commenters requested that the Agencies reduce these
requirements in order to further facilitate the movement of employees
from one institution to another and prevent unnecessary interruption of
mortgage origination activity. However, the Agencies believe that the
current provision adequately reduces regulatory burden on Agency-
regulated institutions as well as the residential mortgage industry
when registered mortgage loan originators change employers and will
allow a mortgage origination transaction in process at the time of the
employment change to proceed smoothly. It requires less than what would
be needed to complete a new registration and requires only that
information necessary to update the employee's registration and confirm
the identity of the originator and the employer, thereby preventing
fraudulent information from being submitted to the Registry. However,
we have amended Sec. ----.103(a)(4)(i)(B) to provide that new
fingerprints are not required to be submitted, pursuant to Sec. --
--.103(d)(1)(ix), if the registered loan originator has fingerprints on
file with the Registry that are less than three years old. The Registry
will use these existing prints for purposes of the background check.
This three-year age limit is consistent with the procedures to be used
by SRR for mortgage loan originators licensed by a State. We note that,
as proposed, the final rule does not
[[Page 44667]]
require fingerprints or a new background check when the change in
employers is due to an acquisition, merger, or reorganization because
these transactions carry a lower risk of fraud and identity theft. The
Agencies note that institutions should still conduct prudent screening
of prospective employees to confirm their identities.
In response to a comment, the Agencies note that paragraph (a)(4)
of Sec. ----.103 applies when an employee of an Agency-regulated
institution becomes an employee of another Agency-regulated
institution, regardless of whether the entities are affiliated.
Similarly, when an employee of a subsidiary of an Agency-regulated
institution becomes an employee of the institution, the requirements of
Sec. ----.103 apply.
In order to reduce regulatory burden and to prevent an interruption
in mortgage origination activity, the proposed Sec. ----.103(a)(4)(ii)
provided a 60-day grace period to comply with the Sec. --
--.103(a)(4)(i) requirements when a registered mortgage loan originator
becomes an employee of an Agency-regulated institution as a result of
an acquisition, merger, or reorganization. Some commenters agreed that
this 60-day grace period is appropriate and provides the proper balance
between implementing the purpose of the S.A.F.E. Act and protecting
consumers. Other commenters, however, requested that this period be
extended to 90 or 180 days due to the complexity and protracted nature
of the merger and acquisition process. Some commenters also requested
that a 60-day grace period apply to all changes in employment,
regardless of whether the change is the result of a merger or
acquisition transaction.
Final Sec. ----.103(a)(4)(ii) retains the proposed 60-day grace
period for a change in employers due to acquisitions, mergers, or
reorganizations. The Agencies find that 60 days is an adequate time for
institutions and their employees to update registrations in the case of
these transactions and agree with the commenters who stated that this
time period balances the purposes of the S.A.F.E. Act and consumer
protection.
Additionally, the Agencies find that a grace period is not
necessary when a mortgage loan originator changes employers for other
reasons. This situation does not raise the same compliance burden as
does an acquisition, merger, or reorganization, in which a large number
of employees are switching employers at the same time. Therefore, as
proposed, the final rule requires that these registered mortgage loan
originators comply with the requirements of Sec. ----.103(a)(4) before
they may originate residential mortgage loans for their new employer.
Another commenter requested that the Agencies permit an employer to
submit one update concerning all affected employees in the case of an
acquisition, merger, or reorganization, rather than having each
individual employee submit what is largely identical information about
their change in employer. The Agencies agree that this approach would
reduce burden for the employee, institution, and the Registry. We
specifically have instructed CSBS and SRR to develop a process for
these transactions that would allow the bulk transfer of business
location and contact information for all mortgage loan originators from
one institution to another. However, each individual employee still
must complete the authorization and attestation for their own updated
registration record.
The Agencies adopt proposed Sec. ----.103(a)(4) with the addition
of the language discussed above related to fingerprints in Sec. --
--.103(a)(4)(i)(B). The Agencies also have modified Sec. --
--.103(a)(4) to clarify that an employee of a bank who has been
properly registered or licensed as a mortgage loan originator need only
update information in the Registry, and complete the required
authorizations and attestation, whether that employee is a new employee
of the Agency-regulated institution or becomes subject to this final
rule while an employee of the institution.
The Agencies note that the registration of a mortgage loan
originator who leaves any employer will be recorded as inactive in the
Registry until he or she is hired by another entity, his or her record
is updated in accordance with the final rule's requirements, and the
new employer acknowledges employing the mortgage loan originator
through the Registry. The individual will be prohibited from acting as
a mortgage loan originator at an Agency-regulated institution until
such time as the registration is reactivated, unless covered by the 60-
day grace period for acquisitions, mergers, and reorganizations.
Maintaining Registration. Under proposed Sec. ----.103(b)(1)(i), a
registered mortgage loan originator must renew his or her registration
with the Registry during the annual renewal period, November 1 through
December 31 of each year. To renew, the employee must confirm that the
information previously submitted to the Registry remains accurate and
complete, updating any information as appropriate. Any registration
that is not renewed during this period will become inactive, and the
individual will be prohibited from acting as a mortgage loan originator
at an Agency-regulated institution until such time as the registration
requirements are met. However, an individual who fails to update
information during this period may renew his or her registration at any
time and does not need to wait until the start of the next annual
renewal period. Inactive mortgage loan originators will not be assigned
a new unique identifier if they reactivate their registration.
Some commenters opposed the requirement to renew registrations
annually as overly burdensome and unnecessary. Some suggested
alternatively that a registration remain valid until there is a change
in employment status or other change that requires an update of
database information. Others recommended that the renewal be every two,
three, or five years, or based on the experience of the originator. The
Agencies understand that an annual renewal process requires an
expenditure of time and resources by individual originators and their
employing Agency-regulated institutions. However, section 1504 of the
S.A.F.E. Act (12 U.S.C. 5103), requires that mortgage loan originators
maintain their registration annually. Therefore, the Agencies can not
eliminate, or lengthen, the time between renewals. For this reason, the
Agencies adopt Sec. ----.103(b)(1)(i) as proposed without revision. We
note that the automated processing of annual renewals, as more fully
described below, could lessen the impact on the resources needed for
these renewals.
One commenter suggested that the final rule not require a mortgage
loan originator to renew his or her registration during this annual
renewal period if registration was made less than six months prior to
the end of the renewal period. The Agencies believe this change is
reasonable and within the scope of the S.A.F.E. Act. We have amended
the final rule accordingly by adding new paragraph (b)(3) to final
Sec. ----.103. However, a mortgage loan originator still is required
to update his or her registration during this six month period if any
information provided to the Registry at the time of registration
changes, pursuant to Sec. ---- .103(b)(1)(ii), described below.
In addition to the annual renewal, proposed Sec. --
--.103(b)(1)(ii) provided that a registration must be updated within 30
days of the occurrence of any of the following events: (1) A change in
the employee's name; (2) the registrant
[[Page 44668]]
ceases to be an employee of the institution; or (3) any of the
employee's responses to the information required for registration
pursuant to paragraphs (d)(1)(iii) through (viii) of Sec. ----.103
become inaccurate.
A few commenters requested that the Agencies increase this 30-day
period for updates to 60 or 90 days. The Agencies believe that the
Registry should be updated as soon as possible and therefore have not
adopted this requested change. Updates are needed on only a case-by-
case basis and therefore, unlike in the case of mergers and
acquisitions, should not be burdensome to registrants or employing
institutions. In addition, the 30-day updating period is consistent
with what is required currently for State-licensed mortgage loan
originators. Therefore, final Sec. ----.103(b)(1)(ii) includes a 30-
day update requirement, as proposed.
Proposed Sec. ----.103(b) also required any employee who registers
with the Registry to maintain his or her registration unless the
employee is no longer a mortgage loan originator. As a result of this
provision, once an employee registers as a loan originator with the
Registry, the employee will be required to continue this registration
until he or she is no longer engaged in the activity of a mortgage loan
originator, even if, in any subsequent 12-month period, the employee
originates fewer mortgage loans than the number specified in the de
minimis exception provision. The purpose of this requirement is to
prevent the creation of a timing loophole that could allow mortgage
loan originators to avoid registration requirements.
As indicated in the proposal's SUPPLEMENTARY INFORMATION section,
the Agencies have considered whether the rule should provide for a
temporary waiver of the rule's registration requirements or for
extension of the initial registration or renewal period, in case of
emergency, system malfunction, or other event beyond the control of the
Agency-regulated institution or the mortgage loan originator. One
commenter expressed support for this concept but noted that such an
exception should be narrowly drawn so as not to create a loophole in
the registration requirement and suggested that each Agency select an
official who has authority to designate an emergency deadline extension
for good cause. Another commenter also supported a waiver when events
beyond the institution's control made timely registration impossible.
The Agencies agree that on rare occasions there may be exigent
circumstances or situations when the Agencies may deem it appropriate
to temporarily waive or suspend the requirements of this rule or extend
the initial registration or renewal periods. The Agencies do not
believe, however, that the final rule must include specific language to
effectuate such waivers, suspensions, or extensions. As is the
Agencies' practice in other supervisory contexts, if a situation arises
that warrants such an action, such as a serious interruption of
communication, computer, or fingerprint collection systems at one or
more institution(s) caused by circumstances beyond the institution's
control, or an extended interruption of Registry service, the Agencies
will announce the availability of waivers, suspensions, or extensions
of time. In addition, Agency-regulated institutions may contact their
regulators to discuss possible relief on a case-by-case basis.
Effective date of registrations and renewals. Proposed Sec. --
--.103(c) provided that a registration is effective on the date that
the registrant receives notification from the Registry that all
employee and institution information required by paragraphs (d) and (e)
of Sec. ----.103 has been submitted and the registration is complete,
and that a renewal or update of a registration is effective on the date
the registrant receives notification from the Registry that all
applicable information required by paragraphs (b) and (e) of Sec. --
--.103 has been submitted and the renewal or update is complete.
We have made two changes to this provision in the final rule.
Because the Registry is not technically capable of determining when a
registrant actually receives its notification that the registration is
complete, we have amended this provision to indicate that a
registration is effective when the Registry transmits notification to
the registrant that the registrant is registered. In addition, we have
streamlined this provision to clarify that this notification of
registration completes the registration process. We have made similar
changes to Sec. ----.103(c)(2) regarding renewals and updates.
We note that, except as provided by the 180-day implementation
period in Sec. ----.103(a)(3) or the 60-day grace period provided in
Sec. ----.103(a)(4), an employee must not engage in residential
mortgage loan origination activity if his or her registration is not
yet effective or has not been renewed or updated pursuant to this rule.
A number of commenters requested further clarification of this
effective date, and specifically requested that the effectiveness of
the registration not be delayed for the processing of a registrant's
fingerprints or receipt of a criminal background check. The Agencies
did not intend to delay the effective date for fingerprint or criminal
background check processing. There is no requirement for the processing
of these fingerprints or the completion of a background check before a
registration becomes effective. Nor, as indicated previously in this
SUPPLEMENTARY INFORMATION section, is the effectiveness of a
registration contingent on Agency or Registry review or approval of the
information submitted to the Registry. Pursuant to the rule, in order
to register, the information required by Sec. ----.103(d) and (e) must
be submitted, and, in order to renew or update a registration, the
information required by Sec. ----.103(b) must be submitted. The
Registry will conduct a completeness check of the information submitted
by or on behalf of the registrant. At the time the Registry determines
all required information has been submitted and all Registry
requirements have been met, such as payment of applicable fees charged
by the Registry, it will transmit notification electronically to the
registrant that he or she is registered or that his or her registration
is renewed or updated, as applicable. The employing institution will be
responsible for reviewing the criminal history background report once
it is completed, and taking any necessary action based on the findings
of this report, pursuant to the institution's policies and procedures,
as required by this final rule. We note that the registrant will obtain
a unique identifier during the registration process and not when the
registration is complete.
Section 1510 of the S.A.F.E. Act (12 U.S.C. 5109), expressly
authorizes the Registry to ``charge reasonable fees to cover the costs
of maintaining and providing access to information from the [Registry],
to the extent that such fees are not charged to consumers for access to
such [Registry].'' We anticipate that the Registry will charge fees for
registration, change in employment, renewal, and fingerprint processing
and background checks. Although some commenters specifically requested
information on the anticipated costs associated with registering with
the Registry, the Agencies are at this time unable to provide this
information as the fees have yet to be established by CSBS and SRR. The
Agencies are consulting with the CSBS and SRR regarding the fees that
the Registry expects to impose. One commenter specifically asked the
Agencies to grant Agency-regulated institutions the opportunity to
comment on fees. CSBS
[[Page 44669]]
has indicated that it intends to provide an opportunity for the public
to comment on these fees, and any future adjustments to such fees,
before their imposition on Federal registrants and/or their employing
institutions.\1\
---------------------------------------------------------------------------
\1\ The agencies note that the NMLS currently charges fees for
the licensing of State originators; however, fees for Federal
registrants and their employing Agency-regulated institutions may
differ from those currently imposed on State licensees. See the NMLS
Web site at http://www.stateregulatoryregistry.org for information
regarding fees imposed on State originators.
---------------------------------------------------------------------------
Required employee information. Section 1507(a)(2) of the S.A.F.E.
Act (12 U.S.C. 5106(a)(2)) specifically requires, in connection with
the registration of a mortgage loan originator, the Agencies to
furnish, or cause to be furnished, to the Registry information
concerning an employee's identity, including fingerprints and personal
history and experience. Final Sec. ----.103(d) implements this
requirement and lists the categories of information that mortgage loan
originators, or the employing Agency-regulated institution on behalf of
the mortgage loan originator, will be required to submit to the
Registry. Agency-regulated institutions may select one or more
individuals to submit the employee information required by this
paragraph to the Registry on behalf of each of their mortgage loan
originators to facilitate the registration process. At the request of
commenters, we have added a new paragraph (d)(3) to the final rule that
specifically permits institutions to select such individuals to submit
employee information on behalf of mortgage loan originators employed by
the institution. The final rule specifically prohibits these selected
individuals from acting as mortgage loan originators. We note that
regardless of the manner that the information is provided to the
Registry, the registering employee, and not the employing institution
or other employees, must complete the authorizations and attestation
required by Sec. ----.103(d)(2), and described below, for the
registration to be complete.
Under proposed Sec. ----.103(d), the employing Agency-regulated
institution would have been required to have its registering employees
submit, or to submit on behalf of its employees, information regarding
the employee's identity (name and former names, social security number,
gender, and date and place of birth) and home and business contact
information; date the employee became an employee of the Agency-
regulated institution; financial services-related employment and
financial history for the past 10 years; criminal history involving
certain felonies and misdemeanors; history of financial services-
related civil actions, arbitrations and regulatory and disciplinary
actions or orders; financial services-related professional license
revocations or suspensions; voluntary or involuntary employment
terminations based on violations of law or industry standards of
conduct; and certain actions listed above that are pending against the
employee. This information is similar to that required by the current
NMLS data collection form for mortgage loan originators regulated by a
State, form MU4. The information applies to employees but includes
responsive information prior to their employment at the Agency-
regulated institution.
The Agencies received many comments on this provision. Although
some supported the proposed list of information to be submitted to the
Registry, many others requested that the Agencies narrow this list,
stating that the extent of personal information required by the
proposal is overbroad, intrusive, and burdensome. Commenters also
requested that we clarify the information that is required to be
submitted.
Based on the comments received, the Agencies have carefully
reviewed this list and agree that some of this information is more
relevant for licensing purposes than for registration. In particular,
we found that the collection of some of this information, which would
not be publicly available to consumers, is not necessary to implement
the purposes and requirements set forth in section 1502 of the S.A.F.E.
Act (12 U.S.C. 5101).
Based on this review, we have deleted proposed Sec. --
--.103(d)(1)(iii) from the final rule, which would have required
submission of the registrant's financial history information (such as
bankruptcies, unsatisfied judgments, liens, paid-out bonds, etc.). This
information would not be available to consumers under this rulemaking
and is not required for registration by the statute. It therefore does
not further the objectives of the S.A.F.E. Act.
In addition, the submission of employment termination information
to the Registry is more appropriate for the purpose of licensing, as a
State regulator would use this information to make a decision on
licensure, conducting further inquiry, if appropriate. Because this
sensitive information would not be made public, we have deleted
proposed Sec. ----.103(d)(1)(x), which required submission of
information regarding employment terminations to the Registry, from the
final rule.
We also have not included in the final rule the requirement to
provide information on pending matters. Because these matters are not
final actions, requiring this information would effectively penalize
mortgage loan originators before a decision had been rendered. We note
that if a pending action does become final, it must be reported to the
Registry and made publicly available within 30 days, pursuant to Sec.
----.103(b)(1)(ii).
The Agencies also have revised the requirement in proposed Sec. --
--.103(d)(1)(iv) to provide information on the mortgage loan
originator's felony and misdemeanor criminal history. The proposal
provided that the registrant supply information regarding felony
convictions or other final criminal actions involving a felony against
the employee or organizations controlled by the employee; or
misdemeanor convictions or other final misdemeanor actions against the
employee or organizations controlled by the employee involving
financial services, a financial services-related business, dishonesty,
or breach of trust. After further review, the Agencies found the
proposal's language too broad, and as a result, would have required the
registrant to disclose convictions that are not directly relevant to
his or her work as a mortgage loan originator. As such, this
information is not necessary to meet the purposes or requirements of
the S.A.F.E. Act.
Final and redesignated Sec. ----.103(d)(1)(iii) removes the
distinction between felonies and misdemeanors and narrows the category
of final actions an employee must disclose to the Registry to final
criminal actions that involve dishonesty or breach of trust or money
laundering. In addition, to fully encompass all relevant final criminal
actions, the final rule amends this category of information to include
an agreement to enter into a pretrial diversion or similar program in
connection with the prosecution for such offense.\1\ This language
derives from section 19(a)(1) of the FDI Act (12 U.S.C. 1829), which,
in general, prohibits the participation of individuals convicted of
such offenses from participating in the affairs of an insured
depository institution. The Agencies intend to rely on FDIC rules and
guidance interpreting section 19(a)(1) of the FDI Act with respect to
the interpretation of criminal offenses
[[Page 44670]]
covered under section 19 of the FDI Act.\2\ Therefore, amending the
proposal to include this language in the final rule provides clearer
guidance to originators and their Agency-regulated institution
employers of the types of criminal offenses required to be disclosed.
For example, the FDIC excludes expunged, sealed and juvenile offenses
and, therefore, the Agencies would not expect this information to be
provided to the Registry.\3\ The final rule also would not require
acquittals to be reported.
---------------------------------------------------------------------------
\1\ An agreement to enter into a pretrial diversion or similar
program is defined by the FDIC as a suspension or eventual dismissal
of charges or criminal prosecution upon agreement of the accused to
treatment, rehabilitation, restitution, or other noncriminal or
nonpunative alternatives. FDIC Statement of Policy for Section 19 of
the FDIC Act, 63 FR 66177 (Dec. 1, 1998).
\2\ See Id. and 12 CFR 303.220-223.
\3\ Id.
---------------------------------------------------------------------------
The Agencies find the remaining information required by the
proposal to be submitted to the Registry relevant to the registration
process and the purposes and requirements of the S.A.F.E. Act. Section
1507(a)(2) of the S.A.F.E. Act (12 U.S.C. 5106(a)(2)) specifically
requires that information regarding the registrant's identity,
including personal history and experience, be furnished to the
Registry. Identifying information, such as name (and any other names
used, such as a nickname, full legal name, or maiden name), home
address, address of principal business location and business contact
information (business phone number and e-mail address) and the
registrant's prior financial services-related employment history (not
all of which will be made public) is necessary to meet this
requirement. In addition to this information, the registrant's social
security number, gender, and date and place of birth are necessary to
conduct the criminal history background check required by section
1507(a)(2)(A) of the S.A.F.E. Act (12 U.S.C. 5106(a)(2)(A)). Likewise,
the required information concerning final criminal actions (as
amended), financial services-related civil judicial actions, publicly-
adjudicated regulatory and disciplinary actions or orders, financial
services-related professional license revocations or suspensions, and
financial services-related customer-initiated arbitration and civil
actions will be made public on the Registry, and, therefore, further
the purpose of the S.A.F.E. Act to provide consumers with easily
accessible information on disciplinary and enforcement actions against
the originator. The Agencies therefore adopt the final rule with the
requirement to provide this information to the Registry.
Pursuant to section 1507(a)(2)(A) of the S.A.F.E. Act (12 U.S.C.
5106(a)(2)(A)), proposed Sec. ----.103(d)(xii) (redesignated as Sec.
----.103(d)(ix) in the final rule) also required employees to provide
fingerprints, in digital form if practicable, to the Registry for
submission to the FBI and any governmental agency or entity authorized
to receive such information for a State and national criminal history
background check. The proposal permitted the use of fingerprints
currently on file with the employing Agency-regulated institution if
taken less than three years prior to the employee's registration with
the Registry.
This requirement elicited many comments. Some commenters requested
that the Agencies permit institutions to continue accessing existing
fingerprint channels recognized and supported by existing relations
with the FBI. Some commenters also suggested that the final rule should
deem background checks conducted by the institution during the hiring
process as compliant with the S.A.F.E. Act's fingerprint and background
check requirement. Commenters also requested that the final rule permit
the submission of fingerprints collected 10 or 15 years prior to
registration. Many of the commenters argued that an age limit is
unnecessary as fingerprints do not change over time. In addition,
commenters noted that allowing the use of existing fingerprints, no
matter when collected, will reduce registration costs and delays.
The S.A.F.E. Act specifically requires fingerprints to be furnished
to the Registry for purposes of submission to the FBI, and any
governmental agency or entity authorized to receive such information
for a State and national criminal history background check.\1\ The
S.A.F.E. Act does not specifically require certain persons or entities
to furnish these fingerprints, nor prohibit other entities from
furnishing fingerprints to the Registry. However, the FBI only will
accept fingerprints from entities authorized as channelers of this
information.
---------------------------------------------------------------------------
\1\ Section 1507(a)(2)(A) of the S.A.F.E. Act (12 U.S.C.
5106(a)(2)(A)). The Agencies note that, in the event that a mortgage
loan originator is unable to provide fingerprints due to a physical
condition, he or she should provide identifying information to the
Registry consistent with FBI protocols.
---------------------------------------------------------------------------
In order to ensure that fingerprints are up-to-date, we have
amended the redesignated Sec. ----.103(d)(1)(ix) to provide that
fingerprints that are less than three years old may be used to satisfy
the requirement to furnish fingerprints to the Registry. As indicated
previously, this three-year age limit is consistent with the procedures
to be used by SRR for mortgage loan originators licensed by a State.
Institutions should consult their existing channelers regarding the
furnishing of fingerprints that are less than three years old to the
Registry.
CSBS and SRR are currently modifying the NMLS to act as a channeler
for fingerprints of State license applicants, pursuant to the S.A.F.E.
Act, and Federal registrants may use this same fingerprinting process
when the NMLS is modified to accept Federal registrations.\2\ The
Agencies anticipate that CSBS and SRR will provide guidance to Agency-
regulated institutions and their mortgage loan originators on the
availability and details of this fingerprint process. CSBS and SRR
intend that this fingerprinting process will be convenient and
efficient for both State licensees and Federal registrants.\1\
---------------------------------------------------------------------------
\2\ Further information on the Registry's fingerprint and
background check procedures can be found on the Registry's Web site
at http://www.stateregulatoryregistry.org/NMLS/.
\1\ SRR plans to contract with a nationwide vendor to take the
fingerprints and forward them to the Registry, which will then
obtain the criminal history background check based on these
fingerprints. According to plans, this vendor will have locations
throughout the country, may be made available on-site at
institutions, and will provide a mail-in option for mortgage loan
originators unable to provide their fingerprints in person.
---------------------------------------------------------------------------
Some commenters asked the Agencies to clarify whether the Registry
may collect fingerprints and submit a request for a background check
before the Agency-regulated institution employs a mortgage loan
originator rather than waiting until after that individual is hired to
submit fingerprints to the Registry. The Agencies have no objection to
the Registry processing a background check just prior to the employment
of a mortgage loan originator, should the Registry provide this
service, and believe this could satisfy the requirements of the rule.
Some commenters also expressed the view that the Registry should
have the capability to accept fingerprints in both paper and digital
form. As in the proposed rule, the final rule does not require digital
fingerprints, but does encourage the use of digital fingerprint
submissions. If digital fingerprints are not available, the Registry
will accept fingerprint cards, and will convert these cards to a
digital format. The Agencies note that the rule's authorization to
submit fingerprints in paper form is intended to assist smaller
institutions for which compliance with a digital fingerprint
requirement may not be feasible.
Employee authorization and attestation. Paragraph (d)(2)(i) of
Sec. ----.103 requires the employee to provide authorization for the
Registry and the employing Agency-regulated
[[Page 44671]]
institution to obtain information related to sanctions or findings in
any administrative, civil, or criminal action, to which the employee is
a party, and, in paragraph (d)(2)(ii) of this section, to attest to the
correctness of all information submitted to the Registry pursuant to
paragraph (d) of this section.
In order to provide relevant information to consumers and to
implement the purposes of the S.A.F.E. Act, paragraph (d)(2)(iii)
requires the employee to authorize the Registry to make available to
the public the information required to be submitted to the Registry
pursuant to Sec. ----.103(d)(1)(i)(A) and (C) and (d)(1)(ii) through
(viii) (his or her name, other names used, name of current employer(s),
current principal business location(s) and business contact
information, 10 years of relevant employment history, and publicly
adjudicated disciplinary and enforcement actions and arbitrations
against the employee).
Although this rulemaking permits the employing institution or other
institution employees to submit the information required by Sec. --
--.103(d)(1) to the Registry on behalf of the registering employee, the
employee, and not the employing institution or its other employees,
must complete the attestation and authorizations required by Sec. --
--.103(d)(2) for the registration to be complete. This task may not be
delegated because it is necessary for the Registry to authenticate the
employee's information.
The Registry plans to make this information available to the public
in two phases. The first phase, implemented at the end of the initial
registration period, would provide for public accessibility of the
employee's name; other names used; name of current employer(s); current
principal business location(s) and business contact information; and
employment history. The remaining categories of information (publicly
adjudicated disciplinary and enforcement actions and arbitrations
against the employee) would be made public at a later date, once the
Registry, in consultation with the Agencies, has designed and
implemented a system through which the registrant may provide
additional explanatory information to accompany a positive response to
any of the disclosure questions regarding criminal history or the other
information requested in paragraphs (d)(1)(iii) through (viii). The
Agencies note that once the Registry makes this enhancement, registered
mortgage loan originators will be able to provide this explanatory
information at any time, including during the annual renewal process,
and that this explanatory language may be made public. Relevant
nonpublic information submitted to the Registry will be only accessible
to the Agencies and State regulators of mortgage originators, as
appropriate, and the submitting mortgage loan originator and his or her
employing institution.\1\
---------------------------------------------------------------------------
\1\ SRR plans to make this public information stored on the
Registry available on an aggregate basis to interested parties for
compliance purposes.
---------------------------------------------------------------------------
The Agencies received many comments on the public availability of
personal information, particularly on how the Registry will store and
prevent the unauthorized use of this personal information, and how
nonpublic personal information will be appropriately protected. One
commenter specifically stated that the final rule should take
appropriate measures to ensure that the electronic submissions to the
Registry are properly encrypted, authorized, and authenticated, and
that the Registry complies with the FBI Criminal Justice Information
Services Security Policy (CJIS Security Policy).\2\
---------------------------------------------------------------------------
\2\ CJISD-ITS-DOC-08140-4.5, December 2008.
---------------------------------------------------------------------------
The Agencies are well aware of the security concerns associated
with providing personal information to the Registry and are contracting
with SRR to ensure appropriate data protection elements are
incorporated within the Registry to ensure compliance with the
requirements of the Federal Information Security Management Act (FISMA)
of 2002, PL 107-347; the CJIS Security Policy; and the related Security
and Management Control Outsourcing Standard.\3\ FISMA requires each
Federal agency to develop, document, and implement an agency-wide
program to provide information security for the information and
information systems that support the operations and assets of the
agency, including those provided or managed by another agency,
contractor, or other source. Specifically, FISMA directed the
promulgation of Federal standards for: (1) The security categorization
of Federal information and information systems based on the objectives
of providing appropriate levels of information security according to a
range of risk levels; and (2) minimum security requirements for
information and information systems in each such category.\1\
---------------------------------------------------------------------------
\3\ See http://www.fbi.gov/hq/cjisd/web%20page/pdf/05132009_
outsourcing_standard.pdf.
\1\ See the National Institute of Standards and Technology
(NIST) publications FIPS Pub 200, Minimum Security Requirements for
Federal Information and Information Systems, March 2006 and NIST
Special Publication 800-53, Recommended Security Controls for
Federal Information Systems, as amended. These standards specify
minimum management, operational, and technical safeguards in 17
security-related areas needed to protect the confidentiality,
integrity, and availability of Federal information systems and the
information processed, stored, and transmitted by those systems.
These security-related areas are: (1) Access control; (2) awareness
and training; (3) audit and accountability; (4) certification,
accreditation, and security assessments; (5) configuration
management; (6) contingency planning; (7) identification and
authentication; (8) incident response; (9) maintenance; (10) media
protection; (11) physical and environmental protection; (12)
planning; (13) personnel security; (14) risk assessment; (15)
systems and services acquisition; (16) system and communications
protection; and (17) system and information integrity.
---------------------------------------------------------------------------
As a channeler and outsourcer of fingerprints, the FBI requires the
Registry to comply with its CJIS Security Policy. The CJIS provides the
minimum level of information technology security requirements
determined acceptable for the transmission, processing, and storage of
the nation's criminal justice information systems data. The purpose of
this policy is to establish uniformity and consistency in safeguarding
criminal justice information security data which is accessed via
networks throughout the Federal, State, and local user community.
However, this policy does not prohibit more stringent security
policies.
The requirements for protecting the privacy and security of the
personal information obtained from employees of Agency-regulated
institutions, and the confidential information obtained from the
institutions themselves, are essentially similar whether a particular
mortgage loan originator is State licensed or Federally registered. SRR
and CSBS will institute security protocols to protect the privacy and
security of such information.
The Agencies adopt Sec. ----.103(d)(2) as proposed, with the
following conforming and clarifying changes. First, we have removed
pending disciplinary and enforcement actions and arbitrations against
the employee from the list of information the employee must authorize
the Registry to make available to the public to conform with our
amendment to Sec. ----.103(d)(1). Second, we have amended Sec. --
--.103(d)(2)(ii) to require a registrant to attest to any update of
their registration, in addition to their initial and renewal
registrations. This requirement had inadvertently been left out of the
proposed rule. Finally, we have added language to clarify that neither
the employing institution, nor any of its other employees, may fulfill
these attestation and authorization
[[Page 44672]]
requirements on behalf of the registering employee.
We also have added a new paragraph (d)(3) to clarify that an
Agency-regulated institution may identify an employee or employees of
the bank who may submit the employee information required by paragraph
(d)(1)(i) to the Registry on behalf of the institution's employees,
provided that this individual, and any employee delegated this
authority, does not act as a mortgage loan originator, consistent with
Sec. ----.103(e)(1)(i)(F). In addition, as more fully explained below,
this new paragraph specifically authorizes an institution to submit to
the Registry some or all of the employee information required by
paragraph (d)(1)(i) and the institution's information required by Sec.
----.103(e)(2) for multiple employees in bulk through batch processing
in a format to be specified by the Registry, to the extent such batch
processing is made available by the Registry.
Required Agency-regulated institution information. The Agencies
adopt proposed Sec. ----.103(e)(1) with the following amendments,
discussed below.
Paragraph (e)(1) of Sec. ----.103 of the final rule requires the
employing Agency-regulated institution to submit certain information to
the Registry as a base record in connection with the registration of
one or more mortgage loan originators. Specifically, the Agency-
regulated institution must provide its name; main office address;
business contact information, such as business phone number or e-mail
address (not required by the proposed rule); primary Federal regulator;
Employer Tax Identification Number (EIN) issued by the Internal Revenue
Service; primary point of contact information; and contact information
for ``system administrators.''
System administrators will have the authority to enter data
required in paragraph (e) of this section on the Registry and will be
responsible for keeping institution information and the list of
employees registered with the Registry current. These individuals,
however, may not act as mortgage loan originators. The Agencies
recognize that some small institutions may not be able to comply with
this latter requirement because all of their staff may be registered
mortgage loan originators. Therefore, we have amended this provision to
exempt institutions with 10 or fewer full time equivalent employees
from the requirement that system administrators do not act as mortgage
loan originators. However, this exemption does not apply to a
subsidiary of an Agency-regulated institution as the staff at the
parent institution could perform this function. In the Agencies'
experience, institutions with more than 10 full time equivalent
employees generally have sufficient staff resources to support the
segregation of these functions. The system administrators may delegate
their authority and assign as many additional system users as necessary
to comply with the registration requirements of the S.A.F.E. Act and
the final rule, provided the delegated administrators meet this
paragraph's requirements. While the primary point of contact also can
be one of the institution's system administrators, the institution's
management is responsible for ensuring proper oversight of the system
administrator's activities.
In addition, paragraph (e)(1)(i)(C) of Sec. ----.103 requires an
Agency-regulated institution to provide its Research Statistics
Supervision Discount (RSSD) number as identifying data for validating
the base record. The RSSD database is maintained by the Board. The
Agencies will provide the Registry with an extract of the Board's
database, indexed by RSSD number, to facilitate an Agency-regulated
institution's authorized access to the Registry and its establishment
of a new base record. Upon receiving the information for a new base
record from an Agency-regulated institution, the Registry will confirm
the information by comparing the application with RSSD data supplied by
the Agencies. The Agencies will establish a mechanism by which Agency-
regulated institutions that do not have an RSSD number will be added to
the RSSD database.
If the institution is a subsidiary of an Agency-regulated
institution, the final rule requires the subsidiary to indicate that it
is a subsidiary of the parent and to provide its parent institution's
RSSD number in addition to its own RSSD number, if it has one. It is
not required to obtain its own RSSD number. The proposal had required
that the subsidiary provide its parent's name. We have revised this
provision in the final rule to require the subsidiary instead to
provide its parent's RSSD number, which is a more accurate method of
identifying the parent institution than by name.
Some Farm Credit System-affiliated commenters requested that the
Agencies consider using the FCA's existing identification system as an
alternative for the RSSD number for FCS institutions. The Agencies
decline to make this modification. Validation of Agency-regulated
institutions will be most efficient and complete if all institutions
can be identified through a single identification system. The FCA will
provide FCS institutions with information on how to obtain an RSSD
number for the purposes of this rulemaking. The Agencies received no
other significant comments on Sec. ----.103(e).
We also have amended proposed Sec. ----.103(e)(1) to require
system administrators to follow NMLS protocols to verify their own
identity and to attest that they have the authority to enter data on
behalf of the Agency-regulated institution, that the information
submitted pursuant to paragraph (e) is correct, and that the Agency-
regulated institution will keep the information required by paragraph
(e) current and will file accurate supplementary information on a
timely basis. In addition, we have amended this paragraph to require
institutions to renew the information they have submitted to the
Registry pursuant to Sec. ----.103(e) on an annual basis. We have
added these two requirements to conform to system protocols identified
by CSBS and SRR.
As in the proposal, renumbered paragraph (e)(1)(iii) of Sec. --
--.103 requires an Agency-regulated institution to update any
information it has submitted within 30 days of the date that the
information becomes inaccurate.
As proposed, Sec. ----.103(e)(2) of the final rule requires an
Agency-regulated institution to provide information to the Registry for
each employee who acts as a mortgage loan originator. The Agency-
regulated institution must: (1) Confirm that it employs the registrant,
after all the information required by paragraph (d) of this section has
been submitted to the Registry; and (2) within 30 days of the date the
registrant ceases to be an employee of the institution, provide
notification that it no longer employs the registrant and the date the
registrant ceased being an employee. This information will link the
registering mortgage loan originator to the Agency-regulated
institution in order to confirm that the registration of the employee
is valid and legitimate. The Agencies note that the Registry's system
protocols will not permit the Agency-regulated institution to confirm
that it employs the registrant unless all of the employee's information
required by paragraph (d) of this section has been submitted to the
Registry and the employee has attested to the accuracy of the
information. As indicated below, batch processing of certain
information for multiple employees will likely be available to
facilitate compliance with this provision.
Batch Processing of Registrations. The SUPPLEMENTARY INFORMATION
section of
[[Page 44673]]
the proposed rule sought comment on whether to permit a ``batch''
process for Agency-regulated institutions to submit to the Registry, in
bulk, some or all of the required employee and institution information
as a way to mitigate the initial and ongoing registration burden on
Agency-regulated institutions and their employees. Commenters
overwhelmingly supported the concept of batch processing, indicating
that such a capability would make registration faster, simpler, more
efficient, and less costly. They also stated that it would enable them
to better control and manage the registration process, pursuant to the
policies and procedures required by this rulemaking.
The Agencies agree that some form of batch processing would be
helpful for the registration process to run smoothly and efficiently
and for all initial registrations to be completed within the 180-day
initial registration period. Batch processing would be especially
beneficial to larger institutions who must register tens of thousands
of employees. The Agencies therefore are working with CSBS and SRR to
ensure that the Registry supports the batch processing of large numbers
of registrations by Agency-regulated institutions. As indicated above,
we have added a new Sec. ----.103(d)(3) to specifically permit
institutions to submit a portion of the information required by
paragraphs (d)(1)(i) and (e)(2) of Sec. ----.103 for multiple
employees in bulk through batch processing, to the extent such batch
processing is made available by the Registry.
Specifically, it is our intent that the Registry will be able to
provide Agency-regulated institutions the capability to submit batch
registration of a portion of the information for multiple mortgage loan
originators and to electronically notify the originators of the need to
complete the registration. The Agencies expect the batch file to
contain at least enough information to establish a mortgage loan
originator record (such as the institution's name and RSSD number and
employee name, SSN, and e-mail address). We also expect that the
Registry will provide the capability for an Agency-regulated
institution to confirm its relationship with mortgage loan originators
either individually or in bulk. The Agencies, CSBS, and SRR are in the
process of specifying the details and means of this batch processing.
Batch processing should be available for institutions at the start of
the initial registration period, and we will provide further
information on batch processing prior to that time.
Section----.104--Policies and Procedures
Proposed Sec. ----.104 required Agency-regulated institutions that
employ mortgage loan originators to adopt and follow written policies
and procedures designed to ensure compliance with the requirements of
the final rule. The proposal stated that the policies and procedures
must be appropriate to the nature, size, complexity, and scope of the
mortgage lending activities of the Agency-regulated institution and
must, at a minimum, include eight specified provisions.
The Agencies received many comments on these required policies and
procedures. Although some supported them, others found the requirement
to have detailed written plans for how to comply with the final rule
unnecessary and overly burdensome, especially in light of other
regulatory requirements imposed on financial institutions. A few
commenters suggested that the Agencies develop model guidelines for, or
samples of, these policies and procedures to reduce implementation and
compliance costs for Agency-regulated institutions and to reduce burden
on examiners in monitoring compliance. Commenters also requested
further clarification of specific provisions and an explanation as to
the reason for the provision.
The Agencies continue to believe that requiring Agency-regulated
institutions to establish policies and procedures is an appropriate way
to ensure and monitor compliance with this final rule. Appropriate
policies and procedures provide an institution and its employees with
the expectations of the institution's board and include the specific
implementing guidance that is applicable to the activities of that
institution. Furthermore, such policies and procedures are necessary to
enable Agency examiners to evaluate the effectiveness of institutions'
implementation of the S.A.F.E. Act requirements that apply to them.
Institutions have the responsibility to adopt policies and procedures
appropriate to their operations. The final rule therefore includes a
policies and procedures requirement. Comments on specific provisions
are addressed below.
First, proposed Sec. ----.104(a) required policies and procedures
to establish a process for identifying which employees of the
institution are required to be registered mortgage loan originators.
This provision highlights a basic and necessary action each institution
must take to comply with the rulemaking. We did not receive specific
substantive comments on this requirement and therefore adopt Sec. --
--.104(a) as proposed.
Second, proposed Sec. ----.104(b) required policies and procedures
to require that all employees of the institution who are mortgage loan
originators be informed of the registration requirements of the
S.A.F.E. Act and the proposed rule 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. As with the first provision, this action is
necessary for Agency-regulated institutions to comply with the rule and
facilitates employee compliance. We did not receive substantive
comments addressing this requirement and therefore adopt Sec. --
--.104(b) as proposed.
Third, proposed Sec. ----.104(c) required that policies and
procedures must establish procedures to comply with the unique
identifier requirements in Sec. ----.105. Once again, this provision
merely reiterates that Agency-regulated institutions must ensure
compliance with a requirement of the rulemaking. We received no
specific comments on this requirement and therefore adopt it as
proposed.
Fourth, proposed Sec. ----.104(d) required policies and procedures
to establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparison with the institution's records. We adopt this provision as
proposed. However, to address the many comments on this requirement,
the Agencies clarify that they will consider an institution to have
reasonable procedures if it confirms the information supplied to the
Registry that is in the institution's personnel files. Typically this
information would include the employee's identifying information, such
as the employee's name; home address; business address and contact
information; social security number; gender; date and place of birth;
and financial services-related civil actions, arbitrations and
regulatory actions taken against the institution's employee, if any. As
noted in the SUPPLEMENTARY INFORMATION section of the proposed rule, to
comply with this requirement, institutions need only compare the
information supplied by the employee to the Registry with the
information contained in the institution's own records. The final rule
does not require, nor do the Agencies expect, Agency-regulated
institutions to obtain private database searches on their employees to
confirm employee registration information.
Fifth, proposed Sec. ----.104(e) required institutions to
establish reasonable
[[Page 44674]]
procedures and tracking systems for monitoring compliance with
registration requirements and procedures. Under this regulatory
provision, Agency-regulated institutions will be expected to
demonstrate compliance with the registration and renewal requirements
of this final rule, such as by maintaining appropriate records. The
action required by this provision is one that an institution must take
to ensure compliance with the rule and may be done in a number of
different ways, such as by using an institution's existing tracking
systems. Having received no substantive comments on this requirement,
the Agencies adopt it as proposed.
Sixth, proposed Sec. ----.104(f) required policies and procedures
that provide for periodic independent testing of the Agency-regulated
institution's policies and procedures for compliance with the S.A.F.E.
Act and the final rule and for such testing to be conducted by
institution personnel or by an outside party. This compliance testing
is standard procedure for Agency-regulated institutions as part of
their internal controls, and we adopt it as proposed with one change.
We have clarified that this compliance testing must be done on an
annual basis, a necessary internal audit interval.
Seventh, proposed Sec. ----.104(g) required policies and
procedures to provide for appropriate disciplinary action against any
employee who fails to comply with the registration requirements of the
S.A.F.E. Act, this rule, or the related policies and procedures of the
institution, including prohibiting such employees from acting as
mortgage loan originators or other appropriate disciplinary actions.
The action required by this provision is one that an institution would
need to take to ensure compliance with the rule. Having received no
substantive comments on this requirement, we adopt it as proposed.
Finally, proposed Sec. ----.104(h) required policies and
procedures to establish 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. A few commenters requested clarification on this requirement. As
noted by other commenters, section 19 of the FDI Act (12 U.S.C. 1829),
in general, prohibits insured depository institutions from employing a
person who has been convicted of any criminal offense involving
dishonesty or a breach of trust or money laundering or has entered into
a pretrial diversion or similar program in connection with a
prosecution for such offense. Similarly, section 5.65(d) of the Farm
Credit Act (12 U.S.C. 2277a-14 (d)), states ``[e]xcept with the prior
written consent of the Farm Credit Administration, it shall be unlawful
for any person convicted of any criminal offense involving dishonesty
or a breach of trust to serve as a director, officer, or employee of
any System institution.'' For Federally insured credit unions, NCUA
intends to rely upon 12 U.S.C. 1786(i) and 12 CFR 741.3(c). We have
revised this provision of the final rule to include references to the
appropriate statutory provision.
The Agencies have added a new provision to clarify the
responsibilities of Agency-regulated institutions regarding their
contracts relating to mortgage loan originations. Institutions must
establish 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. Agency-regulated institutions should monitor third party
entities' compliance with these policies and procedures. This provision
will ensure that individuals acting as mortgage loan originators on
behalf of an Agency-regulated institution are either State licensed and
registered and/or Federally registered.
One commenter requested that the final rule limit an institution's
oversight of its employees' compliance with this rulemaking only to
those activities of the employee that are within the scope of his or
her employment at the institution. It is not our intention to require
the institution to enforce the final rule's requirements with respect
to activities of its employees that are conducted outside of the
employee's scope of employment with that institution and beyond the
institution's control, and we have added language to Sec. ----.104 to
clarify this.
This final rule's requirement to adopt these policies and
procedures applies to all Agency-regulated institutions that employ
individuals who act as mortgage loan originators, regardless of the
application of any de minimis exception to their employees. These
policies and procedures should be in place at an institution prior to
the registration of its employees pursuant to this rule.
Furthermore, the Agencies note that, consistent with the S.A.F.E.
Act, the Registry will not screen or approve registrations received
from employees of Agency-regulated institutions. Instead, it will be
the repository of, and conduit for, information on those employees who
are mortgage loan originators at Agency-regulated institutions.
Pursuant to Sec. Sec. ----.104(d) and (h) of the final rule, it will
be the responsibility of the Agency-regulated institution to establish
reasonable procedures for confirming the adequacy and accuracy of
employee registrations as well as to establish a process for reviewing
any criminal history background reports received from the Registry.
Section ----.105--Use of Unique Identifier
The Agencies proposed in Sec. ----.105(a) to require an Agency-
regulated institution to make the unique identifier(s) of its
registered mortgage loan originator(s) available to consumers in a
manner and method practicable to the institution. Proposed Sec. --
--.105(b) required a registered mortgage loan originator to provide the
originator's unique identifier to a consumer upon request, before
acting as a mortgage loan originator, and through the originator's
initial written communication with a consumer, if any.
Although a mortgage loan originator may change his or her name,
change employment, or move, the unique identifier assigned to the
originator by the Registry at the originator's original registration
will remain the same. Once public access to the Registry is fully
functional, the unique identifier will enable consumer access to an
individual mortgage loan originator's profile stored in the Registry,
including the mortgage loan originator's publicly available
registration information, any State mortgage licenses held (active or
inactive), employment history, and publicly adjudicated disciplinary
and enforcement actions. If a mortgage loan originator is
simultaneously employed by more than one State or Agency-regulated
institution, that information also will be readily visible to the
consumer.
We received a number of comments on this requirement--some noting
that it is cumbersome and of limited benefit to the consumer. However,
the S.A.F.E. Act requires each mortgage loan originator to obtain a
unique identifier to facilitate the electronic tracking of loan
originators, and the uniform identification of, and public access to,
the employment history and publicly adjudicated disciplinary and
enforcement actions against a mortgage loan originator. In order to
effectuate this requirement, a mortgage loan
[[Page 44675]]
originator and the employing institution must ensure that the consumer
has access to the originator's unique identifier. This access must be
made available early enough in the relationship with the originator to
enable the consumer to access the Registry before the consumer commits
to the mortgage loan transaction. Because a consumer may not be aware
of the Registry, it is important that both the institution and
originator make this information available to the consumer, and not
only just upon the consumer's request, as suggested by a number of
commenters. Therefore, we adopt this requirement as proposed, with one
clarifying change described below.
As noted in the SUPPLEMENTARY INFORMATION section of the proposed
rule, an Agency-regulated institution may comply with the Sec. --
--.105(a) requirement in a number of ways. For example, the institution
may choose to direct consumers to a listing of registered mortgage loan
originators and their unique identifiers on its Web site; post this
information prominently in a publicly accessible place, such as a
branch office lobby or lending office reception area; and/or establish
a process to ensure that institution personnel provide the unique
identifier of a registered mortgage loan originator to consumers who
request it from employees other than the mortgage loan originator.
Furthermore, the Agencies intend Sec. ----.105(b)(3) of the rule to
cover written communication from the originator specifically for his or
her customers, such as a commitment letter, good faith estimate or
disclosure statement, and not written materials or promotional items
distributed by the Agency-regulated institution for general use by its
customers. While, this provision does not require institutions to
include the unique identifier on loan program descriptions,
advertisements, business cards, stationary, notepads, and other similar
materials, institutions are not prohibited from doing so. We also
clarify that the requirement to provide the unique identifier to the
consumer through the originator's initial written communication, if
any, applies whether that communication is provided in writing on paper
or through electronic means. We have clarified this requirement in the
final rule. The Agencies also clarify that the unique identifier may be
provided orally, except pursuant to paragraph (b)(3) under which the
unique identifier would be provided with the written or electronic
communication.
We note that the Board has proposed amendments to 12 CFR 226
(Regulation Z) that would require disclosure of the unique identifier
as part of TILA disclosures, which generally must be provided to a
borrower within three business days of the residential mortgage loan
application and seven business days before consummation of the
transaction.\1\ In addition, as indicated above, Fannie Mae and Freddie
Mac are requiring all mortgage loan applications taken on or after the
compliance date for the unique identifier requirement to include the
mortgage loan originator's unique identifier.\1\ We therefore believe
that providing consumers with the originator's unique identifier will
not be difficult or burdensome.
---------------------------------------------------------------------------
\1\ See http://www.federalreserve.gov/newsevents/press/bcreg/
20090723a.htm.
\1\ See footnote 26.
---------------------------------------------------------------------------
Appendix--Examples of Mortgage Loan Originators
The proposed Appendix included a nonexclusive list of examples of
activities that fall within or outside the S.A.F.E. Act's definition of
a mortgage loan originator. Specifically, the Appendix provided
examples of activities that are, and are not, illustrative of taking an
application, and offering or negotiating terms of a mortgage loan for
compensation or gain. The Agencies note that an employee of an Agency-
regulated institution is only subject to the S.A.F.E. Act to the extent
that both prongs of the two-part test for acting as a mortgage loan
originator are met, and that employees who take applications but do not
offer or negotiate terms of a mortgage loan, or vice versa, do not meet
the definition. Commenters generally asked the Agencies to provide more
detail to the examples and to address whether specific activities of
Agency-regulated institution employees would be covered by the two-
prong test of a mortgage loan originator.
The Agencies have made several modifications to the examples of
taking an application. The modified examples clarify that taking an
application occurs when the mortgage loan originator receives
information in connection with a request for a mortgage loan that will
be used to determine whether the consumer qualifies for a loan. The
Agencies note that the information may be provided by another person on
behalf of the consumer.
Some commenters questioned whether an employee takes an application
if that employee only collects limited data about the consumer or does
not decide what data to collect. Another commenter suggested that when
an employee collects the limited information about the consumer that is
required by an automated loan approval system and quotes interest rates
and fees for a specific mortgage loan product as generated by the
system, that employee should not be considered to be engaged in taking
an application. The Agencies disagree, as the limited information
described by the commenter is sufficient to qualify the consumer for a
specific mortgage product and terms. The example of taking an
application was revised to address the receipt of information to be
used to determine whether the consumer qualifies for a mortgage loan,
which includes situations where there are limitations on the data
collected or on the employee's discretion, as described by the
commenter.
Similarly, these commenters also requested clarification as to
whether an employee takes an application when the employee enters
information into an online application in the process of receiving
information from the consumer. The Agencies have provided clarification
that the example of taking an application applies even if the employee
is inputting information into an online or other automated approval
system on behalf of the consumer. The Agencies do not intend this
example to address employees who are engaged in the clerical act of
inputting information from a loan application into an automated
approval system on behalf of a loan officer. Furthermore, contrary to
the suggestions of some commenters, the Agencies have clarified that an
employee may take an application even if the employee is not engaged in
approval of the mortgage loan. An employee also may take an application
even if the employee does not take an application fee.
The Agencies also have clarified that, contrary to the suggestion
of some commenters, an employee may take an application even if the
employee has received the consumer's information indirectly in order to
make an offer or negotiate terms of a mortgage loan. An employee may
receive the consumer's information indirectly, for example, through
another employee, a broker, or an automated system.
The Agencies also have provided further detail regarding the
examples of activities that do not constitute taking an application. In
response to questions raised by commenters, the Agencies have further
clarified that the following activities would not constitute taking an
application: (1) Assisting a consumer who is filling out an application
by explaining the qualifications or criteria necessary to obtain a
mortgage loan product, (2) describing the steps that a
[[Page 44676]]
consumer would need to take to provide information to be used to
determine whether the consumer qualifies for a mortgage loan or
otherwise explaining the mortgage loan application process, and (3)
responding to an inquiry regarding a prequalified offer that a consumer
has received from an Agency-regulated institution, collecting only
basic identifying information about the consumer and forwarding the
consumer to a mortgage loan originator.
The Agencies also have revised the examples of offering or
negotiating terms of a mortgage loan in response to the comments. The
Agencies have revised one example to clarify that providing a
disclosure of the mortgage loan terms after application pursuant to the
Truth in Lending Act is included in presenting a mortgage loan offer. A
number of commenters asked the Agencies to modify the examples to carve
out employees who are limited in their ability to negotiate or finalize
the terms of a mortgage loan. Some commenters posited that employees
should be excluded if they only offer the loan rate to a consumer but
are not permitted to negotiate the rate, or only quote a rate approved
by an automated online system. Similarly, a commenter expressed the
view that an employee would not offer or negotiate terms of a mortgage
loan if involvement of a loan officer also was necessary to finalize
the loan terms or otherwise conclude the mortgage loan approval
process. The Agencies believe that many of these situations discussed
by the commenters would involve an offer or a negotiation of a loan.
Thus the revised examples clarify that presenting a mortgage loan offer
to a consumer for acceptance, either verbally or in writing, is
offering or negotiating terms of a mortgage loan even if other
individuals must complete the mortgage loan process or if only the rate
approved by the Agency-regulated institution's loan approval mechanism
function for a specific loan product is communicated without authority
to negotiate the rate. Similarly, one commenter suggested that an
employee does not offer or negotiate terms of a mortgage loan if the
employee does not lock the rate. The Agencies do not agree and declined
to address this particular activity in the general example of offering
or negotiating terms of a mortgage loan.
The Agencies also have modified and added to the examples of
activities that are not offering or negotiating terms of a mortgage
loan. Some commenters noted that the S.A.F.E. Act excludes employees
who are engaged in administrative and clerical activities. The Agencies
have considered this exclusion in formulating the examples of mortgage
loan origination. Specifically, with respect to offering and
negotiating terms of a mortgage loan, the Agencies have added an
example that an employee who communicates on behalf of a mortgage loan
originator that a written offer has been sent to a consumer, without
providing details of that offer, is not offering or negotiating a loan.
In addition, in response to commenters' requests for more detail,
the Agencies have clarified that providing descriptions, in addition to
explanations, in response to consumer queries regarding qualification
for a specific mortgage loan product or product-related service does
not constitute offering or negotiating terms of a mortgage loan. In
response to the suggestion of another commenter, the Agencies have
provided another new example, specifying that ``offer or negotiate''
does not include explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer, including
qualifications or criteria that would need to be met without providing
guidance specific to the consumer's circumstances.
Some commenters asked whether employees engaged solely in making
underwriting decisions with respect to mortgage loans are offering
terms of a mortgage loan. These employees, although they do not
typically communicate directly with consumers, would appear to fall
within the definition of taking an application. The Agencies have
added, as an example of an activity that is not offering or negotiating
terms of a mortgage loan, making an underwriting decision about whether
the consumer qualifies for a loan. An employee engaged solely in this
activity would not offer or negotiate terms of a loan, and would not,
therefore, meet the two-prong test for acting as a loan originator.
The Agencies, as described previously, understand from many
commenters that numerous employees of Agency-regulated institutions are
engaged solely in modifying loans, such as those which result in
reduced and sustainable payments for a borrower who is in default. The
Agencies have provided, as a new example of an activity that is not
taking an application, receiving information in connection with a
modification to the terms of an existing loan to a borrower as part of
the institution's loss mitigation efforts, when the borrower is
reasonably likely to default. An employee engaged solely in this
activity does not receive a residential mortgage loan application, and
would not, therefore, meet the two-prong test for acting as a loan
originator. The Agencies note that modifying the terms of an existing
loan to a borrower as part of the institution's loss mitigation efforts
generally would not constitute acting as a mortgage loan originator for
purposes of the S.A.F.E. Act. In addition, one commenter requested that
the Agencies clarify that an employee acts as a mortgage loan
originator when the employee renews an existing loan at maturity,
thereby replacing the old loan with a new loan. The Agencies agree with
this commenter.
Finally, one commenter queried whether registration requirements
apply to Agency-regulated institution employees who, in addition to a
variety of customer service duties, only at times act as a mortgage
loan originator and only with respect to a limited number of mortgage
loan products. The Agencies note that an employee who meets the two-
prong test is acting as a mortgage loan originator, even if that
activity is not their primary job duty or the employee may only act as
a mortgage loan originator for a limited number of products. As
described previously, the Agencies have provided a de minimis exception
to address employees who act as mortgage loan originators with respect
to a small number of mortgage loans. In this light, the Agencies
received comments that suggested that an employee would be engaged in
offering the terms of a loan only if the employee's compensation was
based on the number of loans closed or the employee's engagement in
mortgage lending. The Agencies do not agree with this suggestion and
have finalized the examples relating to compensation as proposed.
Therefore, an employee offers or negotiates terms of a loan for
compensation or gain even if the employee does not receive a referral
fee or commission or other special compensation for the mortgage loan.
IV. Regulatory Analysis
A. Regulatory Flexibility Act
OCC: The Regulatory Flexibility Act (RFA) \1\ requires Federal
agencies to prepare and make available to the public a Final Regulatory
Flexibility Analysis (FRFA) for a final rule, unless the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. See 5 U.S.C. 603-605. For
purposes of the RFA, a ``small entity'' within the jurisdiction of the
OCC is a national
[[Page 44677]]
bank or a Federal branch or agency with assets of $175 million or less
(small national bank).\2\ In the NPRM, the OCC certified, pursuant to
section 605(b) of the RFA, that the proposal would not have a
significant economic impact on a substantial number of small
entities.\3\ The OCC's certification was based on an estimated average
total compliance cost of $18,800 per small national bank and the impact
of compliance costs as a percentage of labor costs, as well as
compliance costs as a percent of noninterest expenses. The OCC received
one comment--from the Small Business Administration's Office of
Advocacy (SBA Advocacy)--on the certification.
---------------------------------------------------------------------------
\1\ 5 U.S.C. 601-612.
\2\ 13 CFR 121.201.
\3\ In addition to the OCC, the Board, the FDIC, the OTS, the
NCUA, and the FCA also certified in the proposed rule that the
proposal would not have a significant economic impact on a
substantial number of small entities. See 74 FR at 27398-27399.
---------------------------------------------------------------------------
Based in part on this comment letter, the OCC has reevaluated the
effect of this final rule on small national banks, and, for the reasons
stated below, has determined that this rule will have a significant
economic impact on a substantial number of small entities. Therefore,
we have prepared the following FRFA in accordance with 5 U.S.C. 604.
1. Need for, and Objectives of, the Final Rule
The need for, and objectives of, this final rule are described in
detail in the SUPPLEMENTARY INFORMATION section.
2. Significant Issues Raised by Public Comments
In the comment it submitted, SBA Advocacy expressed concern that
the factual basis for the OCC's (and other Agencies') conclusion that
the proposal would not have a significant economic impact on a
substantial number of small entities may be insufficient, noting that
the OCC's certification did not specify the assumptions used concerning
labor costs or noninterest expenses. SBA Advocacy stated its concern
that OCC's economic impact may be underestimated and sought
clarification regarding the proposal's impact on the number of small
national banks.\1\
---------------------------------------------------------------------------
\1\ A discussion of SBA Advocacy's comments on other provisions
of the proposed rule, namely, the de minimis exception and the
proposed 6-month initial compliance period, is contained in the
SUPPLEMENTARY INFORMATION section of this final rule.
---------------------------------------------------------------------------
In part as a result of this comment letter, the OCC conducted
further analysis of the effect of its rule on the banking industry as a
whole and on small banks in particular. The OCC also obtained
additional information about the impact of the proposal on national
banks. As a result of this information we have modified our initial
conclusions about the economic effect of the rule on small national
banks.
3. Description and Estimate of Small Entities Affected by the Final
Rule
For purposes of OCC regulation, the final rule applies to national
banks, Federal branches and agencies of foreign banks, their operating
subsidiaries (collectively referred to as national banks), and their
employees who act as mortgage loan originators.
OCC estimates that 623 national banks with employees originating
loans secured by residential real estate are small entities based on
the SBA's general principles of affiliation (13 CFR 121.103(a)) and the
size threshold for a small national bank. The OCC believes the final
rule will have a significant impact on approximately 10 percent of
these small national banks (65 banks).\1\ We classify the impact of
total costs on a small national bank as significant if the total costs
in a single year are greater than 5 percent of total salaries and
benefits, or greater than 2.5 percent of total non-interest expense.
Mean total costs per bank in the group of small banks where compliance
costs are significant is approximately $25,000 per bank.\2\
---------------------------------------------------------------------------
\1\ The OCC estimated the impact on small banks both with and
without employee turnover because it is the OCC's understanding that
the turnover rate at small banks is significantly lower than the
rate at large banks and there may be no turnover for several years
in a row at some banks. However, even without employee turnover, the
final rule appears to have a significant impact on a substantial
number of small banks.
\2\ The mean totals of the cost estimates (i.e., the higher cost
estimate and the lower cost estimate) for all (623) small banks
impacted by the final rule are $32,000 and $27,000 respectively. The
mean total cost per small bank in the group of small banks where
costs are significant is approximately $26,000 under the higher cost
estimate, and $23,000 under the lower cost estimate.
---------------------------------------------------------------------------
4. Recordkeeping, Reporting, and Other Compliance Requirements
The final rule imposes requirements on both national banks and
their employees who engage in the business of mortgage loan
origination, regardless of the size of the national bank. Typical
recordkeeping, administrative, computer technology and bank management
skills will be needed to comply with all of the rule's requirements.
Reporting Requirements. Unless the de minimis exception applies,
Sec. 34.103(a) of the final rule requires a mortgage loan originator
employed by a national bank to register with the Registry, maintain
such registration, and obtain a unique identifier. Under Sec.
34.103(b), a bank must require each mortgage loan originator employee
to comply with these requirements. Section 34.103(d) describes the
categories of information that an employee, or the employing bank on
the employee's behalf, must submit to the Registry, along with the
employee's attestation as to the correctness of the information
supplied, and the employee's authorization to obtain further
information and make public some of this information. This section also
requires the submission of the mortgage loan originator's fingerprints
to the Registry.
Section 34.103(e) specifies bank and employee information that a
bank must submit to the Registry in connection with the initial
registration of one or more mortgage loan originators. The bank must
annually renew this information and update this information if
necessary between renewals. Authorized bank representatives must attest
to the correctness of this information and that such information will
be updated on a timely basis.
Disclosure Requirements. Section 34.105(b) requires the mortgage
loan originator to provide the unique identifier to a consumer: (i)
Upon request; (2) before acting as a mortgage loan originator; and (3)
through the originator's initial written communication with a consumer,
if any, whether on paper or electronically.
Section 34.105(a) requires the bank to make the unique
identifier(s) of its mortgage loan originator(s) available to consumers
in a manner and method practicable to the bank.
Recordkeeping and Compliance Requirements.
Section 34.104 requires a bank that employs one or more mortgage
loan originators to adopt and follow written policies and procedures
designed to assure compliance with this final rule. These policies and
procedures must be appropriate to the nature, size, complexity, and
scope of their mortgage lending activities and will apply only to those
employees acting within their scope of employment at the bank. At a
minimum, these policies and procedures must establish a process for:
(i) Identifying which employees are required to register, (ii)
communicating the registration requirements to employees, (iii)
complying with the rule's unique identifier requirements, (iv)
confirming the adequacy and accuracy of employee registrations though
comparisons with bank records, (v) monitoring employee compliance with
the rule, (vi) independent compliance testing, (vii) taking
[[Page 44678]]
appropriate actions with respect to employees who fail to comply with
the registration requirements, (viii) reviewing employee criminal
history background checks received pursuant to this rule, and (ix)
monitoring third party compliance with the S.A.F.E. Act.
5. Steps Taken To Address the Economic Impact on Small Entities
The final rule reflects the consideration given by the OCC, along
with the other Agencies, to the impact that its requirements would have
on small entities.
First, the Agencies have revised the rule's de minimis exception to
reduce compliance burden. In the proposed rule, the Agencies
established a de minimis exception that would have excepted from the
registration requirements an employee of an Agency-regulated
institution if, during the last 12 months: (1) The employee acted as a
mortgage loan originator for 5 or fewer residential mortgage loans; and
(2) the Agency-regulated institution employs mortgage loan originators
who, while excepted from registration pursuant to this section, in the
aggregate, acted as a mortgage loan originator in connection with 25 or
fewer residential mortgage loans. Many commenters on this provision
noted the complexity of the proposed exception. One commenter stated
that the de minimis exception would not have any significant effect
because its complexity would outweigh its benefits. Others noted that
the proposed exception would be difficult for an institution to monitor
and maintain. Still others said that the proposed de minimis exception
would be fairer, and much easier to apply, if the threshold limitation
applied only to the employee or to the institution, but not both. SBA
Advocacy specifically commented that the proposed de minimis exception
would make the rule unduly burdensome on small community banks. In
response to these and other comments and upon further analysis, the
Agencies removed the institution threshold from this de minimis
exception. As a result, the final rule's de minimis exception only
contains the individual threshold, as well as a prohibition on any
Agency-regulated institution from engaging in any act or practice to
evade the limits of the de minimis exception. This revised exception
should simplify compliance and therefore impose the least burden
overall for institutions, including small entities.
The Agencies also considered, pursuant to section 1507(c) of the
S.A.F.E. Act (12 U.S.C. 5106(c)), applying the requirements of the rule
only to institutions above a certain asset threshold, such as the
threshold for Home Mortgage Disclosure Act reporting. However, the
Agencies agreed that this would not further the consumer protection
purposes of the S.A.F.E. Act \1\ in that customers of smaller banks
would not have the same information on mortgage loan originators as
customers of larger institutions. In addition, we believed the
exception should be structured so that employees of institutions of all
sizes could qualify.
---------------------------------------------------------------------------
\1\ Among other things, the objectives of the S.A.F.E. Act
include: Enhancing consumer protections and supporting anti-fraud
measures; increasing accountability and tracking of loan
originators; and providing consumers with easily accessible
information at no charge regarding the employment history of, and
publicly adjudicated disciplinary and enforcement actions against,
loan originators. S.A.F.E. Act at section 1502 (12 U.S.C. 5101).
---------------------------------------------------------------------------
The OCC also has reviewed alternatives for small entity compliance,
including eliminating the requirement for small banks to adopt and
follow written policies and procedures addressing all of the elements
described in the final rule. For example, under such an approach, a
small bank's risk based compliance program might include only such
procedures as are necessary to enable the bank to demonstrate
compliance with the registration and renewal requirements of the
S.A.F.E. Act. Although such an approach may have reduced the compliance
cost per small bank, the OCC does not believe that it would best serve
the interests of national banks or the OCC. Appropriate policies and
procedures provide an institution and its employees with the
expectations of the institution's board and include the specific
implementing guidance that is applicable to the activities of that
institution. Furthermore, such policies and procedures are necessary to
enable examiners to evaluate the effectiveness of institutions'
implementation of the S.A.F.E. Act requirements that apply to them. In
reviewing this alternative, we determined that applying the policies
and procedures requirement in the same way to all institutions,
regardless of size, is necessary to ensure consistency in
implementation and enforcement of the S.A.F.E. Act and is, therefore,
the most appropriate way to ensure that the purposes of the S.A.F.E Act
are met.
The OCC, and the other Agencies, also made changes to the final
rule that reduce the impact that its requirements would have on all
Agency-regulated financial institutions, including small entities. The
final rule decreased the amount of information required for submission
by a mortgage loan originator. Specifically, the final rule does not
require submission of financial history information such as
bankruptcies and liens; employment terminations; pending actions; and
felonies unrelated to crimes of dishonesty. Furthermore, the Agencies
declined to include loan modification activities in the final rule's
definition of mortgage loan originator. Under the OCC's rule, Agency-
regulated institution employees engaged solely in bona fide cost-free
loss mitigation efforts which result in reduced and sustainable
payments for the borrower generally would not meet the definition of
``mortgage loan originator.'' This reduces the number of bank employees
subject to the final rule's requirements.
Board: Pursuant to section 605(b) of the RFA, 5 U.S.C. 605(b), the
regulatory flexibility analysis otherwise required under section 604 of
the RFA is not required if the agency certifies that the rule will not
have a significant economic impact on a substantial number of small
entities and publishes its certification and a short, explanatory
statement in the Federal Register along with its rule.
The final rule implements the S.A.F.E. Act's Federal registration
requirements for mortgage loan originators. The S.A.F.E. Act states
that the objectives of this registration include providing increased
accountability and tracking of mortgage loan originators and providing
consumers with easily accessible information at no charge regarding
mortgage loan originators. The Board is not aware of other Federal
rules which may duplicate, overlap, or conflict with the proposed rule.
The final rule applies to all banks that are members of the Federal
Reserve System (other than national banks) and certain of their
respective subsidiaries, branches and Agencies of foreign banks (other
than Federal branches, Federal agencies, and insured State branches of
foreign banks), and commercial lending companies owned or controlled by
foreign banks.
Under the Board's final rule, employees of the above entities who
act as residential mortgage loan originators must register with the
Registry, obtain a unique identifier, and maintain this registration,
consistent with the requirements of the S.A.F.E. Act. The above
institutions must require their employees who act as residential
mortgage loan originators to comply with the registration requirements
and obtain a unique identifier. These institutions also must provide
certain information to the Registry and must adopt and follow written
policies and
[[Page 44679]]
procedures designed to assure compliance with these requirements. The
institutions and their employees must disclose the unique identifier of
mortgage loan originators in compliance with the rule.
Under regulations issued by the Small Business Administration,\1\ a
small entity includes a banking organization with assets of $175
million or less (a small banking organization). As of December 31,
2008, there were approximately 433 State member banks that are small
banking organizations. The Agencies proposed the de minimis exception
in an effort to reduce compliance costs on small businesses.
---------------------------------------------------------------------------
\1\ See 13 CFR 121.201.
---------------------------------------------------------------------------
The Board received comment from the Office of Advocacy of the U.S.
Small Business Administration on its RFA analysis. This commenter
expressed concern that the factual basis for the Board's (and other
agencies') RFA analysis was insufficient and that the Board and other
agencies may have underestimated the costs associated with the proposed
rule. The commenter queried whether legal compliance costs and training
and tracking costs should be estimated and included in the analysis.
Specifically with respect to the Board's RFA analysis, the commenter
recommended that the Board use revenue, rather than profits, in
determining economic impact since revenue may be a more transparent
indicator than profits.
The Board notes that legal compliance costs, tracking compliance,
and training have been included in the burden analyses for the rule.
The Board estimates compliance costs to be $7.6 million in the
aggregate for the 433 small State member banks. As of December 31,
2008, these institutions had $2.4 billion in revenues in the aggregate.
Therefore, compliance costs would be less than 1% of revenues.
The Board notes that it has adopted in the final rule alternatives
to the proposed rule, which have reduced compliance costs of the rule.
The final rule decreased the amount of information required for
submission by a mortgage loan originator. For example, the final rule
does not require submission of financial history information such as
bankruptcies and liens; employment terminations; pending actions; and
felonies unrelated to crimes of dishonesty. Furthermore, the Agencies
declined to include loan modification activities in the definition of
mortgage loan originator, after considering comments on this issue,
including those regarding the burden and costs of compliance. Under the
Board's rule, modifying the terms of an existing loan to a borrower as
part of the institution's loss mitigation efforts would not constitute
acting as a mortgage loan originator for purposes of the S.A.F.E. Act.
In addition, the final rule simplifies the de minimis exception to
registration requirements of the rule, thereby decreasing compliance
costs and increasing the number of employees who will qualify for the
individual limits required under the de minimis exception. Under the
proposed rule, even if an employee was within the individual limit on
mortgage loan origination activity, the employee still could not
utilize the exception unless the institution itself was within the
aggregate limit on unregistered mortgage loan originators. The Board
notes that it has taken a conservative approach to estimating the
compliance impact of the revised de minimis exception, assuming that at
least as many small entities would not incur registration-related
expenses under the final rule as the proposed rule. Further, the Board
notes that small institutions typically do not originate a significant
volume of mortgage loans.
The Board has not adopted other significant alternatives to the
proposed rule. For example, the final rule continues to include a
mandate for Agency-regulated institutions to require their mortgage
loan originator employees to meet registration requirements and adopt
policies and procedures to assure compliance. These requirements remain
in the final rule because the Board believes that these provisions are
necessary to achieve the objectives of the statute and to assure
compliance with the rule.
Therefore, pursuant to section 605(b) of the RFA, the Board hereby
certifies that this proposal will not have a significant economic
impact on a substantial number of small entities. Although a regulatory
flexibility analysis is not needed, the Board has voluntarily provided
an analysis.
FDIC: In accordance with the RFA, 5 U.S.C. 601-612, an agency must
publish a final regulatory flexibility analysis with its final rule,
unless the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities (defined for
purposes of the RFA to include banks with less than $175 million in
assets). The FDIC hereby certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
Approximately 3,116 FDIC-supervised banks are small entities. In
the RFA analysis for the proposed rule, the FDIC determined that
approximately 2,255 of those small entities would incur only those
costs related to adopting and following appropriate policies and
procedures, not registration-related expenses, because they originate
25 or fewer residential mortgage loans annually and therefore would not
have qualified for the aggregate institution limit of the proposed
rule's de minimis exception. Since the aggregate institution limit has
been eliminated in the final rule, the exception will apply to a
greater number of employees than under the proposed rule. However,
because it is difficult to estimate how many more employees would be
covered by the revised de minimis exception, a more conservative
approach would be to assume that at least as many small entities would
not incur registration-related expenses under the final rule as under
the proposed rule (i.e., 2,255 small entities). For those 2,255 small
entities, the set up costs are estimated to be about 0.5% of total non-
interest expense and annual costs are estimated to be about 0.2% of
total non-interest expenses (based on a mean non-interest expense of
$2.5 million reported by the 3,116 FDIC-supervised small entities for
fourth quarter 2008).
Given the foregoing assumptions, only approximately 861 small
entities supervised by the FDIC--about 28% of FDIC-supervised small
entities--will be subject to all of the requirements of the final rule.
For those 861 small entities, the estimated initial costs for complying
with the final rule would represent, on average, approximately 0.7% of
total non-interest expenses, and the annual compliance costs would
represent, on average, approximately 0.3% of total non-interest
expenses (based on the aforementioned mean non-interest expense of $2.5
million).
For the 861 FDIC supervised small entities that will be subject to
all of the requirements of the final rule, the S.A.F.E. Act
requirements will cost $17,395 for set up and $7,436 annually (based on
an estimated 350 hours for set up, 113 hours for annual compliance,
11.435 mortgage loan originators per entity, and a weighted average
labor cost of $49.70 per hour). For the 2,255 FDIC supervised small
entities that will incur only those costs related to adopting and
following appropriate policies and procedures, the S.A.F.E. Act
requirements will cost $12,922 for set up (based on an estimated 260
labor hours and the aforementioned labor cost) and $4,473 annually
(based on an estimated 90 labor hours and the aforementioned labor
cost).
[[Page 44680]]
OTS: The RFA\1\ requires Federal agencies to prepare and make
available to the public a Final Regulatory Flexibility Analysis (FRFA)
for a final rule, unless the agency certifies that the rule will not
have a significant economic impact on a substantial number of small
entities. See 5 U.S.C. 603-605. For purposes of the RFA and OTS-
regulated entities, a ``small entity'' within the jurisdiction of the
OTS is a savings association with assets of $175 million or less (small
savings association). In the NPRM, the OTS certified, pursuant to
section 605(b) of the RFA, that the regulatory flexibility analysis
otherwise required under section 604 of the RFA was not required
because the proposal would not have a significant economic impact on a
substantial number of small entities.\1\ The OTS's certification was
based on an estimated average total compliance cost of $13,311 per
small savings association and the impact of compliance costs as a
percentage of labor costs, as well as compliance costs as a percent of
noninterest expenses. The OTS received one comment--from the Small
Business Administration's Office of Advocacy (SBA Advocacy)--on the
certification.
---------------------------------------------------------------------------
\1\ 5 U.S.C. 601-612.
\1\ In addition to the OTS, the Board, the OCC, the FDIC, the
NCUA, and the FCA also certified in the proposed rule that the
proposal would not have a significant economic impact on a
substantial number of small entities. See 74 FR at 27398-27399.
---------------------------------------------------------------------------
Based in part on this comment letter, the OTS has reevaluated the
effect of this final rule on small savings associations, and, based on
the information provided below, has reaffirmed that this rule will not
have a significant economic impact on a substantial number of small
entities. Therefore, OTS is not required to prepare an FRFA under 5
U.S.C. 604. However, OTS believes that the initial analysis included in
the proposed rule should be slightly modified, and therefore, we have
included in the final rule a description of the economic effect on
small savings associations and additional information addressing the
final rule and the comment letter on the certification.
1. Description and Estimate of Small Entities Affected by the Final
Rule
For purposes of the OTS regulation, the final rule applies to
savings associations and their operating subsidiaries and their
employees who act as mortgage loan originators. In determining the
economic impact on small savings associations, OTS determined that 385
small savings associations would potentially be affected by the final
rule. We estimate that 23 of these savings associations, or 6 percent,
have no mortgage loan originator (MLO) employees, and therefore, will
incur no costs under the final rule. The remaining 362 small savings
associations can be expected to incur costs under the final rule.
Specifically, OTS estimates the average cost of compliance for these
362 small savings associations to be $17,085. In order to determine
whether the costs of compliance have a significant economic impact on
this population of small savings associations, we compared each
association's projected compliance costs to both its total annualized
labor costs and to its total annualized noninterest expense.
(Noninterest expense is typically used as a benchmark for ``overhead''
in financial firms.) If projected S.A.F.E. Act compliance costs
exceeded 5 percent of a small saving association's total labor costs,
or 2.5 percent of its noninterest expense, OTS considered the impact of
compliance to be ``significant.'' These benchmarks have been used in
the past by OTS and other Federal financial regulatory agencies. OTS
estimates that 32 small savings associations, or 8.3 percent of the
small savings association population, will experience a significant
economic impact associated with compliance using the benchmarks
described above. The average cost of compliance for these 32 savings
associations is projected to be $17,441. Pursuant to Sec. 605(b) of
the RFA, OTS therefore certifies that this final rule will not have a
significant economic impact on a substantial number of small entities,
and, accordingly, a FRFA is not required.
2. Need for, and Objectives of, the Final Rule
As described in the SUPPLEMENTARY INFORMATION, the objectives of
this final rule are to implement the requirements of the S.A.F.E. Act.
Specifically, the final rule implements:
Section 1504 of the S.A.F.E. Act (12 U.S.C. 5103(a)),
which provides that subject to the existence of a registration regime,
an individual who is an employee of a depository institution may not
engage in the business of a loan originator without first: (i)
Obtaining and maintaining annually a registration as a registered loan
originator, and, (ii) obtaining a unique identifier; and,
Section 1507 of the S.A.F.E. Act (12 U.S.C. 5106), which
requires the Agencies to: (i) Jointly develop and maintain a system for
registering employees of a depository institution and of a subsidiary
that is owned and controlled by a depository institution and regulated
by an Agency as registered loan originators with the National Mortgage
License System and Registry (Registry); and (ii) furnish certain
information, or cause it to be furnished, to the Registry.
3. Significant Issues Raised by Public Comments
As indicated above, the OTS did not publish an IRFA with the
proposed rule. We therefore did not receive any comments specifically
directed at an analysis in an IRFA. However, in the comment the SBA
Advocacy submitted, it expressed concern that the factual basis for the
OTS's (and other Agencies') conclusion that the proposal would not have
a significant economic impact on a substantial number of small entities
may be insufficient, noting that the OTS's certification did not
specify the assumptions used concerning labor costs or noninterest
expenses. In addition, SBA Advocacy stated its concern that OTS's
economic impact may be underestimated and sought clarification
regarding the proposal's impact on the number of small savings
associations.\1\ SBA Advocacy recommended that the Agencies work with
the industry to determine an accurate estimate of the economic impact
of the rule on small entities and develop ways to minimize that burden.
In part as a result of this comment letter and as noted above, the OTS
conducted further analysis of the effect of our rule on the savings
association industry as a whole and on small savings associations in
particular.
---------------------------------------------------------------------------
\1\ A discussion of SBA Advocacy's comments on other provisions
of the proposed rule, namely, the de minimis exception and the
proposed 6-month compliance period, is contained in the
SUPPLEMENTARY INFORMATION section of this final rule.
---------------------------------------------------------------------------
4. Recordkeeping, Reporting, and Other Compliance Requirements
The final rule applies to savings associations, their operating
subsidiaries (collectively referred to as savings associations), and
their employees who act as mortgage loan originators. Typical
recordkeeping, administrative, computer technology and savings
association management skills will be needed to comply with all of the
rule's requirements.
Reporting Requirements. Unless the de minimis exception applies,
Sec. 563.103(a) of the final rule requires a mortgage loan originator
employed by a savings association to register with the Registry,
maintain such registration, and obtain an unique identifier. Under
Sec. 563.103(b), an association must require each mortgage loan
originator employee to comply with these
[[Page 44681]]
requirements. Section 563.103(d) describes the categories of
information that an employee, or the employing savings association on
the employee's behalf, must submit to the Registry, along with the
employee's attestation as to the correctness of the information
supplied, and the employee's authorization to obtain further
information and make public some of this information. This section also
requires the submission of the mortgage loan originator's fingerprints
to the Registry.
Section 563.103(e) specifies savings association and employee
information that an association must submit to the Registry in
connection with the initial registration of one or more mortgage loan
originators. The savings association must annually renew this
information and update this information if necessary between renewals.
Authorized savings association representatives must attest to the
correctness of this information and that such information will be
updated on a timely basis.
Disclosure Requirements. Section 563.105(b) requires the mortgage
loan originator to provide the unique identifier to a consumer: (i)
Upon request; (2) before acting as a mortgage loan originator; and (3)
through the originator's initial written communication with a consumer,
if any, whether on paper or electronically.
Section 563.105(a) requires the savings association to make the
unique identifiers of its mortgage loan originators available to
consumers in a manner and method practicable to the association.
Recordkeeping and Compliance Requirements. Section 563.104 requires
a savings association that employs one or more mortgage loan
originators to adopt and follow written policies and procedures
designed to assure compliance with this final rule. These policies and
procedures must be appropriate to the nature, size, complexity, and
scope of their mortgage lending activities and will apply only to those
employees acting within their scope of employment at the savings
association. At a minimum, these policies and procedures must establish
a process for: (i) Identifying which employees are required to
register, (ii) communicating the registration requirements to
employees, (iii) complying with the rule's unique identifier
requirements, (iv) confirming the adequacy and accuracy of employee
registrations though comparisons with savings association records, (v)
monitoring employee compliance with the rule, (vi) independent
compliance testing, (vii) taking appropriate actions with respect to
employees who fail to comply with the registration requirements, (viii)
reviewing employee criminal history background checks received pursuant
to this rule, and (ix) monitoring third party compliance with the
S.A.F.E. Act.
5. Steps Taken To Address the Economic Impact on Small Entities
The final rule reflects the consideration given by the OTS, along
with the other Agencies, to the impact that its requirements would have
on small entities. First, the Agencies have revised the rule's de
minimis exception to reduce compliance burden. In the proposed rule,
the Agencies established a de minimis exception that would have
excepted from the registration requirements an employee of an Agency-
regulated institution if, during the last 12 months: (1) The employee
acted as a mortgage loan originator for 5 or fewer residential mortgage
loans and (2) the Agency-regulated institution employs mortgage loan
originators who, while excepted from registration pursuant to this
section, in the aggregate, acted as a mortgage loan originator in
connection with 25 or fewer residential mortgage loans. Many commenters
on this provision noted the complexity of the proposed exception. One
commenter stated that the de minimis exception would not have any
significant effect because its complexity would outweigh its benefits.
Others noted that the proposed exception would be difficult for an
institution to monitor and maintain. Still others said that the
proposed de minimis exception would be fairer, and much easier to
apply, if the threshold limitation applied only to the employee or to
the institution, but not both. SBA Advocacy specifically commented that
the proposed de minimis exception would make the rule unduly burdensome
on small community institutions. In response to these and other
comments and upon further analysis, the Agencies removed the
institution threshold from this de minimis exception. As a result, the
final rule's de minimis exception only contains the individual
threshold, as well as a prohibition on any Agency-regulated institution
from engaging in any act or practice to evade the limits of the de
minimis exception. This revised exception should simplify compliance
and therefore impose the least burden overall for institutions,
including small entities.
The OTS also has reviewed alternatives for small entity compliance,
including eliminating the requirement for small savings associations to
adopt and follow written policies and procedures addressing all of the
elements described in the final rule. For example, under such an
approach, a small savings association's risk based compliance program
might include only such procedures as are necessary to enable the
association to demonstrate compliance with the registration and renewal
requirements of the S.A.F.E. Act and the final rule. Although such an
approach may have reduced the compliance cost per small savings
association, the OTS does not believe that it would best serve the
interests of savings associations or the OTS. Appropriate policies and
procedures provide an institution and its employees with the
expectations of the institution's board and include the specific
implementing guidance that is applicable to the activities of that
institution. Furthermore, such policies and procedures are necessary to
enable examiners to evaluate the effectiveness of institutions'
implementation of the S.A.F.E. Act requirements that apply to them. In
reviewing this alternative, we determined that applying the policies
and procedures requirement in the same way to all institutions,
regardless of size, is necessary to ensure consistency in
implementation and enforcement of the S.A.F.E. Act and is, therefore,
the most appropriate way to ensure that the purposes of the S.A.F.E Act
are met.
The OTS, and the other Agencies, also made changes to the final
rule that reduce the impact that its requirements would have on all
Agency-regulated financial institutions, including small entities. The
final rule decreased the amount of information required for submission
by a mortgage loan originator. Specifically, the final rule does not
require submission of financial history information such as
bankruptcies and liens; employment and terminations; pending actions;
and felonies unrelated to crimes of dishonesty. Furthermore, the
Agencies declined to include loan modification activities in the final
rule's definition of mortgage loan originator. Under the OTS's rule,
Agency-regulated institution employees engaged solely in bona fide
cost-free loss mitigation efforts, which result in reduced and
sustainable payments for the borrower generally would not meet the
definition of ``mortgage loan originator.'' This reduces the number of
savings association employees subject to the final rule's requirements.
FCA: Pursuant to section 605(b) of the RFA (5 U.S.C. 601 et seq.)
the FCA certifies that the final rule will not have a significant
economic impact on a substantial number of small entities. Each of the
banks in the Farm Credit
[[Page 44682]]
System, considered together with its affiliated associations, has
assets and annual income in excess of the amounts that would qualify
them as small entities.
The comment letter from the Office of Advocacy in the Small
Business Administration (SBA) stated that the FCA did not provide any
information about the potential impact of the rule on FCS institutions.
The RFA requires each agency to certify that a rulemaking will not have
a significant economic impact on a significant number of small
entities. The FCA observes that the RFA definition of ``small entity''
derives from the SBA's definition of ``small business concern,''
including size standards. According to section 3(a)(1) of the Small
Business Act, as amended, a small business concern is independently
owned and operated, and it is not dominant in its field of operation.
Whether a business concern is ``independently owned and operated''
depends, in part, on its affiliation with other business entities.
Generally, an affiliate is either controlled by, or has control over
another entity. Businesses that are economically dependent on each
other because of their ownership, management, and contractual
relationships may be affiliates. FCS associations own and control their
funding banks. Additionally, FCS associations borrow exclusively from
their funding banks, and they pledge virtually all of their loans and
other assets to these banks to secure their loans. For these reasons,
the FCA has determined that the interrelated ownership, control, and
contractual relationships are sufficient to treat FCS banks and
associations as a single entity for the purposes of the RFA.
SBA regulations also establish size categories to determine whether
entities that engage in ``Credit Intermediation and Related
Activities'' are small business concerns. These regulations categorize
``All Other Non-Depository Credit Intermediation'' institutions as
small entities if their annual receipts are $7 million or less. As
affiliated entities, the combined annual receipts of each Farm Credit
bank and its affiliated associations exceed $7 million. For this
reason, FCS institutions do not qualify as small entities under the
RFA.
NCUA: In accordance with the RFA, 5 U.S.C. 601-612, NCUA must
publish a regulatory flexibility analysis with its final rule, unless
NCUA certifies that the rule will not have a significant economic
impact on a substantial number of small entities (defined for purposes
of the RFA to include credit unions with less than $10 million in
assets). Approximately 2,995 out of 7,554 Federally insured credit
unions and 61 out of 156 non-Federally insured credit unions are small
entities. NCUA hereby certifies that the final rule would not have a
significant economic impact on a substantial number of these small
entities.
The final rule will apply to all Federally insured credit unions,
non-Federally insured credit unions located in States where the State
supervisory authorities enter into and maintain MOUs with NCUA, and
employees who act as mortgage originators for these credit unions. The
final rule imposes no requirements on credit unions not originating
residential mortgages. This accounts for 1,923 of the 2,995 small,
Federally insured credit unions and 45 of the 61 small, non-Federally
insured credit unions.
Under the final rule, all these credit unions, including small
entities, originating any residential mortgages must have policies and
procedures in place for mortgage loan origination registration. This
currently includes only about 1,072 of the 2,995 small, Federally
insured credit unions, and only about 16 of the 61 small, non-Federally
insured credit unions. The policies and procedures must be appropriate
to the nature, size, complexity, and scope of the credit unions'
mortgage lending activities and will apply only to those employees
acting within their scope of credit union employment.
Approximately 2,716 of the 2,995 small, Federally insured credit
unions, and 15 of the 16 small, non-Federally insured credit unions,
would qualify for the final rule's de minimis exception to the
registration requirements for mortgage loan originators because they
originate fewer than five or no residential mortgage loans. Those
credit unions not originating mortgages have no obligations under this
final rule. Those small credit unions and their employees originating
between one and four mortgages per year are not subject to the final
rule's registration requirements and, thus, drafting and implementing
the policies and procedures will not be burdensome.
Accordingly, NCUA estimates only about 279 of the 2,995 small
Federally insured credit unions, about 9.3% of them, and only one of
the 61 small, non-Federally insured credit unions, about 1.6%, will be
subject to the final rule's registration requirements and will
establish policies and procedures for the registration.
Therefore, for all of the above reasons, NCUA concludes the final
rule would not have a significant economic impact on a substantial
number of small credit unions.
B. Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995, the agencies may not conduct or sponsor, and respondents are
not required to respond to, an information collection unless it
displays a currently valid Office of Management and Budget (OMB)
control number.
The information collection requirements contained in this joint
final rule have been submitted by the OCC, FDIC, OTS, and NCUA to, and
pre-approved by, OMB under section 3506 of the PRA and Sec. 1320.11 of
OMB's implementing regulations (5 CFR part 1320). The FCA collects
information from Farm Credit System institutions, which are Federal
instrumentalities, in the FCA's capacity as their safety and soundness
regulator, and, therefore, OMB approval is not required for this
collection. The Board reviewed the proposed rule under the authority
delegated to the Board by the Office of Management and Budget. The
final rule contains requirements subject to the PRA. The requirements
are found in 12 CFR ----.103(a)-(b), (d)-(e), ----.104, and ----.105.
No comments concerning PRA were received in response to the notice
of proposed rulemaking. Therefore, the hourly burden estimates for
respondents noted in the proposed rule have not changed. The agencies
have an ongoing interest in your comments. They should be sent to
[Agency] Desk Officer, [OMB Control No.], by mail to U.S. Office of
Management and Budget, 725 17th Street, NW., 10235, Washington, DC
20503, or by fax to (202) 395-6974. Written comments should address:
(a) Whether the collection of information is necessary for the
proper performance of the Federal banking agencies' functions,
including whether the information has practical utility;
(b) The accuracy of the estimates of the burden of the information
collection, including the validity of the methodology and assumptions
used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
[[Page 44683]]
C. OCC Executive Order 12866 Determination
Executive Order 12866 requires each Federal agency to provide to
the Administrator of OMB's Office of Information and Regulatory Affairs
(OIRA) a Regulatory Impact Analysis for agency actions that are found
to be ``significant regulatory actions.'' ``Significant regulatory
actions'' include, among other things, rulemakings that ``have an
annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities.'' \1\
Regulatory actions that satisfy one or more of these criteria are
referred to as ``economically significant regulatory actions.'' In
conducting this Regulatory Impact Analysis, Executive Order 12866
requires each Federal agency to provide to OIRA:
---------------------------------------------------------------------------
\1\ Executive Order 12866 (September 30, 1993), 58 FR 51735
(October 4, 1993). For the complete text of the definition of
``significant regulatory action,'' see E.O. 12866 at Sec. 3(f). A
``regulatory action'' is ``any substantive action by an agency
(normally published in the Federal Register) that promulgates or is
expected to lead to the promulgation of a final rule or regulation,
including notices of inquiry, advance notices of proposed
rulemaking, and notices of proposed rulemaking.'' E.O. 12866 at
Sec. 3(e).
---------------------------------------------------------------------------
The text of the draft regulatory action, together with a
reasonably detailed description of the need for the regulatory action
and an explanation of how the regulatory action will meet that need;
An assessment of the potential costs and benefits of the
regulatory action, including an explanation of the manner in which the
regulatory action is consistent with a statutory mandate and, to the
extent permitted by law, promotes the President's priorities and avoids
undue interference with State, local, and Tribal governments in the
exercise of their governmental functions;
An assessment, including the underlying analysis, of
benefits anticipated from the regulatory action (such as, but not
limited to, the promotion of the efficient functioning of the economy
and private markets, the enhancement of health and safety, the
protection of the natural environment, and the elimination or reduction
of discrimination or bias) together with, to the extent feasible, a
quantification of those benefits;
An assessment, including the underlying analysis, of costs
anticipated from the regulatory action (such as, but not limited to,
the direct cost both to the government in administering the regulation
and to businesses and others in complying with the regulation, and any
adverse effects on the efficient functioning of the economy, private
markets (including productivity, employment, and competitiveness),
health, safety, and the natural environment), together with, to the
extent feasible, a quantification of those costs; and
An assessment, including the underlying analysis, of costs
and benefits of potentially effective and reasonably feasible
alternatives to the planned regulation, identified by the agencies or
the public (including improving the current regulation and reasonably
viable nonregulatory actions), and an explanation why the planned
regulatory action is preferable to the identified potential
alternatives.
The OCC has concluded that the final rule exceeds the $100 million
criterion and therefore is an economically significant regulatory
action. As required by Executive Order 12866, the OCC prepared a
Regulatory Impact Analysis, which was submitted to OIRA on January 8,
2010. The OCC's final set of revisions responding to OIRA comments was
submitted on July 1, 2010. As discussed in more detail in the
Regulatory Impact Analysis, the OCC determined that given the
constraints imposed on the OCC by the S.A.F.E. Act, and based on the
estimated mean cost, the rule was the least cost option available to
the OCC. The OCC's Regulatory Impact Analysis in its entirety is
available at http://www.regulations.gov, docket ID OCC-2010-0007.
D. OTS Executive Order 12866 Determination
Executive Order 12866 requires each Federal agency to provide the
Administrator of OMB's OIRA a Regulatory Impact Analysis for agency
actions that are found to be ``significant regulatory actions.''
Significant regulatory actions include, among other things, rulemakings
that ``have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or Tribal governments or
communities.'' \1\ Regulatory actions that satisfy one or more of these
criteria are referred to as ``economically significant regulatory
actions.'' In conducting this Regulatory Impact Analysis, Executive
Order 12866 requires each Federal agency to provide to OIRA:
---------------------------------------------------------------------------
\1\ Executive Order 12866 (September 30, 1993), 58 FR 51735
(October 4, 1993). For the complete text of the definition of
``significant regulatory action,'' see E.O. 12866 at Sec. 3(f). A
``regulatory action'' is ``any substantive action by an agency
(normally published in the Federal Register) that promulgates or is
expected to lead to the promulgation of a final rule or regulation,
including notices of inquiry, advance notices of proposed
rulemaking, and notices of proposed rulemaking.'' E.O. 12866 at
Sec. 3(e).
---------------------------------------------------------------------------
The text of the draft regulatory action, together with a
reasonably detailed description of the need for the regulatory action
and an explanation of how the regulatory action will meet that need;
An assessment of the potential costs and benefits of the
regulatory action, including an explanation of the manner in which the
regulatory action is consistent with a statutory mandate and, to the
extent permitted by law, promotes the President's priorities and avoids
undue interference with State, local, and Tribal governments in the
exercise of their governmental functions;
An assessment, including the underlying analysis, of
benefits anticipated from the regulatory action (such as, but not
limited to, the promotion of the efficient functioning of the economy
and private markets, the enhancement of health and safety, the
protection of the natural environment, and the elimination or reduction
of discrimination or bias) together with, to the extent feasible, a
quantification of those benefits;
An assessment, including the underlying analysis, of costs
anticipated from the regulatory action (such as, but not limited to,
the direct cost both to the government in administering the regulation
and to businesses and others in complying with the regulation, and any
adverse effects on the efficient functioning of the economy, private
markets (including productivity, employment, and competitiveness),
health, safety, and the natural environment), together with, to the
extent feasible, a quantification of those costs; and
An assessment, including the underlying analysis, of costs
and benefits of potentially effective and reasonably feasible
alternatives to the planned regulation, identified by the agencies or
the public (including improving the current regulation and reasonably
viable nonregulatory actions), and an explanation why the planned
regulatory action is preferable to the identified potential
alternatives.
The OTS has determined that this final rule is not a significant
regulatory action under Executive Order 12866. We have concluded that
the changes made by this final rule will not have an
[[Page 44684]]
annual effect on the economy of $100 million or more. The OTS further
concludes that this final rule does not meet any of the other standards
for a significant regulatory action set forth in Executive Order 12866.
As required by Executive Order 12866, the OTS prepared a Regulatory
Impact Analysis, which was submitted to OIRA on March 9, 2010. The
OTS's final revisions were submitted to OIRA on July 12, 2010. As
discussed in more detail in the Regulatory Impact Analysis, the OTS
determined that given the constraints imposed on the OTS by the
S.A.F.E. Act, and based on the estimated cost, the rule was the least
cost option available to the OTS. The OTS's Regulatory Impact Analysis
in its entirety is available at http://www.regulations.gov, Docket No.
OTS-2010-0021.
E. OCC and OTS Unfunded Mandates Reform Act of 1995 Determination
Section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1532), requires the OCC and OTS to prepare a budgetary impact statement
before promulgating a rule that includes a Federal mandate that may
result in the expenditure by State, local, and Tribal governments, in
the aggregate, or by the private sector, of $133 million or more in any
one year. However, this requirement does not apply to regulations that
incorporate requirements specifically set forth in law. Because this
proposed rule implements the S.A.F.E. Act, the OTS and OCC have not
conducted an Unfunded Mandates Analysis for this rulemaking.\1\
---------------------------------------------------------------------------
\1\ See 2 U.S.C. 1531.
---------------------------------------------------------------------------
F. OCC and OTS Executive Order 13132 Determination
E.O. 13132 sets forth certain ``Fundamental Federalism Principles''
and ``Federalism Policymaking Criteria'' that must be followed by the
OCC and OTS in developing any regulation that has Federalism
implications. A regulation has Federalism implications if it has
``substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.'' If a
rule meets the test for Federalism implications, the executive order
requires the agency, among other things, to prepare a Federalism
summary impact statement for inclusion in the rule's SUPPLEMENTARY
INFORMATION section and must consult with State and local officials
about the rule. The OCC and OTS have determined that their respective
portions of the final rule do not have a substantial direct effect on
the States, on the connection between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Therefore, the final rule does not have
any Federalism implications for purposes of Executive Order 13132.
G. NCUA Executive Order 13132 Determination
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on State and local interests. In
adherence to fundamental Federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5)
voluntarily complies with the Executive Order. The final rule applies
to credit unions and would not have substantial direct effects on the
States, on the connection between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. The NCUA has determined that the final
rule does not constitute a policy that has Federalism implications for
purposes of the Executive Order.
H. NCUA: The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this final rule would not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
I. NCUA: Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) (SBREFA) provides generally for congressional review
of agency rules. A reporting requirement is triggered in instances
where NCUA issues a final rule as defined by section 551 of the
Administrative Procedure Act. 5 U.S.C. 551. NCUA does not believe this
final rule is a ``major rule'' within the meaning of the relevant
sections of SBREFA. NCUA has submitted the rule to the Office of
Management and Budget (OMB) for its determination and OMB concurred
that the rule is not a major rule.
List of Subjects
12 CFR Part 34
Mortgages, National banks, Reporting and recordkeeping
requirements.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Consumer protection, Crime, Currency, Insurance,
Investments, Mortgages, Reporting and recordkeeping requirements,
Securities.
12 CFR Part 211
Exports, Foreign banking, Holding companies, Investments, Reporting
and recordkeeping requirements.
12 CFR Part 365
Banks, banking, Mortgages.
12 CFR Part 563
Accounting, Administrative practice and procedure, Advertising,
Conflict of interests, Crime, Currency, Holding companies, Investments,
Mortgages, Reporting and recordkeeping requirements, Savings
associations, Securities, Surety bonds.
12 CFR Part 610
Banks, banking, Consumer protection, Loan programs--housing and
community development, Mortgages, Reporting and recordkeeping
requirements, Rural areas.
12 CFR Part 741
Bank deposit insurance, Credit unions, Reporting and recordkeeping
requirements.
12 CFR Part 761
Credit unions, Mortgages, Reporting and recordkeeping requirements.
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
0
For the reasons set forth in the preamble, chapter I of title 12 of the
Code of Federal Regulations is amended as follows:
PART 34--REAL ESTATE LENDING AND APPRAISALS
0
1. The authority citation for part 34 is revised to read as follows:
Authority: 12 U.S.C. 1 et seq., 29, 93a, 371, 1701j-3, 1828(o),
3331 et seq., and 5101 et seq.
0
2. Add Subpart F to part 34 to read as follows:
[[Page 44685]]
Subpart F--Registration of Residential Mortgage Loan Originators
Sec.
34.101 Authority, purpose, and scope.
34.102 Definitions.
34.103 Registration of mortgage loan originators.
34.104 Policies and procedures.
34.105 Use of unique identifier.
Appendix A to Subpart F of Part 34-- Examples of Mortgage Loan
Originator Activities
Subpart F--Registration of Residential Mortgage Loan Originators
Sec. 34.101 Authority, purpose, and scope.
(a) Authority. This subpart is issued pursuant to the Secure and
Fair Enforcement for Mortgage Licensing Act of 2008, title V of the
Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-
289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.).
(b) Purpose. This subpart implements the S.A.F.E. Act's Federal
registration requirement for mortgage loan originators. The S.A.F.E.
Act provides that the objectives of this registration include
aggregating and improving the flow of information to and between
regulators; providing increased accountability and tracking of mortgage
loan originators; enhancing consumer protections; supporting anti-fraud
measures; and providing consumers with easily accessible information at
no charge regarding the employment history of, and publicly adjudicated
disciplinary and enforcement actions against, mortgage loan
originators.
(c) Scope. (1) In general. This subpart applies to national banks,
Federal branches and agencies of foreign banks, their operating
subsidiaries (collectively referred to in this subpart as national
banks), and their employees who act as mortgage loan originators.
(2) De minimis exception. (i) This subpart and the requirements of
12 U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any
employee of a national bank who has never been registered or licensed
through the Registry as a mortgage loan originator if during the past
12 months the employee acted as a mortgage loan originator for 5 or
fewer residential mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that
exceeds the exception limit in paragraph (c)(2)(i) of this section, a
national bank employee must register with the Registry pursuant to this
subpart.
(iii) Evasion. National banks are prohibited from engaging in any
act or practice to evade the limits of the de minimis exception set
forth in paragraph (c)(2)(i) of this section.
Sec. 34.102 Definitions.
For purposes of this subpart F, the following definitions apply:
(a) Annual renewal period means November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator \3\ means an individual who:
---------------------------------------------------------------------------
\3\ Appendix A of this subpart provides examples of activities
that would, and would not, cause an employee to fall within this
definition of mortgage loan originator.
---------------------------------------------------------------------------
(i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for
compensation or gain.
(2) The term mortgage loan originator does not include:
(i) An individual who performs purely administrative or clerical
tasks on behalf of an individual who is described in paragraph (b)(1)
of this section;
(ii) An individual who only performs real estate brokerage
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or
registered as a real estate broker in accordance with applicable State
law, unless the individual is compensated by a lender, a mortgage
broker, or other mortgage loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator, and meets
the definition of mortgage loan originator in paragraph (b)(1) of this
section; or
(iii) An individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined in 11 U.S.C.
101(53D).
(3) Administrative or clerical tasks means the receipt, collection,
and distribution of information common for the processing or
underwriting of a loan in the residential mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan.
(c) Nationwide Mortgage Licensing System and Registry or Registry
means the system developed and maintained by the Conference of State
Bank Supervisors and the American Association of Residential Mortgage
Regulators for the State licensing and registration of State-licensed
mortgage loan originators and the registration of mortgage loan
originators pursuant to 12 U.S.C. 5107.
(d) Registered mortgage loan originator or registrant means any
individual who:
(1) Meets the definition of mortgage loan originator and is an
employee of a national bank; and
(2) Is registered pursuant to this subpart with, and maintains a
unique identifier through, the Registry.
(e) Residential mortgage loan means 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 (as defined in section 103(v) of the Truth in Lending Act, 15
U.S.C. 1602(v)) or residential real estate upon which is constructed or
intended to be constructed a dwelling, and includes refinancings,
reverse mortgages, home equity lines of credit and other first and
additional lien loans that meet the qualifications listed in this
definition.
(f) Unique identifier means a number or other identifier that:
(1) Permanently identifies a registered mortgage loan originator;
(2) Is assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry, the Federal banking agencies, and the
Farm Credit Administration to facilitate:
(i) Electronic tracking of mortgage loan originators; and
(ii) Uniform identification of, and public access to, the
employment history of and the publicly adjudicated disciplinary and
enforcement actions against mortgage loan originators; and
(3) Must not be used for purposes other than those set forth under
the S.A.F.E. Act.
Sec. 34.103 Registration of mortgage loan originators.
(a) Registration requirement--(1) Employee registration. Each
employee of a national bank who acts as a mortgage loan originator must
register with the Registry, obtain a unique identifier, and maintain
this registration in accordance with the requirements of this subpart.
Any such employee who is not in compliance with the registration and
unique identifier requirements set forth in this subpart is in
violation of the S.A.F.E. Act and this subpart.
(2) National bank requirement--(i) In general. A national bank that
employs one or more individuals who act as a residential mortgage loan
originator must require each such employee to register with the
Registry, maintain this registration, and obtain a unique identifier in
accordance with the requirements of this subpart.
(ii) Prohibition. A national bank must not permit an employee of
the bank who is subject to the registration requirements of this
subpart to act as a mortgage loan originator for the bank unless such
employee is registered with the Registry pursuant to this subpart.
[[Page 44686]]
(3) Implementation period for initial registration. An employee of
a national bank who is a mortgage loan originator must complete an
initial registration with the Registry pursuant to this subpart within
180 days from the date that the OCC provides in a public notice that
the Registry is accepting registrations.
(4) Employees previously registered or licensed through the
Registry--(i) In general. If an employee of a national bank was
registered or licensed through, and obtained a unique identifier from,
the Registry and has maintained this registration or license before the
employee becomes subject to this subpart at this bank, then the
registration requirements of the S.A.F.E. Act and this subpart are
deemed to be met, provided that:
(A) The employment information in paragraphs (d)(1)(i)(C) and
(d)(1)(ii) of this section is updated and the requirements of paragraph
(d)(2) of this section are met;
(B) New fingerprints of the employee are submitted to the Registry
for a background check, as required by paragraph (d)(1)(ix) of this
section, unless the employee has fingerprints on file with the Registry
that are less than 3 years old;
(C) The national bank information required in paragraphs (e)(1)(i)
(to the extent the bank has not previously met these requirements) and
(e)(2)(i) of this section is submitted to the Registry; and
(D) The registration is maintained pursuant to paragraphs (b) and
(e)(1)(ii) of this section, as of the date that the employee becomes
subject to this subpart.
(ii) Rule for certain acquisitions, mergers, or reorganizations.
When registered or licensed mortgage loan originators become national
bank employees as a result of an acquisition, merger, or
reorganization, only the requirements of paragraphs (a)(4)(i)(A), (C),
and (D) of this section must be met, and these requirements must be met
within 60 days from the effective date of the acquisition, merger, or
reorganization.
(b) Maintaining registration. (1) A mortgage loan originator who is
registered with the Registry pursuant to paragraph (a) of this section
must:
(i) Except as provided in paragraph (b)(3) of this section, renew
the registration during the annual renewal period, confirming the
responses set forth in paragraphs (d)(1)(i) through (viii) of this
section remain accurate and complete, and updating this information, as
appropriate; and
(ii) Update the registration within 30 days of any of the following
events:
(A) A change in the name of the registrant;
(B) The registrant ceases to be an employee of the national bank;
or
(C) The information required under paragraphs (d)(1)(iii) through
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
(2) A registered mortgage loan originator must maintain his or her
registration, unless the individual is no longer engaged in the
activity of a mortgage loan originator.
(3) The annual registration renewal requirement set forth in
paragraph (b)(1) of this section does not apply to a registered
mortgage loan originator who has completed his or her registration with
the Registry pursuant to paragraph (a)(1) of this section less than 6
months prior to the end of the annual renewal period.
(c) Effective dates--(1) Registration. A registration pursuant to
paragraph (a)(1) of this section is effective on the date the Registry
transmits notification to the registrant that the registrant is
registered.
(2) Renewals or updates. A renewal or update pursuant to paragraph
(b) of this section is effective on the date the Registry transmits
notification to the registrant that the registration has been renewed
or updated.
(d) Required employee information--(1) In general. For purposes of
the registration required by this section, a national bank must require
each employee who is a mortgage loan originator to submit to the
Registry, or must submit on behalf of the employee, the following
categories of information, to the extent this information is collected
by the Registry:
(i) Identifying information, including the employee's:
(A) Name and any other names used;
(B) Home address and contact information;
(C) Principal business location address and business contact
information;
(D) Social security number;
(E) Gender; and
(F) Date and place of birth;
(ii) Financial services-related employment history for the 10 years
prior to the date of registration or renewal, including the date the
employee became an employee of the bank;
(iii) Convictions of any criminal offense involving dishonesty,
breach of trust, or money laundering against the employee or
organizations controlled by the employee, or agreements to enter into a
pretrial diversion or similar program in connection with the
prosecution for such offense(s);
(iv) Civil judicial actions against the employee in connection with
financial services-related activities, dismissals with settlements, or
judicial findings that the employee violated financial services-related
statutes or regulations, except for actions dismissed without a
settlement agreement;
(v) Actions or orders by a State or Federal regulatory agency or
foreign financial regulatory authority that:
(A) Found the employee to have made a false statement or omission
or been dishonest, unfair or unethical; to have been involved in a
violation of a financial services-related regulation or statute; or to
have been a cause of a financial services-related business having its
authorization to do business denied, suspended, revoked, or restricted;
(B) Are entered against the employee in connection with a financial
services-related activity;
(C) Denied, suspended, or revoked the employee's registration or
license to engage in a financial services-related activity; disciplined
the employee or otherwise by order prevented the employee from
associating with a financial services-related business or restricted
the employee's activities; or
(D) Barred the employee from association with an entity or its
officers regulated by the agency or authority or from engaging in a
financial services-related business;
(vi) Final orders issued by a State or Federal regulatory agency or
foreign financial regulatory authority based on violations of any law
or regulation that prohibits fraudulent, manipulative, or deceptive
conduct;
(vii) Revocation or suspension of the employee's authorization to
act as an attorney, accountant, or State or Federal contractor;
(viii) Customer-initiated financial services-related arbitration or
civil action against the employee that required action, including
settlements, or which resulted in a judgment; and
(ix) Fingerprints of the employee, in digital form if practicable,
and any appropriate identifying information for submission to the
Federal Bureau of Investigation and any governmental agency or entity
authorized to receive such information in connection with a State and
national criminal history background check; however, fingerprints
provided to the Registry that are less than 3 years old may be used to
satisfy this requirement.
(2) Employee authorizations and attestation. An employee
registering as a mortgage loan originator or renewing or updating his
or her registration under this subpart, and not the employing
[[Page 44687]]
national bank or other employees of the national bank, must:
(i) Authorize the Registry and the employing institution to obtain
information related to sanctions or findings in any administrative,
civil, or criminal action, to which the employee is a party, made by
any governmental jurisdiction;
(ii) Attest to the correctness of all information required by
paragraph (d) of this section, whether submitted by the employee or on
behalf of the employee by the employing bank; and
(iii) Authorize the Registry to make available to the public
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii)
through (viii) of this section.
(3) Submission of information. A national bank may identify one or
more employees of the bank who may submit the information required by
paragraph (d)(1) of this section to the Registry on behalf of the
bank's employees provided that this individual, and any employee
delegated such authority, does not act as a mortgage loan originator,
consistent with paragraph (e)(1)(i)(F) of this section. In addition, a
national bank may submit to the Registry some or all of the information
required by paragraphs (d)(1) and (e)(2) of this section for multiple
employees in bulk through batch processing in a format to be specified
by the Registry, to the extent such batch processing is made available
by the Registry.
(e) Required bank information. A national bank must submit the
following categories of information to the Registry:
(1) Bank record. (i) In connection with the registration of one or
more mortgage loan originators:
(A) Name, main office address, and business contact information;
(B) Internal Revenue Service Employer Tax Identification Number
(EIN);
(C) Research Statistics Supervision and Discount (RSSD) number, as
issued by the Board of Governors of the Federal Reserve System;
(D) Identification of its primary Federal regulator;
(E) Name(s) and contact information of the individual(s) with
authority to act as the bank's primary point of contact for the
Registry;
(F) Name(s) and contact information of the individual(s) with
authority to enter the information required by paragraphs (d)(1) and
(e) of this section to the Registry and who may delegate this authority
to other individuals. For the purpose of providing information required
by paragraph (e) of this section, this individual and their delegates
must not act as mortgage loan originators unless the bank has 10 or
fewer full time or equivalent employees and is not a subsidiary; and
(G) If a subsidiary of a national bank, indication that it is a
subsidiary and the RSSD number of the parent bank.
(ii) Attestation. The individual(s) identified in paragraphs
(e)(1)(i)(E) and (F) of this section must comply with Registry
protocols to verify their identity and must attest that they have the
authority to enter data on behalf of the national bank, that the
information provided to the Registry pursuant to this paragraph (e) is
correct, and that the national bank will keep the information required
by this paragraph (e) current and will file accurate supplementary
information on a timely basis.
(iii) A national bank must update the information required by this
paragraph (e) of this section within 30 days of the date that this
information becomes inaccurate.
(iv) A national bank must renew the information required by
paragraph (e) of this section on an annual basis.
(2) Employee information. In connection with the registration of
each employee who acts as a mortgage loan originator:
(i) After the information required by paragraph (d) of this section
has been submitted to the Registry, confirmation that it employs the
registrant; and
(ii) Within 30 days of the date the registrant ceases to be an
employee of the bank, notification that it no longer employs the
registrant and the date the registrant ceased being an employee.
Sec. 34.104 Policies and procedures.
A national bank that employs one or more mortgage loan originators
must adopt and follow written policies and procedures designed to
assure compliance with this subpart. These policies and procedures must
be appropriate to the nature, size, complexity, and scope of the
mortgage lending activities of the bank, and apply only to those
employees acting within the scope of their employment at the bank. At a
minimum, these policies and procedures must:
(a) Establish a process for identifying which employees of the bank
are required to be registered mortgage loan originators;
(b) Require that all employees of the national bank who are
mortgage loan originators be informed of the registration requirements
of the S.A.F.E. Act and this subpart and be instructed on how to comply
with such requirements and procedures;
(c) Establish procedures to comply with the unique identifier
requirements in Sec. 34.105;
(d) Establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparisons with its own records;
(e) Establish reasonable procedures and tracking systems for
monitoring compliance with registration and renewal requirements and
procedures;
(f) Provide for independent testing for compliance with this
subpart to be conducted at least annually by bank personnel or by an
outside party;
(g) Provide for appropriate action in the case of any employee who
fails to comply with the registration requirements of the S.A.F.E. Act,
this subpart, or the bank's related policies and procedures, including
prohibiting such employees from acting as mortgage loan originators or
other appropriate disciplinary actions;
(h) Establish a process for reviewing employee criminal history
background reports received pursuant to this subpart, taking
appropriate action consistent with applicable Federal law, including
section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) and
implementing regulations with respect to these reports, and maintaining
records of these reports and actions taken with respect to applicable
employees; and
(i) Establish procedures designed to ensure that any third party
with which the bank 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.
Sec. 34.105 Use of unique identifier.
(a) The national bank shall make the unique identifier(s) of its
registered mortgage loan originator(s) available to consumers in a
manner and method practicable to the institution.
(b) A registered mortgage loan originator shall provide his or her
unique identifier to a consumer:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's initial written communication with a
consumer, if any, whether on paper or electronically.
Appendix A to Subpart F of Part 34--Examples of Mortgage Loan
Originator Activities
This Appendix provides examples to aid in the understanding of
activities that would cause an employee of a national bank to fall
within or outside the definition of mortgage loan originator. The
examples in this
[[Page 44688]]
Appendix are not all inclusive. They illustrate only the issue
described and do not illustrate any other issues that may arise
under this subpart. For purposes of the examples below, the term
``loan'' refers to a residential mortgage loan.
(a) Taking a loan application. The following examples illustrate
when an employee takes, or does not take, a loan application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the consumer qualifies for a loan, even if the
employee:
(i) Has received the consumer's information indirectly in order
to make an offer or negotiate a loan;
(ii) Is not responsible for verifying information;
(iii) Is inputting information into an online application or
other automated system on behalf of the consumer; or
(iv) Is not engaged in approval of the loan, including
determining whether the consumer qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a consumer to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
(iii) Assisting a consumer who is filling out an application by
clarifying what type of information is necessary for the application
or otherwise explaining the qualifications or criteria necessary to
obtain a loan product;
(iv) Describing the steps that a consumer would need to take to
provide information to be used to determine whether the consumer
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a consumer has received from a bank, collecting only basic
identifying information about the consumer and forwarding the
consumer to a mortgage loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the bank's
loss mitigation efforts when the borrower is reasonably likely to
default.
(b) Offering or negotiating terms of a loan. The following
examples are designed to illustrate when an employee offers or
negotiates terms of a loan, and conversely, what does not constitute
offering or negotiating terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a consumer for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the bank's loan approval mechanism
function for a specific loan product is communicated without
authority to negotiate the rate.
(ii) Responding to a consumer's request for a lower rate or
lower points on a pending loan application by presenting to the
consumer a revised loan offer, either verbally or in writing, that
includes a lower interest rate or lower points than the original
offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to consumer queries regarding qualification for a specific loan
product, such as explaining loan terminology (i.e., debt-to-income
ratio); lending policies (i.e., the loan-to-value ratio policy of
the national bank); or product-related services;
(ii) In response to a consumer's request, informing a consumer
of the loan rates that are publicly available, such as on the
national bank's Web site, for specific types of loan products
without communicating to the consumer whether qualifications are met
for that loan product;
(iii) Collecting information about a consumer in order to
provide the consumer with information on loan products for which the
consumer generally may qualify, without presenting a specific loan
offer to the consumer for acceptance, either verbally or in writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a consumer about those
arrangements, provided that communication with the consumer only
verifies loan terms already offered or negotiated;
(v) Providing a consumer with information unrelated to loan
terms, such as the best days of the month for scheduling loan
closings at the bank;
(vi) Making an underwriting decision about whether the consumer
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer,
including qualifications or criteria that would need to be met
without providing guidance specific to that consumer's
circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to the
Truth in Lending Act, has been sent to a consumer without providing
any details of that offer.
(c) Offering or negotiating a loan for compensation or gain. The
following examples illustrate when an employee does or does not
offer or negotiate terms of a loan ``for compensation or gain.''
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this Appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the national
bank.
Board of Governors of the Federal Reserve System
12 CFR Chapter II
Authority and Issuance
0
For the reasons set forth in the preamble, chapter II of title 12 of
the Code of Federal Regulations is amended as follows:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
0
1. The authority citation for part 208 is revised to read as follows:
Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a,
371d, 461, 481-486, 601, 611, 1814, 1816, 1820(d)(9), 1823(j),
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882,
2901-2907, 3105, 3106a(1), 3108(a), 3310, 3331-3351, and 3906-3909,
5101 et seq., 15 U.S.C. 78b, 78l(b), 78l(g), 78l(i), 78o-4(c)(5),
78q, 78q-1, 78w, 1681s, 1681w, 6801 and 6805; 31 U.S.C. 5318, 42
U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
2. Subpart I, consisting of Sec. Sec. 208.100 and 208.101, is
redesignated as Subpart J, consisting of Sec. Sec. 208.110 and
208.111.
0
3. New subpart I is added to read as follows:
Subpart I--Registration of Residential Mortgage Loan Originators
Sec.
208.101 Authority, purpose, and scope.
208.102 Definitions.
208.103 Registration of mortgage loan originators.
208.104 Policies and procedures.
208.105 Use of unique identifier.
Appendix A to Subpart I of Part 208--Examples of Mortgage Loan
Originator Activities
Subpart I--Registration of Residential Mortgage Loan Originators
Sec. 208.101 Authority, purpose, and scope.
(a) Authority. This subpart is issued pursuant to the Secure and
Fair Enforcement for Mortgage Licensing Act of 2008, title V of the
Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-
289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.), 12 U.S.C. 248(a),
3106a(1), and 3108(a).
(b) Purpose. This subpart implements the S.A.F.E. Act's Federal
registration requirement for mortgage loan originators. The S.A.F.E.
Act provides that the objectives of this registration include
aggregating and improving the flow of information to and between
regulators; providing increased accountability and tracking of mortgage
loan originators; enhancing consumer protections; supporting anti-fraud
measures; and providing consumers
[[Page 44689]]
with easily accessible information at no charge regarding the
employment history of, and publicly adjudicated disciplinary and
enforcement actions against, mortgage loan originators.
(c) Scope. (1) In general. This subpart applies to member banks of
the Federal Reserve System (other than national banks); their
respective subsidiaries that are not functionally regulated within the
meaning of section 5(c)(5) of the Bank Holding Company Act, as amended
(12 U.S.C. 1844(c)(5)); branches and agencies of foreign banks (other
than Federal branches, Federal agencies and insured State branches of
foreign banks); commercial lending companies owned or controlled by
foreign banks (collectively referred to in this subpart as banks); and
their employees who act as mortgage loan originators.
(2) De minimis exception. (i) This subpart and the requirements of
12 U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any
employee of a bank who has never been registered or licensed through
the Registry as a mortgage loan originator if during the past 12 months
the employee acted as a mortgage loan originator for 5 or fewer
residential mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that
exceeds the exception limit in paragraph (c)(2)(i) of this section, a
bank employee must register with the Registry pursuant to this subpart.
(iii) Evasion. Banks are prohibited from engaging in any act or
practice to evade the limits of the de minimis exception set forth in
paragraph (c)(2)(i) of this section.
Sec. 208.102 Definitions.
For purposes of this subpart I, the following definitions apply:
(a) Annual renewal period means November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator \7\ means an individual who:
---------------------------------------------------------------------------
\7\ Appendix A of this subpart provides examples of activities
that would, and would not, cause an employee to fall within this
definition of mortgage loan originator.
---------------------------------------------------------------------------
(i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for
compensation or gain.
(2) The term mortgage loan originator does not include:
(i) An individual who performs purely administrative or clerical
tasks on behalf of an individual who is described in paragraph (b)(1)
of this section;
(ii) An individual who only performs real estate brokerage
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or
registered as a real estate broker in accordance with applicable State
law, unless the individual is compensated by a lender, a mortgage
broker, or other mortgage loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator, and meets
the definition of mortgage loan originator in paragraph (b)(1) of this
section; or
(iii) An individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined in 11 U.S.C.
101(53D).
(3) Administrative or clerical tasks means the receipt, collection,
and distribution of information common for the processing or
underwriting of a loan in the residential mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan.
(c) Nationwide Mortgage Licensing System and Registry or Registry
means the system developed and maintained by the Conference of State
Bank Supervisors and the American Association of Residential Mortgage
Regulators for the State licensing and registration of State-licensed
mortgage loan originators and the registration of mortgage loan
originators pursuant to 12 U.S.C. 5107.
(d) Registered mortgage loan originator or registrant means any
individual who:
(1) Meets the definition of mortgage loan originator and is an
employee of a bank; and
(2) Is registered pursuant to this subpart with, and maintains a
unique identifier through, the Registry.
(e) Residential mortgage loan means 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 (as defined in section 103(v) of the Truth in Lending Act, 15
U.S.C. 1602(v)) or residential real estate upon which is constructed or
intended to be constructed a dwelling, and includes refinancings,
reverse mortgages, home equity lines of credit and other first and
additional lien loans that meet the qualifications listed in this
definition.
(f) Unique identifier means a number or other identifier that:
(1) Permanently identifies a registered mortgage loan originator;
(2) Is assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry, the Federal banking agencies, and the
Farm Credit Administration to facilitate:
(i) Electronic tracking of mortgage loan originators; and
(ii) Uniform identification of, and public access to, the
employment history of and the publicly adjudicated disciplinary and
enforcement actions against mortgage loan originators; and
(3) Must not be used for purposes other than those set forth under
the S.A.F.E. Act.
Sec. 208.103 Registration of mortgage loan originators.
(a) Registration requirement--(1) Employee registration. Each
employee of a bank who acts as a mortgage loan originator must register
with the Registry, obtain a unique identifier, and maintain this
registration in accordance with the requirements of this subpart. Any
such employee who is not in compliance with the registration and unique
identifier requirements set forth in this subpart is in violation of
the S.A.F.E. Act and this subpart.
(2) Bank requirement--(i) In general. A bank that employs one or
more individuals who act as a residential mortgage loan originator must
require each such employee to register with the Registry, maintain this
registration, and obtain a unique identifier in accordance with the
requirements of this subpart.
(ii) Prohibition. A bank must not permit an employee of the bank
who is subject to the registration requirements of this subpart to act
as a mortgage loan originator for the bank unless such employee is
registered with the Registry pursuant to this subpart.
(3) Implementation period for initial registration. An employee of
a bank who is a mortgage loan originator must complete an initial
registration with the Registry pursuant to this subpart within 180 days
from the date that the Board provides in a public notice that the
Registry is accepting registrations.
(4) Employees previously registered or licensed through the
Registry--(i) In general. If an employee of a bank was registered or
licensed through, and obtained a unique identifier from, the Registry
and has maintained this registration or license before the employee
becomes subject to this subpart at this bank, then the registration
requirements of the S.A.F.E. Act and this subpart are deemed to be met,
provided that:
(A) The employment information in paragraphs (d)(1)(i)(C) and
(d)(1)(ii) of this section is updated and the requirements of paragraph
(d)(2) of this section are met;
(B) New fingerprints of the employee are submitted to the Registry
for a background check, as required by paragraph (d)(1)(ix) of this
section,
[[Page 44690]]
unless the employee has fingerprints on file with the Registry that are
less than 3 years old;
(C) The bank information required in paragraphs (e)(1)(i) (to the
extent the bank has not previously met these requirements) and
(e)(2)(i) of this section is submitted to the Registry; and
(D) The registration is maintained pursuant to paragraphs (b) and
(e)(1)(ii) of this section, as of the date that the employee becomes
subject to this subpart.
(ii) Rule for certain acquisitions, mergers, or reorganizations.
When registered or licensed mortgage loan originators become bank
employees as a result of an acquisition, merger, or reorganization,
only the requirements of paragraphs (a)(4)(i)(A), (C), and (D) of this
section must be met, and these requirements must be met within 60 days
from the effective date of the acquisition, merger, or reorganization.
(b) Maintaining registration. (1) A mortgage loan originator who is
registered with the Registry pursuant to paragraph (a) of this section
must:
(i) Except as provided in paragraph (b)(3) of this section, renew
the registration during the annual renewal period, confirming the
responses set forth in paragraphs (d)(1)(i) through (viii) of this
section remain accurate and complete, and updating this information, as
appropriate; and
(ii) Update the registration within 30 days of any of the following
events:
(A) A change in the name of the registrant;
(B) The registrant ceases to be an employee of the bank; or
(C) The information required under paragraphs (d)(1)(iii) through
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
(2) A registered mortgage loan originator must maintain his or her
registration, unless the individual is no longer engaged in the
activity of a mortgage loan originator.
(3) The annual registration renewal requirement set forth in
paragraph (b)(1) of this section does not apply to a registered
mortgage loan originator who has completed his or her registration with
the Registry pursuant to paragraph (a)(1) of this section less than 6
months prior to the end of the annual renewal period.
(c) Effective dates--(1) Registration. A registration pursuant to
paragraph (a)(1) of this section is effective on the date the Registry
transmits notification to the registrant that the registrant is
registered.
(2) Renewals or updates. A renewal or update pursuant to paragraph
(b) of this section is effective on the date the Registry transmits
notification to the registrant that the registration has been renewed
or updated.
(d) Required employee information--(1) In general. For purposes of
the registration required by this section, a bank must require each
employee who is a mortgage loan originator to submit to the Registry,
or must submit on behalf of the employee, the following categories of
information, to the extent this information is collected by the
Registry:
(i) Identifying information, including the employee's:
(A) Name and any other names used;
(B) Home address and contact information;
(C) Principal business location address and business contact
information;
(D) Social security number;
(E) Gender; and
(F) Date and place of birth;
(ii) Financial services-related employment history for the 10 years
prior to the date of registration or renewal, including the date the
employee became an employee of the bank;
(iii) Convictions of any criminal offense involving dishonesty,
breach of trust, or money laundering against the employee or
organizations controlled by the employee, or agreements to enter into a
pretrial diversion or similar program in connection with the
prosecution for such offense(s);
(iv) Civil judicial actions against the employee in connection with
financial services-related activities, dismissals with settlements, or
judicial findings that the employee violated financial services-related
statutes or regulations, except for actions dismissed without a
settlement agreement;
(v) Actions or orders by a State or Federal regulatory agency or
foreign financial regulatory authority that:
(A) Found the employee to have made a false statement or omission
or been dishonest, unfair or unethical; to have been involved in a
violation of a financial services-related regulation or statute; or to
have been a cause of a financial services-related business having its
authorization to do business denied, suspended, revoked, or restricted;
(B) Are entered against the employee in connection with a financial
services-related activity;
(C) Denied, suspended, or revoked the employee's registration or
license to engage in a financial services-related activity; disciplined
the employee or otherwise by order prevented the employee from
associating with a financial services-related business or restricted
the employee's activities; or
(D) Barred the employee from association with an entity or its
officers regulated by the agency or authority or from engaging in a
financial services-related business;
(vi) Final orders issued by a State or Federal regulatory agency or
foreign financial regulatory authority based on violations of any law
or regulation that prohibits fraudulent, manipulative, or deceptive
conduct;
(vii) Revocation or suspension of the employee's authorization to
act as an attorney, accountant, or State or Federal contractor;
(viii) Customer-initiated financial services-related arbitration or
civil action against the employee that required action, including
settlements, or which resulted in a judgment; and
(ix) Fingerprints of the employee, in digital form if practicable,
and any appropriate identifying information for submission to the
Federal Bureau of Investigation and any governmental agency or entity
authorized to receive such information in connection with a State and
national criminal history background check; however, fingerprints
provided to the Registry that are less than 3 years old may be used to
satisfy this requirement.
(2) Employee authorizations and attestation. An employee
registering as a mortgage loan originator or renewing or updating his
or her registration under this subpart, and not the employing bank or
other employees of the bank, must:
(i) Authorize the Registry and the employing institution to obtain
information related to sanctions or findings in any administrative,
civil, or criminal action, to which the employee is a party, made by
any governmental jurisdiction;
(ii) Attest to the correctness of all information required by
paragraph (d) of this section, whether submitted by the employee or on
behalf of the employee by the employing bank; and
(iii) Authorize the Registry to make available to the public
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii)
through (viii) of this section.
(3) Submission of information. A bank may identify one or more
employees of the bank who may submit the information required by
paragraph (d)(1) of this section to the Registry on behalf of the
bank's employees provided that this individual, and any employee
delegated such authority, does not act as a mortgage loan originator,
consistent with paragraph (e)(1)(i)(F) of this section. In addition, a
bank may submit
[[Page 44691]]
to the Registry some or all of the information required by paragraphs
(d)(1) and (e)(2) of this section for multiple employees in bulk
through batch processing in a format to be specified by the Registry,
to the extent such batch processing is made available by the Registry.
(e) Required bank information. A bank must submit the following
categories of information to the Registry:
(1) Bank record. (i) In connection with the registration of one or
more mortgage loan originators:
(A) Name, main office address, and business contact information;
(B) Internal Revenue Service Employer Tax Identification Number
(EIN);
(C) Research Statistics Supervision and Discount (RSSD) number, as
issued by the Board of Governors of the Federal Reserve System;
(D) Identification of its primary Federal regulator;
(E) Name(s) and contact information of the individual(s) with
authority to act as the bank's primary point of contact for the
Registry;
(F) Name(s) and contact information of the individual(s) with
authority to enter the information required by paragraphs (d)(1) and
(e) of this section to the Registry and who may delegate this authority
to other individuals. For the purpose of providing information required
by paragraph (e) of this section, this individual and their delegates
must not act as mortgage loan originators unless the bank has 10 or
fewer full time or equivalent employees and is not a subsidiary; and
(G) If a subsidiary of a bank, indication that it is a subsidiary
and the RSSD number of the parent bank.
(ii) Attestation. The individual(s) identified in paragraphs
(e)(1)(i)(E) and (F) of this section must comply with Registry
protocols to verify their identity and must attest that they have the
authority to enter data on behalf of the bank, that the information
provided to the Registry pursuant to this paragraph (e) is correct, and
that the bank will keep the information required by this paragraph (e)
current and will file accurate supplementary information on a timely
basis.
(iii) A bank must update the information required by this paragraph
(e) of this section within 30 days of the date that this information
becomes inaccurate.
(iv) A bank must renew the information required by paragraph (e) of
this section on an annual basis.
(2) Employee information. In connection with the registration of
each employee who acts as a mortgage loan originator:
(i) After the information required by paragraph (d) of this section
has been submitted to the Registry, confirmation that it employs the
registrant; and
(ii) Within 30 days of the date the registrant ceases to be an
employee of the bank, notification that it no longer employs the
registrant and the date the registrant ceased being an employee.
Sec. 208.104 Policies and procedures.
A bank that employs one or more mortgage loan originators must
adopt and follow written policies and procedures designed to assure
compliance with this subpart. These policies and procedures must be
appropriate to the nature, size, complexity, and scope of the mortgage
lending activities of the bank, and apply only to those employees
acting within the scope of their employment at the bank. At a minimum,
these policies and procedures must:
(a) Establish a process for identifying which employees of the bank
are required to be registered mortgage loan originators;
(b) Require that all employees of the bank who are mortgage loan
originators be informed of the registration requirements of the
S.A.F.E. Act and this subpart and be instructed on how to comply with
such requirements and procedures;
(c) Establish procedures to comply with the unique identifier
requirements in Sec. 208.105;
(d) Establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparisons with its own records;
(e) Establish reasonable procedures and tracking systems for
monitoring compliance with registration and renewal requirements and
procedures;
(f) Provide for independent testing for compliance with this
subpart to be conducted at least annually by bank personnel or by an
outside party;
(g) Provide for appropriate action in the case of any employee who
fails to comply with the registration requirements of the S.A.F.E. Act,
this subpart, or the bank's related policies and procedures, including
prohibiting such employees from acting as mortgage loan originators or
other appropriate disciplinary actions;
(h) Establish a process for reviewing employee criminal history
background reports received pursuant to this subpart, taking
appropriate action consistent with applicable Federal law, including
section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) and
implementing regulations with respect to these reports, and maintaining
records of these reports and actions taken with respect to applicable
employees; and
(i) Establish procedures designed to ensure that any third party
with which the bank 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.
Sec. 208.105 Use of unique identifier.
(a) The bank shall make the unique identifier(s) of its registered
mortgage loan originator(s) available to consumers in a manner and
method practicable to the institution.
(b) A registered mortgage loan originator shall provide his or her
unique identifier to a consumer:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's initial written communication with a
consumer, if any, whether on paper or electronically.
Appendix A to Subpart I of Part 208--Examples of Mortgage Loan
Originator Activities
This Appendix provides examples to aid in the understanding of
activities that would cause an employee of a bank to fall within or
outside the definition of mortgage loan originator. The examples in
this Appendix are not all inclusive. They illustrate only the issue
described and do not illustrate any other issues that may arise
under this subpart. For purposes of the examples below, the term
``loan'' refers to a residential mortgage loan.
(a) Taking a loan application. The following examples illustrate
when an employee takes, or does not take, a loan application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the consumer qualifies for a loan, even if the
employee:
(i) Has received the consumer's information indirectly in order
to make an offer or negotiate a loan;
(ii) Is not responsible for verifying information;
(iii) Is inputting information into an online application or
other automated system on behalf of the consumer; or
(iv) Is not engaged in approval of the loan, including
determining whether the consumer qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a consumer to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
[[Page 44692]]
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
(iii) Assisting a consumer who is filling out an application by
clarifying what type of information is necessary for the application
or otherwise explaining the qualifications or criteria necessary to
obtain a loan product;
(iv) Describing the steps that a consumer would need to take to
provide information to be used to determine whether the consumer
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a consumer has received from a bank, collecting only basic
identifying information about the consumer and forwarding the
consumer to a mortgage loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the bank's
loss mitigation efforts when the borrower is reasonably likely to
default.
(b) Offering or negotiating terms of a loan. The following
examples are designed to illustrate when an employee offers or
negotiates terms of a loan, and conversely, what does not constitute
offering or negotiating terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a consumer for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the bank's loan approval mechanism
function for a specific loan product is communicated without
authority to negotiate the rate.
(ii) Responding to a consumer's request for a lower rate or
lower points on a pending loan application by presenting to the
consumer a revised loan offer, either verbally or in writing, that
includes a lower interest rate or lower points than the original
offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to consumer queries regarding qualification for a specific loan
product, such as explaining loan terminology (i.e., debt-to-income
ratio); lending policies (i.e., the loan-to-value ratio policy of
the bank); or product-related services;
(ii) In response to a consumer's request, informing a consumer
of the loan rates that are publicly available, such as on the bank's
Web site, for specific types of loan products without communicating
to the consumer whether qualifications are met for that loan
product;
(iii) Collecting information about a consumer in order to
provide the consumer with information on loan products for which the
consumer generally may qualify, without presenting a specific loan
offer to the consumer for acceptance, either verbally or in writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a consumer about those
arrangements, provided that communication with the consumer only
verifies loan terms already offered or negotiated;
(v) Providing a consumer with information unrelated to loan
terms, such as the best days of the month for scheduling loan
closings at the bank;
(vi) Making an underwriting decision about whether the consumer
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer,
including qualifications or criteria that would need to be met
without providing guidance specific to that consumer's
circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to the
Truth in Lending Act, has been sent to a consumer without providing
any details of that offer.
(c) Offering or negotiating a loan for compensation or gain. The
following examples illustrate when an employee does or does not
offer or negotiate terms of a loan ``for compensation or gain.''
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this Appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the bank.
0
4. Newly designated Sec. 208.111 is amended by redesignating footnotes
7 and 8 as footnotes 8 and 9, respectively, and by revising newly
designated footnote 9 to read as follows:
Sec. 208.111 Obligations concerning institutional customers.
* * * * *
\9\ See footnote 8 in paragraph (d) of this section.
PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)
0
5. The authority citation for part 211 is revised to read as follows:
Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq.,
3101 et seq., 3901 et seq., and 5101 et seq.; 15 U.S.C. 1681s,
1681w, 6801 and 6805.
0
6. Section 211.24 is amended by adding new paragraph (k) to read as
follows:
Sec. 211.24 Approval of offices of foreign banks; procedures for
applications; standards for approval; representative office activities
and standards for approval; preservation of existing authority.
* * * * *
(k) Registration of residential mortgage loan originators. An
uninsured State-licensed branch or agency of a foreign bank or
commercial lending company owned or controlled by a foreign bank and
any residential mortgage loan originator that it employs are subject to
the requirements, including registration requirements, as applicable,
of the Secure and Fair Enforcement for Mortgage Licensing Act (12
U.S.C. 5101 et seq.) and the Board's implementing regulation set forth
in Regulation H at subpart I of part 208 of this chapter.
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
0
For the reasons set forth in the preamble, the Federal Deposit
Insurance Corporation amends part 365 of chapter III of title 12 of the
Code of Federal Regulations as follows:
PART 365--REAL ESTATE LENDING STANDARDS
0
1. The authority citation for part 365 is revised to read as follows:
Authority: 12 U.S.C. 1828(o) and 5101 et seq.
0
2. Sections 365.1 and 365.2 and Appendix A are placed under a new
subpart A, and the heading for new subpart A is added to read as
follows:
Subpart A--Real Estate Lending Standards
0
3. Section 365.1 is amended by removing ``part'' and adding ``subpart''
in its place.
0
4. Appendix A to Part 365 is redesignated as Appendix A to Subpart A of
Part 365, and the heading is revised to read as follows:
Appendix A to Subpart A of Part 365--Interagency Guidelines for Real
Estate Lending Policies
0
5. New subpart B is added to read as follows:
Subpart B--Registration of Residential Mortgage Loan Originators
Sec.
365.101 Authority, purpose, and scope.
365.102 Definitions.
365.103 Registration of mortgage loan originators.
365.104 Policies and procedures.
365.105 Use of unique identifier.
Appendix A to Subpart B of Part 365--Examples of Mortgage Loan
Originator Activities
[[Page 44693]]
Subpart B--Registration of Residential Mortgage Loan Originators
Sec. 365.101 Authority, purpose, and scope.
(a) Authority. This subpart is issued pursuant to the Secure and
Fair Enforcement for Mortgage Licensing Act of 2008, title V of the
Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-
289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.).
(b) Purpose. This subpart implements the S.A.F.E. Act's Federal
registration requirement for mortgage loan originators. The S.A.F.E.
Act provides that the objectives of this registration include
aggregating and improving the flow of information to and between
regulators; providing increased accountability and tracking of mortgage
loan originators; enhancing consumer protections; supporting anti-fraud
measures; and providing consumers with easily accessible information at
no charge regarding the employment history of, and publicly adjudicated
disciplinary and enforcement actions against, mortgage loan
originators.
(c) Scope--(1) In general. This subpart applies to insured State
nonmember banks (including State-licensed insured branches of foreign
banks), their subsidiaries (except brokers, dealers, persons providing
insurance, investment companies, and investment advisers) (collectively
referred to in this subpart as insured State nonmember banks), and
employees of such banks or subsidiaries who act as mortgage loan
originators.
(2) De minimis exception. (i) This subpart and the requirements of
12 U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any
employee of an insured State nonmember bank who has never been
registered or licensed through the Registry as a mortgage loan
originator if during the past 12 months the employee acted as a
mortgage loan originator for 5 or fewer residential mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that
exceeds the exception limit in paragraph (c)(2)(i) of this section, an
insured State nonmember bank employee must register with the Registry
pursuant to this subpart.
(iii) Evasion. Insured State nonmember banks are prohibited from
engaging in any act or practice to evade the limits of the de minimis
exception set forth in paragraph (c)(2)(i) of this section.
Sec. 365.102 Definitions.
For purposes of this subpart, the following definitions apply:
(a) Annual renewal period means November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator \1\ means an individual who:
---------------------------------------------------------------------------
\1\ Appendix A of this subpart provides examples of activities
that would, and would not, cause an employee to fall within this
definition of mortgage loan originator.
---------------------------------------------------------------------------
(i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for
compensation or gain.
(2) The term mortgage loan originator does not include:
(i) An individual who performs purely administrative or clerical
tasks on behalf of an individual who is described in paragraph (b)(1)
of this section;
(ii) An individual who only performs real estate brokerage
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or
registered as a real estate broker in accordance with applicable State
law, unless the individual is compensated by a lender, a mortgage
broker, or other mortgage loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator, and meets
the definition of mortgage loan originator in paragraph (b)(1) of this
section; or
(iii) An individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined in 11 U.S.C.
101(53D).
(3) Administrative or clerical tasks means the receipt, collection,
and distribution of information common for the processing or
underwriting of a loan in the residential mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan.
(c) Nationwide Mortgage Licensing System and Registry or Registry
means the system developed and maintained by the Conference of State
Bank Supervisors and the American Association of Residential Mortgage
Regulators for the State licensing and registration of State-licensed
mortgage loan originators and the registration of mortgage loan
originators pursuant to 12 U.S.C. 5107.
(d) Registered mortgage loan originator or registrant means any
individual who:
(1) Meets the definition of mortgage loan originator and is an
employee of an insured State nonmember bank; and
(2) Is registered pursuant to this subpart with, and maintains a
unique identifier through, the Registry.
(e) Residential mortgage loan means 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 (as defined in section 103(v) of the Truth in Lending Act, 15
U.S.C. 1602(v)) or residential real estate upon which is constructed or
intended to be constructed a dwelling, and includes refinancings,
reverse mortgages, home equity lines of credit and other first and
additional lien loans that meet the qualifications listed in this
definition.
(f) Unique identifier means a number or other identifier that:
(1) Permanently identifies a registered mortgage loan originator;
(2) Is assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry, the Federal banking agencies, and the
Farm Credit Administration to facilitate:
(i) Electronic tracking of mortgage loan originators; and
(ii) Uniform identification of, and public access to, the
employment history of and the publicly adjudicated disciplinary and
enforcement actions against mortgage loan originators; and
(3) Must not be used for purposes other than those set forth under
the S.A.F.E. Act.
Sec. 365.103 Registration of mortgage loan originators.
(a) Registration requirement--(1) Employee registration. Each
employee of an insured State nonmember bank who acts as a mortgage loan
originator must register with the Registry, obtain a unique identifier,
and maintain this registration in accordance with the requirements of
this subpart. Any such employee who is not in compliance with the
registration and unique identifier requirements set forth in this
subpart is in violation of the S.A.F.E. Act and this subpart.
(2) Insured State nonmember bank requirement--(i) In general. An
insured State nonmember bank that employs one or more individuals who
act as a residential mortgage loan originator must require each such
employee to register with the Registry, maintain this registration, and
obtain a unique identifier in accordance with the requirements of this
subpart.
(ii) Prohibition. An insured State nonmember bank must not permit
an employee of the bank who is subject to the registration requirements
of this subpart to act as a mortgage loan originator for the bank
unless such employee is registered with the Registry pursuant to this
subpart.
(3) Implementation period for initial registration. An employee of
an insured State nonmember bank who is a
[[Page 44694]]
mortgage loan originator must complete an initial registration with the
Registry pursuant to this subpart within 180 days from the date that
the FDIC provides in a public notice that the Registry is accepting
registrations.
(4) Employees previously registered or licensed through the
Registry--(i) In general. If an employee of an insured State nonmember
bank was registered or licensed through, and obtained a unique
identifier from, the Registry and has maintained this registration or
license before the employee becomes subject to this subpart at this
bank, then the registration requirements of the S.A.F.E. Act and this
subpart are deemed to be met, provided that:
(A) The employment information in paragraphs (d)(1)(i)(C) and
(d)(1)(ii) of this section is updated and the requirements of paragraph
(d)(2) of this section are met;
(B) New fingerprints of the employee are submitted to the Registry
for a background check, as required by paragraph (d)(1)(ix) of this
section, unless the employee has fingerprints on file with the Registry
that are less than 3 years old;
(C) The insured State nonmember bank information required in
paragraphs (e)(1)(i) (to the extent the bank has not previously met
these requirements) and (e)(2)(i) of this section is submitted to the
Registry; and
(D) The registration is maintained pursuant to paragraphs (b) and
(e)(1)(ii) of this section, as of the date that the employee becomes
subject to this subpart.
(ii) Rule for certain acquisitions, mergers, or reorganizations.
When registered or licensed mortgage loan originators become insured
State nonmember bank employees as a result of an acquisition, merger,
or reorganization, only the requirements of paragraphs (a)(4)(i)(A),
(C), and (D) of this section must be met, and these requirements must
be met within 60 days from the effective date of the acquisition,
merger, or reorganization.
(b) Maintaining registration. (1) A mortgage loan originator who is
registered with the Registry pursuant to paragraph (a) of this section
must:
(i) Except as provided in paragraph (b)(3) of this section, renew
the registration during the annual renewal period, confirming the
responses set forth in paragraphs (d)(1)(i) through (viii) of this
section remain accurate and complete, and updating this information, as
appropriate; and
(ii) Update the registration within 30 days of any of the following
events:
(A) A change in the name of the registrant;
(B) The registrant ceases to be an employee of the insured State
nonmember bank; or
(C) The information required under paragraphs (d)(1)(iii) through
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
(2) A registered mortgage loan originator must maintain his or her
registration, unless the individual is no longer engaged in the
activity of a mortgage loan originator.
(3) The annual registration renewal requirement set forth in
paragraph (b)(1) of this section does not apply to a registered
mortgage loan originator who has completed his or her registration with
the Registry pursuant to paragraph (a)(1) of this section less than 6
months prior to the end of the annual renewal period.
(c) Effective dates--(1) Registration. A registration pursuant to
paragraph (a)(1) of this section is effective on the date the Registry
transmits notification to the registrant that the registrant is
registered.
(2) Renewals or updates. A renewal or update pursuant to paragraph
(b) of this section is effective on the date the Registry transmits
notification to the registrant that the registration has been renewed
or updated.
(d) Required employee information--(1) In general. For purposes of
the registration required by this section, an insured State nonmember
bank must require each employee who is a mortgage loan originator to
submit to the Registry, or must submit on behalf of the employee, the
following categories of information to the extent this information is
collected by the Registry:
(i) Identifying information, including the employee's:
(A) Name and any other names used;
(B) Home address and contact information;
(C) Principal business location address and business contact
information;
(D) Social security number;
(E) Gender; and
(F) Date and place of birth;
(ii) Financial services-related employment history for the 10 years
prior to the date of registration or renewal, including the date the
employee became an employee of the bank;
(iii) Convictions of any criminal offense involving dishonesty,
breach of trust, or money laundering against the employee or
organizations controlled by the employee, or agreements to enter into a
pretrial diversion or similar program in connection with the
prosecution for such offense(s);
(iv) Civil judicial actions against the employee in connection with
financial services-related activities, dismissals with settlements, or
judicial findings that the employee violated financial services-related
statutes or regulations, except for actions dismissed without a
settlement agreement;
(v) Actions or orders by a State or Federal regulatory agency or
foreign financial regulatory authority that:
(A) Found the employee to have made a false statement or omission
or been dishonest, unfair or unethical; to have been involved in a
violation of a financial services-related regulation or statute; or to
have been a cause of a financial services-related business having its
authorization to do business denied, suspended, revoked, or restricted;
(B) Are entered against the employee in connection with a financial
services-related activity;
(C) Denied, suspended, or revoked the employee's registration or
license to engage in a financial services-related activity; disciplined
the employee or otherwise by order prevented the employee from
associating with a financial services-related business or restricted
the employee's activities; or
(D) Barred the employee from association with an entity or its
officers regulated by the agency or authority or from engaging in a
financial services-related business;
(vi) Final orders issued by a State or Federal regulatory agency or
foreign financial regulatory authority based on violations of any law
or regulation that prohibits fraudulent, manipulative, or deceptive
conduct;
(vii) Revocation or suspension of the employee's authorization to
act as an attorney, accountant, or State or Federal contractor;
(viii) Customer-initiated financial services-related arbitration or
civil action against the employee that required action, including
settlements, or which resulted in a judgment; and
(ix) Fingerprints of the employee, in digital form if practicable,
and any appropriate identifying information for submission to the
Federal Bureau of Investigation and any governmental agency or entity
authorized to receive such information in connection with a State and
national criminal history background check; however, fingerprints
provided to the Registry that are less than 3 years old may be used to
satisfy this requirement.
(2) Employee authorizations and attestation. An employee
registering as a mortgage loan originator or renewing or updating his
or her registration under this subpart, and not the employing
[[Page 44695]]
insured State nonmember bank or other employees of the insured State
nonmember bank, must:
(i) Authorize the Registry and the employing institution to obtain
information related to sanctions or findings in any administrative,
civil, or criminal action, to which the employee is a party, made by
any governmental jurisdiction;
(ii) Attest to the correctness of all information required by
paragraph (d) of this section, whether submitted by the employee or on
behalf of the employee by the employing bank; and
(iii) Authorize the Registry to make available to the public
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii)
through (viii) of this section.
(3) Submission of information. An insured State nonmember bank may
identify one or more employees of the bank who may submit the
information required by paragraph (d)(1) of this section to the
Registry on behalf of the bank's employees provided that this
individual, and any employee delegated such authority, does not act as
a mortgage loan originator, consistent with paragraph (e)(1)(i)(F) of
this section. In addition, an insured State nonmember bank may submit
to the Registry some or all of the information required by paragraphs
(d)(1) and (e)(2) of this section for multiple employees in bulk
through batch processing in a format to be specified by the Registry,
to the extent such batch processing is made available by the Registry.
(e) Required bank information. An insured State nonmember bank must
submit the following categories of information to the Registry:
(1) Bank record. (i) In connection with the registration of one or
more mortgage loan originators:
(A) Name, main office address, and business contact information;
(B) Internal Revenue Service Employer Tax Identification Number
(EIN);
(C) Research Statistics Supervision and Discount (RSSD) number, as
issued by the Board of Governors of the Federal Reserve System;
(D) Identification of its primary Federal regulator;
(E) Name(s) and contact information of the individual(s) with
authority to act as the bank's primary point of contact for the
Registry;
(F) Name(s) and contact information of the individual(s) with
authority to enter the information required by paragraphs (d)(1) and
(e) of this section to the Registry and who may delegate this authority
to other individuals. For the purpose of providing information required
by paragraph (e) of this section, this individual and their delegates
must not act as mortgage loan originators unless the bank has 10 or
fewer full time or equivalent employees and is not a subsidiary; and
(G) If a subsidiary of an insured State nonmember bank, indication
that it is a subsidiary and the RSSD number of the parent bank.
(ii) Attestation. The individual(s) identified in paragraphs
(e)(1)(i)(E) and (F) of this section must comply with Registry
protocols to verify their identity and must attest that they have the
authority to enter data on behalf of the insured State nonmember bank,
that the information provided to the Registry pursuant to this
paragraph (e) is correct, and that the insured State nonmember bank
will keep the information required by this paragraph (e) current and
will file accurate supplementary information on a timely basis.
(iii) An insured State nonmember bank must update the information
required by this paragraph (e) of this section within 30 days of the
date that this information becomes inaccurate.
(iv) An insured State nonmember bank must renew the information
required by paragraph (e) of this section on an annual basis.
(2) Employee information. In connection with the registration of
each employee who acts as a mortgage loan originator:
(i) After the information required by paragraph (d) of this section
has been submitted to the Registry, confirmation that it employs the
registrant; and
(ii) Within 30 days of the date the registrant ceases to be an
employee of the bank, notification that it no longer employs the
registrant and the date the registrant ceased being an employee.
Sec. 365.104 Policies and procedures.
An insured State nonmember bank that employs one or more mortgage
loan originators must adopt and follow written policies and procedures
designed to assure compliance with this subpart. These policies and
procedures must be appropriate to the nature, size, complexity, and
scope of the mortgage lending activities of the bank, and apply only to
those employees acting within the scope of their employment at the
bank. At a minimum, these policies and procedures must:
(a) Establish a process for identifying which employees of the bank
are required to be registered mortgage loan originators;
(b) Require that all employees of the insured State nonmember bank
who are mortgage loan originators be informed of the registration
requirements of the S.A.F.E. Act and this subpart and be instructed on
how to comply with such requirements and procedures;
(c) Establish procedures to comply with the unique identifier
requirements in Sec. 365.105;
(d) Establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparisons with its own records;
(e) Establish reasonable procedures and tracking systems for
monitoring compliance with registration and renewal requirements and
procedures;
(f) Provide for independent testing for compliance with this
subpart to be conducted at least annually by bank personnel or by an
outside party;
(g) Provide for appropriate action in the case of any employee who
fails to comply with the registration requirements of the S.A.F.E. Act,
this subpart, or the bank's related policies and procedures, including
prohibiting such employees from acting as mortgage loan originators or
other appropriate disciplinary actions;
(h) Establish a process for reviewing employee criminal history
background reports received pursuant to this subpart, taking
appropriate action consistent with applicable Federal law, including
section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) and
implementing regulations with respect to these reports, and maintaining
records of these reports and actions taken with respect to applicable
employees; and
(i) Establish procedures designed to ensure that any third party
with which the bank 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.
Sec. 365.105 Use of unique identifier.
(a) The insured State nonmember bank shall make the unique
identifier(s) of its registered mortgage loan originator(s) available
to consumers in a manner and method practicable to the institution.
(b) A registered mortgage loan originator shall provide his or her
unique identifier to a consumer:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's initial written communication with a
consumer, if any, whether on paper or electronically.
[[Page 44696]]
Appendix A to Subpart B of Part 365--Examples of Mortgage Loan
Originator Activities
This Appendix provides examples to aid in the understanding of
activities that would cause an employee of an insured State
nonmember bank to fall within or outside the definition of mortgage
loan originator. The examples in this Appendix are not all
inclusive. They illustrate only the issue described and do not
illustrate any other issues that may arise under this subpart. For
purposes of the examples below, the term ``loan'' refers to a
residential mortgage loan.
(a) Taking a loan application. The following examples illustrate
when an employee takes, or does not take, a loan application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the consumer qualifies for a loan, even if the
employee:
(i) Has received the consumer's information indirectly in order
to make an offer or negotiate a loan;
(ii) Is not responsible for verifying information;
(iii) Is inputting information into an online application or
other automated system on behalf of the consumer; or
(iv) Is not engaged in approval of the loan, including
determining whether the consumer qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a consumer to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
(iii) Assisting a consumer who is filling out an application by
clarifying what type of information is necessary for the application
or otherwise explaining the qualifications or criteria necessary to
obtain a loan product;
(iv) Describing the steps that a consumer would need to take to
provide information to be used to determine whether the consumer
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a consumer has received from a bank, collecting only basic
identifying information about the consumer and forwarding the
consumer to a mortgage loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the bank's
loss mitigation efforts when the borrower is reasonably likely to
default.
(b) Offering or negotiating terms of a loan. The following
examples are designed to illustrate when an employee offers or
negotiates terms of a loan, and conversely, what does not constitute
offering or negotiating terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a consumer for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the bank's loan approval mechanism
function for a specific loan product is communicated without
authority to negotiate the rate.
(ii) Responding to a consumer's request for a lower rate or
lower points on a pending loan application by presenting to the
consumer a revised loan offer, either verbally or in writing, that
includes a lower interest rate or lower points than the original
offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to consumer queries regarding qualification for a specific loan
product, such as explaining loan terminology (i.e., debt-to-income
ratio); lending policies (i.e., the loan-to-value ratio policy of
the insured State nonmember bank); or product-related services;
(ii) In response to a consumer's request, informing a consumer
of the loan rates that are publicly available, such as on the
insured State nonmember bank's Web site, for specific types of loan
products without communicating to the consumer whether
qualifications are met for that loan product;
(iii) Collecting information about a consumer in order to
provide the consumer with information on loan products for which the
consumer generally may qualify, without presenting a specific loan
offer to the consumer for acceptance, either verbally or in writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a consumer about those
arrangements, provided that communication with the consumer only
verifies loan terms already offered or negotiated;
(v) Providing a consumer with information unrelated to loan
terms, such as the best days of the month for scheduling loan
closings at the bank;
(vi) Making an underwriting decision about whether the consumer
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer,
including qualifications or criteria that would need to be met
without providing guidance specific to that consumer's
circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to the
Truth in Lending Act, has been sent to a consumer without providing
any details of that offer.
(c) Offering or negotiating a loan for compensation or gain. The
following examples illustrate when an employee does or does not
offer or negotiate terms of a loan ``for compensation or gain.''
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this Appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the insured
State nonmember bank.
Office of Thrift Supervision
12 CFR Chapter V
Authority and Issuance
0
For the reasons set forth in the preamble, chapter V of title 12 of the
Code of Federal Regulations is amended as follows:
PART 563--SAVINGS ASSOCIATIONS--OPERATIONS
0
1. The authority citation for part 563 is revised to read as follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1820, 1828, 1831o, 3806, 5101 et seq.; 31 U.S.C. 5318; 42
U.S.C. 4106.
0
3. Add Subpart D to part 563 to read as follows:
Subpart D--Registration of Residential Mortgage Loan Originators
Sec.
563.101 Authority, purpose, and scope.
563.102 Definitions.
563.103 Registration of mortgage loan originators.
563.104 Policies and procedures.
563.105 Use of unique identifier.
Appendix A to Subpart D of Part 563--Examples of Mortgage Loan
Originator Activities
Subpart D--Registration of Residential Mortgage Loan Originators
Sec. 563.101 Authority, purpose, and scope.
(a) Authority. This subpart is issued pursuant to the Secure and
Fair Enforcement for Mortgage Licensing Act of 2008, title V of the
Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-
289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.).
(b) Purpose. This subpart implements the S.A.F.E. Act's Federal
registration requirement for mortgage loan originators. The S.A.F.E.
Act provides that the objectives of this registration include
aggregating and improving the flow of information to and between
regulators; providing increased accountability and tracking of mortgage
loan originators; enhancing consumer protections; supporting anti-fraud
measures; and providing consumers with easily accessible information at
no charge regarding the employment history of, and publicly adjudicated
disciplinary and enforcement actions against, mortgage loan
originators.
[[Page 44697]]
(c) Scope--(1) In general. This subpart applies to savings
associations, their operating subsidiaries (collectively referred to in
this subpart as savings associations), and their employees who act as
mortgage loan originators.
(2) De minimis exception. (i) This subpart and the requirements of
12 U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any
employee of a savings association who has never been registered or
licensed through the Registry as a mortgage loan originator if during
the past 12 months the employee acted as a mortgage loan originator for
5 or fewer residential mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that
exceeds the exception limit in paragraph (c)(2)(i) of this section, a
savings association employee must register with the Registry pursuant
to this subpart.
(iii) Evasion. Savings associations are prohibited from engaging in
any act or practice to evade the limits of the de minimis exception set
forth in paragraph (c)(2)(i) of this section.
Sec. 563.102 Definitions.
For purposes of this subpart D, the following definitions apply:
(a) Annual renewal period means November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator \1\ means an individual who:
---------------------------------------------------------------------------
\1\ Appendix A of this subpart provides examples of activities
that would, and would not, cause an employee to fall within this
definition of mortgage loan originator.
---------------------------------------------------------------------------
(i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for
compensation or gain.
(2) The term mortgage loan originator does not include:
(i) An individual who performs purely administrative or clerical
tasks on behalf of an individual who is described in paragraph (b)(1)
of this section;
(ii) An individual who only performs real estate brokerage
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or
registered as a real estate broker in accordance with applicable State
law, unless the individual is compensated by a lender, a mortgage
broker, or other mortgage loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator, and meets
the definition of mortgage loan originator in paragraph (b)(1) of this
section; or
(iii) An individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined in 11 U.S.C.
101(53D).
(3) Administrative or clerical tasks means the receipt, collection,
and distribution of information common for the processing or
underwriting of a loan in the residential mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan.
(c) Nationwide Mortgage Licensing System and Registry or Registry
means the system developed and maintained by the Conference of State
Bank Supervisors and the American Association of Residential Mortgage
Regulators for the State licensing and registration of State-licensed
mortgage loan originators and the registration of mortgage loan
originators pursuant to 12 U.S.C. 5107.
(d) Registered mortgage loan originator or registrant means any
individual who:
(1) Meets the definition of mortgage loan originator and is an
employee of a savings association; and
(2) Is registered pursuant to this subpart with, and maintains a
unique identifier through, the Registry.
(e) Residential mortgage loan means 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 (as defined in section 103(v) of the Truth in Lending Act, 15
U.S.C. 1602(v)) or residential real estate upon which is constructed or
intended to be constructed a dwelling, and includes refinancings,
reverse mortgages, home equity lines of credit and other first and
additional lien loans that meet the qualifications listed in this
definition.
(f) Unique identifier means a number or other identifier that:
(1) Permanently identifies a registered mortgage loan originator;
(2) Is assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry, the Federal banking agencies, and the
Farm Credit Administration to facilitate:
(i) Electronic tracking of mortgage loan originators; and
(ii) Uniform identification of, and public access to, the
employment history of and the publicly adjudicated disciplinary and
enforcement actions against mortgage loan originators; and
(3) Must not be used for purposes other than those set forth under
the S.A.F.E. Act.
Sec. 563.103 Registration of mortgage loan originators.
(a) Registration requirement--(1) Employee registration. Each
employee of a savings association who acts as a mortgage loan
originator must register with the Registry, obtain a unique identifier,
and maintain this registration in accordance with the requirements of
this subpart. Any such employee who is not in compliance with the
registration and unique identifier requirements set forth in this
subpart is in violation of the S.A.F.E. Act and this subpart.
(2) Savings association requirement--(i) In general. A savings
association that employs one or more individuals who act as a
residential mortgage loan originator must require each such employee to
register with the Registry, maintain this registration, and obtain a
unique identifier in accordance with the requirements of this subpart.
(ii) Prohibition. A savings association must not permit an employee
of the association who is subject to the registration requirements of
this subpart to act as a mortgage loan originator for the association
unless such employee is registered with the Registry pursuant to this
subpart.
(3) Implementation period for initial registration. An employee of
a savings association who is a mortgage loan originator must complete
an initial registration with the Registry pursuant to this subpart
within 180 days from the date that the OTS provides in a public notice
that the Registry is accepting registrations.
(4) Employees previously registered or licensed through the
Registry--(i) In general. If an employee of a savings association was
registered or licensed through, and obtained a unique identifier from,
the Registry and has maintained this registration or license before the
employee of the association becomes subject to this subpart at this
association, then the registration requirements of the S.A.F.E. Act and
this subpart are deemed to be met, provided that:
(A) The employment information in paragraphs (d)(1)(i)(C) and
(d)(1)(ii) of this section is updated and the requirements of paragraph
(d)(2) of this section are met;
(B) New fingerprints of the employee are submitted to the Registry
for a background check, as required by paragraph (d)(1)(ix) of this
section, unless the employee has fingerprints on file with the Registry
that are less than 3 years old;
(C) The savings association information required in paragraphs
(e)(1)(i) (to the extent the association has not previously met these
requirements) and (e)(2)(i) of this section is submitted to the
Registry; and
(D) The registration is maintained pursuant to paragraphs (b) and
(e)(1)(ii)
[[Page 44698]]
of this section, as of the date that the employee becomes subject to
this subpart.
(ii) Rule for certain acquisitions, mergers, or reorganizations.
When registered or licensed mortgage loan originators become savings
association employees as a result of an acquisition, merger, or
reorganization, only the requirements of paragraphs (a)(4)(i)(A), (C),
and (D) of this section must be met, and these requirements must be met
within 60 days from the effective date of the acquisition, merger, or
reorganization.
(b) Maintaining registration. (1) A mortgage loan originator who is
registered with the Registry pursuant to paragraph (a) of this section
must:
(i) Except as provided in paragraph (b)(3) of this section, renew
the registration during the annual renewal period, confirming the
responses set forth in paragraphs (d)(1)(i) through (viii) of this
section remain accurate and complete, and updating this information, as
appropriate; and
(ii) Update the registration within 30 days of any of the following
events:
(A) A change in the name of the registrant;
(B) The registrant ceases to be an employee of the savings
association; or
(C) The information required under paragraphs (d)(1)(iii) through
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
(2) A registered mortgage loan originator must maintain his or her
registration, unless the individual is no longer engaged in the
activity of a mortgage loan originator.
(3) The annual registration renewal requirement set forth in
paragraph (b)(1) of this section does not apply to a registered
mortgage loan originator who has completed his or her registration with
the Registry pursuant to paragraph (a)(1) of this section less than 6
months prior to the end of the annual renewal period.
(c) Effective dates--(1) Registration. A registration pursuant to
paragraph (a)(1) of this section is effective on the date the Registry
transmits notification to the registrant that the registrant is
registered.
(2) Renewals or updates. A renewal or update pursuant to paragraph
(b) of this section is effective on the date the Registry transmits
notification to the registrant that the registration has been renewed
or updated.
(d) Required employee information--(1) In general. For purposes of
the registration required by this section, a savings association must
require each employee who is a mortgage loan originator to submit to
the Registry, or must submit on behalf of the employee, the following
categories of information, to the extent this information is collected
by the Registry:
(i) Identifying information, including the employee's:
(A) Name and any other names used;
(B) Home address and contact information;
(C) Principal business location address and business contact
information;
(D) Social security number;
(E) Gender; and
(F) Date and place of birth;
(ii) Financial services-related employment history for the 10 years
prior to the date of registration or renewal, including the date the
employee became an employee of the savings association;
(iii) Convictions of any criminal offense involving dishonesty,
breach of trust, or money laundering against the employee or
organizations controlled by the employee, or agreements to enter into a
pretrial diversion or similar program in connection with the
prosecution for such offense(s);
(iv) Civil judicial actions against the employee in connection with
financial services-related activities, dismissals with settlements, or
judicial findings that the employee violated financial services-related
statutes or regulations, except for actions dismissed without a
settlement agreement;
(v) Actions or orders by a State or Federal regulatory agency or
foreign financial regulatory authority that:
(A) Found the employee to have made a false statement or omission
or been dishonest, unfair or unethical; to have been involved in a
violation of a financial services-related regulation or statute; or to
have been a cause of a financial services-related business having its
authorization to do business denied, suspended, revoked, or restricted;
(B) Are entered against the employee in connection with a financial
services-related activity;
(C) Denied, suspended, or revoked the employee's registration or
license to engage in a financial services-related activity; disciplined
the employee or otherwise by order prevented the employee from
associating with a financial services-related business or restricted
the employee's activities; or
(D) Barred the employee from association with an entity or its
officers regulated by the agency or authority or from engaging in a
financial services-related business;
(vi) Final orders issued by a State or Federal regulatory agency or
foreign financial regulatory authority based on violations of any law
or regulation that prohibits fraudulent, manipulative, or deceptive
conduct;
(vii) Revocation or suspension of the employee's authorization to
act as an attorney, accountant, or State or Federal contractor;
(viii) Customer-initiated financial services-related arbitration or
civil action against the employee that required action, including
settlements, or which resulted in a judgment; and
(ix) Fingerprints of the employee, in digital form if practicable,
and any appropriate identifying information for submission to the
Federal Bureau of Investigation and any governmental agency or entity
authorized to receive such information in connection with a State and
national criminal history background check; however, fingerprints
provided to the Registry that are less than 3 years old may be used to
satisfy this requirement.
(2) Employee authorizations and attestation. An employee
registering as a mortgage loan originator or renewing or updating his
or her registration under this subpart, and not the employing savings
association or other employees of the savings association, must:
(i) Authorize the Registry and the employing institution to obtain
information related to sanctions or findings in any administrative,
civil, or criminal action, to which the employee is a party, made by
any governmental jurisdiction;
(ii) Attest to the correctness of all information required by
paragraph (d) of this section, whether submitted by the employee or on
behalf of the employee by the employing savings association; and
(iii) Authorize the Registry to make available to the public
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii)
through (viii) of this section.
(3) Submission of information. A savings association may identify
one or more employees of the association who may submit the information
required by paragraph (d)(1) of this section to the Registry on behalf
of the association's employees provided that this individual, and any
employee delegated such authority, does not act as a mortgage loan
originator, consistent with paragraph (e)(1)(i)(F) of this section. In
addition, a savings association may submit to the Registry some or all
of the information required by paragraphs (d)(1) and (e)(2) of this
section for multiple employees in bulk through batch processing in a
format to be specified by the Registry, to the extent such batch
processing is made available by the Registry.
[[Page 44699]]
(e) Required savings association information. A savings association
must submit the following categories of information to the Registry:
(1) Savings association record. (i) In connection with the
registration of one or more mortgage loan originators:
(A) Name, main office address, and business contact information;
(B) Internal Revenue Service Employer Tax Identification Number
(EIN);
(C) Research Statistics Supervision and Discount (RSSD) number, as
issued by the Board of Governors of the Federal Reserve System;
(D) Identification of its primary Federal regulator;
(E) Name(s) and contact information of the individual(s) with
authority to act as the savings association's primary point of contact
for the Registry;
(F) Name(s) and contact information of the individual(s) with
authority to enter the information required by paragraphs (d)(1) and
(e) of this section to the Registry and who may delegate this authority
to other individuals. For the purpose of providing information required
by paragraph (e) of this section, this individual and their delegates
must not act as mortgage loan originators unless the savings
association has 10 or fewer full time or equivalent employees and is
not a subsidiary; and
(G) If a subsidiary of a savings association, indication that it is
a subsidiary and the RSSD number of the parent association.
(ii) Attestation. The individual(s) identified in paragraphs
(e)(1)(i)(E) and (F) of this section must comply with Registry
protocols to verify their identity and must attest that they have the
authority to enter data on behalf of the savings association, that the
information provided to the Registry pursuant to this paragraph (e) is
correct, and that the savings association will keep the information
required by this paragraph (e) current and will file accurate
supplementary information on a timely basis.
(iii) A savings association must update the information required by
this paragraph (e) of this section within 30 days of the date that this
information becomes inaccurate.
(iv) A savings association must renew the information required by
paragraph (e) of this section on an annual basis.
(2) Employee information. In connection with the registration of
each employee who acts as a mortgage loan originator:
(i) After the information required by paragraph (d) of this section
has been submitted to the Registry, confirmation that it employs the
registrant; and
(ii) Within 30 days of the date the registrant ceases to be an
employee of the savings association, notification that it no longer
employs the registrant and the date the registrant ceased being an
employee.
Sec. 563.104 Policies and procedures.
A savings association that employs one or more mortgage loan
originators must adopt and follow written policies and procedures
designed to assure compliance with this subpart. These policies and
procedures must be appropriate to the nature, size, complexity, and
scope of the mortgage lending activities of the savings association,
and apply only to those employees acting within the scope of their
employment at the association. At a minimum, these policies and
procedures must:
(a) Establish a process for identifying which employees of the
savings association are required to be registered mortgage loan
originators;
(b) Require that all employees of the savings association who are
mortgage loan originators be informed of the registration requirements
of the S.A.F.E. Act and this subpart and be instructed on how to comply
with such requirements and procedures;
(c) Establish procedures to comply with the unique identifier
requirements in Sec. 563.105;
(d) Establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparisons with its own records;
(e) Establish reasonable procedures and tracking systems for
monitoring compliance with registration and renewal requirements and
procedures;
(f) Provide for independent testing for compliance with this
subpart to be conducted at least annually by savings association
personnel or by an outside party;
(g) Provide for appropriate action in the case of any employee who
fails to comply with the registration requirements of the S.A.F.E. Act,
this subpart, or the savings association's related policies and
procedures, including prohibiting such employees from acting as
mortgage loan originators or other appropriate disciplinary actions;
(h) Establish a process for reviewing employee criminal history
background reports received pursuant to this subpart, taking
appropriate action consistent with applicable Federal law, including
section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) and
implementing regulations with respect to these reports, and maintaining
records of these reports and actions taken with respect to applicable
employees; and
(i) Establish procedures designed to ensure that any third party
with which the savings association 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.
Sec. 563.105 Use of unique identifier.
(a) The savings association shall make the unique identifier(s) of
its registered mortgage loan originator(s) available to consumers in a
manner and method practicable to the institution.
(b) A registered mortgage loan originator shall provide his or her
unique identifier to a consumer:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's initial written communication with a
consumer, if any, whether on paper or electronically.
Appendix A to Subpart D of Part 563--Examples of Mortgage Loan
Originator Activities
This Appendix provides examples to aid in the understanding of
activities that would cause an employee of a savings association to
fall within or outside the definition of mortgage loan originator.
The examples in this Appendix are not all inclusive. They illustrate
only the issue described and do not illustrate any other issues that
may arise under this subpart. For purposes of the examples below,
the term ``loan'' refers to a residential mortgage loan.
(a) Taking a loan application. The following examples illustrate
when an employee takes, or does not take, a loan application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the consumer qualifies for a loan, even if the
employee:
(i) Has received the consumer's information indirectly in order
to make an offer or negotiate a loan;
(ii) Is not responsible for verifying information;
(iii) Is inputting information into an online application or
other automated system on behalf of the consumer; or
(iv) Is not engaged in approval of the loan, including
determining whether the consumer qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a consumer to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
[[Page 44700]]
(iii) Assisting a consumer who is filling out an application by
clarifying what type of information is necessary for the application
or otherwise explaining the qualifications or criteria necessary to
obtain a loan product;
(iv) Describing the steps that a consumer would need to take to
provide information to be used to determine whether the consumer
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a consumer has received from a savings association, collecting
only basic identifying information about the consumer and forwarding
the consumer to a mortgage loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the savings
association's loss mitigation efforts when the borrower is
reasonably likely to default.
(b) Offering or negotiating terms of a loan. The following
examples are designed to illustrate when an employee offers or
negotiates terms of a loan, and conversely, what does not constitute
offering or negotiating terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a consumer for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the savings association's loan
approval mechanism function for a specific loan product is
communicated without authority to negotiate the rate.
(ii) Responding to a consumer's request for a lower rate or
lower points on a pending loan application by presenting to the
consumer a revised loan offer, either verbally or in writing, that
includes a lower interest rate or lower points than the original
offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to consumer queries regarding qualification for a specific loan
product, such as explaining loan terminology (i.e., debt-to-income
ratio); lending policies (i.e., the loan-to-value ratio policy of
the savings association); or product-related services;
(ii) In response to a consumer's request, informing a consumer
of the loan rates that are publicly available, such as on the
savings association's Web site, for specific types of loan products
without communicating to the consumer whether qualifications are met
for that loan product;
(iii) Collecting information about a consumer in order to
provide the consumer with information on loan products for which the
consumer generally may qualify, without presenting a specific loan
offer to the consumer for acceptance, either verbally or in writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a consumer about those
arrangements, provided that communication with the consumer only
verifies loan terms already offered or negotiated;
(v) Providing a consumer with information unrelated to loan
terms, such as the best days of the month for scheduling loan
closings at the savings association;
(vi) Making an underwriting decision about whether the consumer
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer,
including qualifications or criteria that would need to be met
without providing guidance specific to that consumer's
circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to the
Truth in Lending Act, has been sent to a consumer without providing
any details of that offer.
(c) Offering or negotiating a loan for compensation or gain. The
following examples illustrate when an employee does or does not
offer or negotiate terms of a loan ``for compensation or gain.''
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this Appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the savings
association.
Farm Credit Administration
12 CFR Chapter VI
Authority and Issuance
0
For the reasons set forth in the preamble, chapter VI of title 12 of
the Code of Federal Regulations is amended by adding a new part 610 to
read as follows:
PART 610--REGISTRATION OF MORTGAGE LOAN ORIGINATORS
Sec.
610.101 Authority, purpose, and scope.
610.102 Definitions.
610.103 Registration of mortgage loan originators.
610.104 Policies and procedures.
610.105 Use of unique identifier.
Appendix A to Part 610--Examples of Mortgage Loan Originator
Activities
Authority: Secs. 1.5, 1.7, 1.9, 1.10, 1.11, 1.13, 2.2, 2.4,
2.12, 5.9, 5.17, 7.2, 7.6, 7.8 of the Farm Credit Act (12 U.S.C.
2013, 2015, 2017, 2018, 2019, 2021, 2073, 2075, 2093, 2243, 2252,
2279a-2, 2279b, 2279c-10); and secs. 1501 et seq. of Pub. L. 110-
289, 122 Stat. 2654.
Sec. 610.101 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008, title V of the Housing
and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122
Stat. 2654, 12 U.S.C. 5101 et seq.).
(b) Purpose. This part implements the S.A.F.E. Act's Federal
registration requirement for mortgage loan originators. The S.A.F.E.
Act provides that the objectives of this registration include
aggregating and improving the flow of information to and between
regulators; providing increased accountability and tracking of mortgage
loan originators; enhancing consumer protections; supporting anti-fraud
measures; and providing consumers with easily accessible information at
no charge regarding the employment history of, and publicly adjudicated
disciplinary and enforcement actions against, mortgage loan
originators.
(c) Scope--(1) In general. This part applies to any Farm Credit
System lending institution that actually originates residential
mortgage loans pursuant to its authority under sections 1.9(3), 1.11,
or 2.4(a) and (b) of the Farm Credit Act of 1971, as amended, and their
employees who act as mortgage loan originators.
(2) De minimis exception.
(i) This part and the requirements of 12 U.S.C. 5103(a)(1)(A) and
(2) of the S.A.F.E. Act do not apply to any employee of a Farm Credit
System institution who has never been registered or licensed through
the Registry as a mortgage loan originator if during the past 12 months
the employee acted as a mortgage loan originator for 5 or fewer
residential mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that
exceeds the exception limit in paragraph (c)(2)(i) of this section, a
Farm Credit System institution employee must register with the Registry
pursuant to this part.
(iii) Evasion. Farm Credit System institutions are prohibited from
engaging in any act or practice to evade the limits of the de minimis
exception set forth in paragraph (c)(2)(i) of this section.
Sec. 610.102 Definitions.
For purposes of this part, the following definitions apply:
(a) Annual renewal period means November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator \1\ means an individual who:
---------------------------------------------------------------------------
\1\ Appendix A of this part provides examples of activities that
would, and would not, cause an employee to fall within this
definition of mortgage loan originator.
---------------------------------------------------------------------------
(i) Takes a residential mortgage loan application; and
[[Page 44701]]
(ii) Offers or negotiates terms of a residential mortgage loan for
compensation or gain.
(2) The term mortgage loan originator does not include:
(i) An individual who performs purely administrative or clerical
tasks on behalf of an individual who is described in paragraph (b)(1)
of this section;
(ii) An individual who only performs real estate brokerage
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or
registered as a real estate broker in accordance with applicable State
law, unless the individual is compensated by a lender, a mortgage
broker, or other mortgage loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator, and meets
the definition of mortgage loan originator in paragraph (b)(1) of this
section; or
(iii) An individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined in 11 U.S.C.
101(53D).
(3) Administrative or clerical tasks means the receipt, collection,
and distribution of information common for the processing or
underwriting of a loan in the residential mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan.
(c) Nationwide Mortgage Licensing System and Registry or Registry
means the system developed and maintained by the Conference of State
Bank Supervisors and the American Association of Residential Mortgage
Regulators for the State licensing and registration of State-licensed
mortgage loan originators and the registration of mortgage loan
originators pursuant to 12 U.S.C. 5107.
(d) Registered mortgage loan originator or registrant means any
individual who:
(1) Meets the definition of mortgage loan originator and is an
employee of a Farm Credit System institution; and
(2) Is registered pursuant to this part with, and maintains a
unique identifier through, the Registry.
(e) Residential mortgage loan means 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 (as defined in section 103(v) of the Truth in Lending Act, 15
U.S.C. 1602(v)) or residential real estate upon which is constructed or
intended to be constructed a dwelling, and includes refinancings,
reverse mortgages, home equity lines of credit and other first and
additional lien loans that meet the qualifications listed in this
definition. This definition does not amend or supersede Sec.
613.3030(c) of this chapter.
(f) Unique identifier means a number or other identifier that:
(1) Permanently identifies a registered mortgage loan originator;
(2) Is assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry, the Federal banking agencies, and the
Farm Credit Administration to facilitate:
(i) Electronic tracking of mortgage loan originators; and
(ii) Uniform identification of, and public access to, the
employment history of and the publicly adjudicated disciplinary and
enforcement actions against mortgage loan originators; and
(3) Must not be used for purposes other than those set forth under
the S.A.F.E. Act.
Sec. 610.103 Registration of mortgage loan originators.
(a) Registration requirement--(1) Employee registration. Each
employee of a Farm Credit System institution who acts as a mortgage
loan originator must register with the Registry, obtain a unique
identifier, and maintain this registration in accordance with the
requirements of this part. Any such employee who is not in compliance
with the registration and unique identifier requirements set forth in
this part is in violation of the S.A.F.E. Act and this part.
(2) Farm Credit System institution requirement--(i) In general. A
Farm Credit System institution that employs one or more individuals who
act as a residential mortgage loan originator must require each such
employee to register with the Registry, maintain this registration, and
obtain a unique identifier in accordance with the requirements of this
part.
(ii) Prohibition. A Farm Credit System institution must not permit
an employee who is subject to the registration requirements of this
part to act as a mortgage loan originator for the Farm Credit System
institution unless such employee is registered with the Registry
pursuant to this part.
(3) Implementation period for initial registration. An employee of
a Farm Credit System institution who is a mortgage loan originator must
complete an initial registration with the Registry pursuant to this
part within 180 days from the date that the Farm Credit Administration
provides in a public notice that the Registry is accepting
registrations.
(4) Employees previously registered or licensed through the
Registry--(i) In general. If an employee of a Farm Credit System
institution was registered or licensed through, and obtained a unique
identifier from, the Registry and has maintained this registration or
license before the employee becomes subject to this part at this Farm
Credit System institution, then the registration requirements of the
S.A.F.E. Act and this part are deemed to be met, provided that:
(A) The employment information in paragraphs (d)(1)(i)(C) and
(d)(1)(ii) of this section is updated and the requirements of paragraph
(d)(2) of this section are met;
(B) New fingerprints of the employee are submitted to the Registry
for a background check, as required by paragraph (d)(1)(ix) of this
section, unless the employee has fingerprints on file with the Registry
that are less than 3 years old;
(C) The Farm Credit System institution information required in
paragraphs (e)(1)(i) (to the extent the Farm Credit System institution
has not previously met these requirements) and (e)(2)(i) of this
section is submitted to the Registry; and
(D) The registration is maintained pursuant to paragraphs (b) and
(e)(1)(ii) of this section, as of the date that the employee becomes
subject to this part.
(ii) Rule for certain acquisitions, mergers, or reorganizations.
When registered or licensed mortgage loan originators become employees
of another Farm Credit System institution as a result of a
consolidation, merger, or reorganization, only the requirements of
paragraphs (a)(4)(i)(A), (C), and (D) of this section must be met, and
these requirements must be met within 60 days from the effective date
of the consolidation, merger, or reorganization.
(b) Maintaining registration.
(1) A mortgage loan originator who is registered with the Registry
pursuant to paragraph (a) of this section must:
(i) Except as provided in paragraph (b)(3) of this section, renew
the registration during the annual renewal period, confirming the
responses set forth in paragraphs (d)(1)(i) through (viii) of this
section remain accurate and complete, and updating this information, as
appropriate; and
(ii) Update the registration within 30 days of any of the following
events:
(A) A change in the name of the registrant;
(B) The registrant ceases to be an employee of the Farm Credit
System institution; or
(C) The information required under paragraphs (d)(1)(iii) through
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
[[Page 44702]]
(2) A registered mortgage loan originator must maintain his or her
registration, unless the individual is no longer engaged in the
activity of a mortgage loan originator.
(3) The annual registration renewal requirement set forth in
paragraph (b)(1) of this section does not apply to a registered
mortgage loan originator who has completed his or her registration with
the Registry pursuant to paragraph (a)(1) of this section less than 6
months prior to the end of the annual renewal period.
(c) Effective dates--(1) Registration. A registration pursuant to
paragraph (a)(1) of this section is effective on the date the Registry
transmits notification to the registrant that the registrant is
registered.
(2) Renewals or updates. A renewal or update pursuant to paragraph
(b) of this section is effective on the date the Registry transmits
notification to the registrant that the registration has been renewed
or updated.
(d) Required employee information--(1) In general. For purposes of
the registration required by this section, a Farm Credit System
institution must require each employee who is a mortgage loan
originator to submit to the Registry, or must submit on behalf of the
employee, the following categories of information, to the extent this
information is collected by the Registry:
(i) Identifying information, including the employee's:
(A) Name and any other names used;
(B) Home address and contact information;
(C) Principal business location address and business contact
information;
(D) Social security number;
(E) Gender; and
(F) Date and place of birth;
(ii) Financial services-related employment history for the 10 years
prior to the date of registration or renewal, including the date the
employee became an employee of the Farm Credit System institution;
(iii) Convictions of any criminal offense involving dishonesty,
breach of trust, or money laundering against the employee or
organizations controlled by the employee, or agreements to enter into a
pretrial diversion or similar program in connection with the
prosecution for such offense(s);
(iv) Civil judicial actions against the employee in connection with
financial services-related activities, dismissals with settlements, or
judicial findings that the employee violated financial services-related
statutes or regulations, except for actions dismissed without a
settlement agreement;
(v) Actions or orders by a State or Federal regulatory agency or
foreign financial regulatory authority that:
(A) Found the employee to have made a false statement or omission
or been dishonest, unfair or unethical; to have been involved in a
violation of a financial services-related regulation or statute; or to
have been a cause of a financial services-related business having its
authorization to do business denied, suspended, revoked, or restricted;
(B) Are entered against the employee in connection with a financial
services-related activity;
(C) Denied, suspended, or revoked the employee's registration or
license to engage in a financial services-related activity; disciplined
the employee or otherwise by order prevented the employee from
associating with a financial services-related business or restricted
the employee's activities; or
(D) Barred the employee from association with an entity or its
officers regulated by the agency or authority or from engaging in a
financial services-related business;
(vi) Final orders issued by a State or Federal regulatory agency or
foreign financial regulatory authority based on violations of any law
or regulation that prohibits fraudulent, manipulative, or deceptive
conduct;
(vii) Revocation or suspension of the employee's authorization to
act as an attorney, accountant, or State or Federal contractor;
(viii) Customer-initiated financial services-related arbitration or
civil action against the employee that required action, including
settlements, or which resulted in a judgment; and
(ix) Fingerprints of the employee, in digital form if practicable,
and any appropriate identifying information for submission to the
Federal Bureau of Investigation and any governmental agency or entity
authorized to receive such information in connection with a State and
national criminal history background check; however, fingerprints
provided to the Registry that are less than 3 years old may be used to
satisfy this requirement.
(2) Employee authorizations and attestation. An employee
registering as a mortgage loan originator or renewing or updating his
or her registration under this part, and not the employing Farm Credit
System institution or other employees of the Farm Credit System
institution, must:
(i) Authorize the Registry and the employing institution to obtain
information related to sanctions or findings in any administrative,
civil, or criminal action, to which the employee is a party, made by
any governmental jurisdiction;
(ii) Attest to the correctness of all information required by
paragraph (d) of this section, whether submitted by the employee or on
behalf of the employee by the employing Farm Credit System institution;
and
(iii) Authorize the Registry to make available to the public
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii)
through (viii) of this section.
(3) Submission of information. A Farm Credit System institution may
identify one or more employees of the Farm Credit System institution
who may submit the information required by paragraph (d)(1) of this
section to the Registry on behalf of the Farm Credit System
institution's employees provided that this individual, and any employee
delegated such authority, does not act as a mortgage loan originator,
consistent with paragraph (e)(1)(i)(F) of this section. In addition, a
Farm Credit System institution may submit to the Registry some or all
of the information required by paragraphs (d)(1) and (e)(2) of this
section for multiple employees in bulk through batch processing in a
format to be specified by the Registry, to the extent such batch
processing is made available by the Registry.
(e) Required Farm Credit System institution information. A Farm
Credit System institution must submit the following categories of
information to the Registry:
(1) Farm Credit System institution record.
(i) In connection with the registration of one or more mortgage
loan originators:
(A) Name, main office address, and business contact information;
(B) Internal Revenue Service Employer Tax Identification Number
(EIN);
(C) Research Statistics Supervision and Discount (RSSD) number, as
issued by the Board of Governors of the Federal Reserve System;
(D) Identification of its primary Federal regulator;
(E) Name(s) and contact information of the individual(s) with
authority to act as the Farm Credit System institution's primary point
of contact for the Registry;
(F) Name(s) and contact information of the individual(s) with
authority to enter the information required by paragraphs (d)(1) and
(e) of this section to the Registry and who may delegate this authority
to other individuals. For
[[Page 44703]]
the purpose of providing information required by paragraph (e) of this
section, this individual and their delegates must not act as mortgage
loan originators unless the Farm Credit System institution has 10 or
fewer full time or equivalent employees and is not a subsidiary; and
(G) If an operating subsidiary of an agricultural credit
association, indication that it is a subsidiary and the RSSD number of
the parent agricultural credit association.
(ii) Attestation. The individual(s) identified in paragraphs
(e)(1)(i)(E) and (F) of this section must comply with Registry
protocols to verify their identity and must attest that they have the
authority to enter data on behalf of the Farm Credit System
institution, that the information provided to the Registry pursuant to
this paragraph (e) is correct, and that the Farm Credit System
institution will keep the information required by this paragraph (e)
current and will file accurate supplementary information on a timely
basis.
(iii) A Farm Credit System institution must update the information
required by this paragraph (e) of this section within 30 days of the
date that this information becomes inaccurate.
(iv) A Farm Credit System institution must renew the information
required by paragraph (e) of this section on an annual basis.
(2) Employee information. In connection with the registration of
each employee who acts as a mortgage loan originator:
(i) After the information required by paragraph (d) of this section
has been submitted to the Registry, confirmation that it employs the
registrant; and
(ii) Within 30 days of the date the registrant ceases to be an
employee of the Farm Credit System institution, notification that it no
longer employs the registrant and the date the registrant ceased being
an employee.
Sec. 610.104 Policies and procedures.
A Farm Credit System institution that employs one or more mortgage
loan originators must adopt and follow written policies and procedures
designed to assure compliance with this part. These policies and
procedures must be appropriate to the nature, size, complexity, and
scope of the mortgage lending activities of the Farm Credit System
institution, and apply only to those employees acting within the scope
of their employment at the Farm Credit System institution. At a
minimum, these policies and procedures must:
(a) Establish a process for identifying which employees of the Farm
Credit System institution are required to be registered mortgage loan
originators;
(b) Require that all employees of the Farm Credit System
institution who are mortgage loan originators be informed of the
registration requirements of the S.A.F.E. Act and this part and be
instructed on how to comply with such requirements and procedures;
(c) Establish procedures to comply with the unique identifier
requirements in Sec. 610.105;
(d) Establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparisons with its own records;
(e) Establish reasonable procedures and tracking systems for
monitoring compliance with registration and renewal requirements and
procedures;
(f) Provide for independent testing for compliance with this part
to be conducted at least annually by Farm Credit System institution
personnel or by an outside party;
(g) Provide for appropriate action in the case of any employee who
fails to comply with the registration requirements of the S.A.F.E. Act,
this part, or the Farm Credit System institution's related policies and
procedures, including prohibiting such employees from acting as
mortgage loan originators or other appropriate disciplinary actions;
(h) Establish a process for reviewing employee criminal history
background reports received pursuant to this part, taking appropriate
action consistent with applicable Federal law, including section
5.65(d) of the Farm Credit Act of 1971, as amended, 12 U.S.C. 2277a-
14(d) and implementing regulations with respect to these reports, and
maintaining records of these reports and actions taken with respect to
applicable employees; and
(i) Establish procedures designed to ensure that any third party
with which the Farm Credit System institution 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.
Sec. 610.105 Use of unique identifier.
(a) The Farm Credit System institution shall make the unique
identifier(s) of its registered mortgage loan originator(s) available
to consumers in a manner and method practicable to the institution.
(b) A registered mortgage loan originator shall provide his or her
unique identifier to a consumer:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's initial written communication with a
consumer, if any, whether on paper or electronically.
Appendix A to Part 610--Examples of Mortgage Loan Originator Activities
This Appendix provides examples to aid in the understanding of
activities that would cause an employee of a Farm Credit System
institution to fall within or outside the definition of mortgage
loan originator. The examples in this Appendix are not all
inclusive. They illustrate only the issue described and do not
illustrate any other issues that may arise under this part. For
purposes of the examples below, the term ``loan'' refers to a
residential mortgage loan.
(a) Taking a loan application. The following examples illustrate
when an employee takes, or does not take, a loan application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the consumer qualifies for a loan, even if the
employee:
(i) Has received the consumer's information indirectly in order
to make an offer or negotiate a loan;
(ii) Is not responsible for verifying information;
(iii) Is inputting information into an online application or
other automated system on behalf of the consumer; or
(iv) Is not engaged in approval of the loan, including
determining whether the consumer qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a consumer to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
(iii) Assisting a consumer who is filling out an application by
clarifying what type of information is necessary for the application
or otherwise explaining the qualifications or criteria necessary to
obtain a loan product;
(iv) Describing the steps that a consumer would need to take to
provide information to be used to determine whether the consumer
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a consumer has received from a Farm Credit System institution,
collecting only basic identifying information about the consumer and
forwarding the consumer to a mortgage loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the Farm
Credit System institution's loss mitigation efforts when the
borrower is reasonably likely to default.
(b) Offering or negotiating terms of a loan. The following
examples are designed to
[[Page 44704]]
illustrate when an employee offers or negotiates terms of a loan,
and conversely, what does not constitute offering or negotiating
terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a consumer for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the Farm Credit System
institution's loan approval mechanism function for a specific loan
product is communicated without authority to negotiate the rate.
(ii) Responding to a consumer's request for a lower rate or
lower points on a pending loan application by presenting to the
consumer a revised loan offer, either verbally or in writing, that
includes a lower interest rate or lower points than the original
offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to consumer queries regarding qualification for a specific loan
product, such as explaining loan terminology (i.e., debt-to-income
ratio); lending policies (i.e., the loan-to-value ratio policy of
the Farm Credit System institution); or product-related services;
(ii) In response to a consumer's request, informing a consumer
of the loan rates that are publicly available, such as on the Farm
Credit System institution's Web site, for specific types of loan
products without communicating to the consumer whether
qualifications are met for that loan product;
(iii) Collecting information about a consumer in order to
provide the consumer with information on loan products for which the
consumer generally may qualify, without presenting a specific loan
offer to the consumer for acceptance, either verbally or in writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a consumer about those
arrangements, provided that communication with the consumer only
verifies loan terms already offered or negotiated;
(v) Providing a consumer with information unrelated to loan
terms, such as the best days of the month for scheduling loan
closings at the Farm Credit System institution;
(vi) Making an underwriting decision about whether the consumer
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
consumer would need to take in order to obtain a loan offer,
including qualifications or criteria that would need to be met
without providing guidance specific to that consumer's
circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to the
Truth in Lending Act, has been sent to a consumer without providing
any details of that offer.
(c) Offering or negotiating a loan for compensation or gain. The
following examples illustrate when an employee does or does not
offer or negotiate terms of a loan ``for compensation or gain.''
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this Appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the Farm
Credit System institution.
National Credit Union Administration
12 CFR Chapter VII
Authority and Issuance
0
For the reasons stated in the preamble, the National Credit Union
Administration amends chapter VII of title 12 of the Code of Federal
Regulations as follows:
PART 741--REQUIREMENTS FOR INSURANCE
0
1. The authority citation for part 741 continues to read as follows:
Authority: 12 U.S.C. 1757, 1766, 1781-1790, and 1790d.
0
2. Add a new Sec. 741.223 to subpart B to read as follows:
Sec. 741.223 Registration of residential mortgage loan originators.
Any credit union which is insured pursuant to Title II of the Act
must adhere to the requirements stated in part 761 of this chapter.
0
3. Add a new part 761 to subchapter A to read as follows:
PART 761--REGISTRATION OF RESIDENTIAL MORTGAGE LOAN ORIGINATORS
Sec.
761.101 Authority, purpose, and scope.
761.102 Definitions.
761.103 Registration of mortgage loan originators.
761.104 Policies and procedures.
761.105 Use of unique identifier.
Appendix A to Part 761--Examples of Mortgage Loan Originator
Activities.
Authority: 12 U.S.C. 1751 et seq. and 5101 et seq.
PART 761--REGISTRATION OF RESIDENTIAL MORTGAGE LOAN ORIGINATORS
Sec. 761.101 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008, title V of the Housing
and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122
Stat. 2654, 12 U.S.C. 5101 et seq.).
(b) Purpose. This part implements the S.A.F.E. Act's Federal
registration requirement for mortgage loan originators. The S.A.F.E.
Act provides that the objectives of this registration include
aggregating and improving the flow of information to and between
regulators; providing increased accountability and tracking of mortgage
loan originators; enhancing member protections; reducing fraud in the
residential mortgage loan origination process; and providing members
with easily accessible information at no charge regarding the
employment history of, and publicly adjudicated disciplinary and
enforcement actions against, mortgage loan originators.
(c) Scope--(1) In general. This part applies to any Federally
insured credit union and its employees, including volunteers, who act
as mortgage loan originators. This part also applies to non-Federally
insured credit unions and their employees, including volunteers, who
act as mortgage loan originators, subject to the conditions in
paragraph (c)(3) of this section.
(2) Exception. (i) This part and the requirements of 12 U.S.C.
5104(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any employee
of a credit union who has never been registered or licensed through the
Registry as a mortgage loan originator if during the past 12 months the
employee acted as a mortgage loan originator for 5 or fewer residential
mortgage loans.
(ii) Prior to engaging in mortgage loan origination activity that
exceeds the exception limit in paragraph (c)(2)(i) of this section, a
credit union employee must register with the Registry pursuant to this
part.
(iii) Evasion. Credit unions are prohibited from engaging in any
act or practice to evade the limits of the de minimis exception set
forth in paragraph (c)(2)(i) of this section.
(3) For non-Federally insured credit unions. Non-Federally insured
credit unions and their employees who are mortgage loan originators may
register under this rule only if:
(i) The appropriate State supervisory authorities where non-
Federally insured credit unions are located enter into a Memorandum of
Understanding (MOU) with the National Credit Union Administration on or
before the date NCUA provides in a public notice that the Registry is
accepting initial registrations.
(ii) The MOU may require non-Federally insured credit unions to pay
various fees related to oversight costs and registration costs for the
non-
[[Page 44705]]
Federally insured credit unions' mortgage loan originators.
(iii) Any Nationwide Mortgage Licensing System and Registry listing
of a non-Federally insured credit union and its employees must contain
a clear and conspicuous statement that the non-Federally insured credit
union is not insured by the National Credit Union Share Insurance Fund.
(iv) If any State supervisory authority where non-Federally insured
credit unions are located fails to enter into or maintain an agreement
with the National Credit Union Administration for this registration
process and oversight, the non-Federally insured credit unions and
their employees in that State cannot register or maintain registration
under the Federal system. They instead must use the appropriate State
licensing and registration system, or if the State does not have such a
system, the licensing and registration system established by the
Department of Housing and Urban Department (HUD) for mortgage loan
originators and their employees.
Sec. 761.102 Definitions.
For purposes of this part, the following definitions apply:
(a) Annual renewal period means November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator \1\ means an individual who:
---------------------------------------------------------------------------
\1\ Appendix A of this part provides examples of activities that
would, and would not, cause an employee to fall within the
definition of mortgage loan originator.
---------------------------------------------------------------------------
(i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for
compensation or gain.
(2) The term mortgage loan originator does not include:
(i) An individual who performs purely administrative or clerical
tasks on behalf of an individual who is described in paragraph (b)(1)
of this section;
(ii) An individual who only performs real estate brokerage
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or
registered as a real estate broker in accordance with applicable State
law, unless the individual is compensated by a lender, a mortgage
broker, or other mortgage loan originator or by any agent of such
lender, mortgage broker, or other mortgage loan originator, and meets
the definition of mortgage loan originator in paragraph (b)(1) of this
section; or
(iii) An individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined in 11 U.S.C.
101(53D).
(3) Administrative or clerical tasks means the receipt, collection,
and distribution of information common for the processing or
underwriting of a loan in the residential mortgage industry and
communication with a member to obtain information necessary for the
processing or underwriting of a residential mortgage loan.
(c) Nationwide Mortgage Licensing System and Registry or Registry
means the system developed and maintained by the Conference of State
Bank Supervisors and the American Association of Residential Mortgage
Regulators for the State licensing and registration of State-licensed
mortgage loan originators and the registration of mortgage loan
originators pursuant to 12 U.S.C. 5107.
(d) Registered mortgage loan originator or registrant means any
individual who:
(1) Meets the definition of mortgage loan originator and is an
employee of a credit union; and
(2) Is registered pursuant to this part with, and maintains a
unique identifier through, the Registry.
(e) Residential mortgage loan means 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 (as defined in section 103(v) of the Truth in Lending Act, 15
U.S.C. 1602(v)) or residential real estate upon which is constructed or
intended to be constructed a dwelling, and includes refinancings,
reverse mortgages, home equity lines of credit and other first and
additional lien loans that meet the qualifications listed in this
definition.
(f) Unique identifier means a number or other identifier that:
(1) Permanently identifies a registered mortgage loan originator;
(2) Is assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry, the Federal banking agencies, and the
Farm Credit Administration to facilitate:
(i) Electronic tracking of mortgage loan originators; and
(ii) Uniform identification of, and public access to, the
employment history of and the publicly adjudicated disciplinary and
enforcement actions against mortgage loan originators; and
(3) Must not be used for purposes other than those set forth under
the S.A.F.E. Act.
Sec. 761.103 Registration of mortgage loan originators.
(a) Registration requirement--(1) Employee registration. Each
employee of a credit union who acts as a mortgage loan originator must
register with the Registry, obtain a unique identifier, and maintain
this registration in accordance with the requirements of this part. Any
such employee who is not in compliance with the registration and unique
identifier requirements set forth in this part is in violation of the
S.A.F.E. Act and this part.
(2) Credit union requirement--(i) In general. A credit union that
employs one or more individuals who act as a residential mortgage loan
originator must require each employee who is a mortgage loan originator
to register with the Registry, maintain this registration, and obtain a
unique identifier in accordance with the requirements of this part.
(ii) Prohibition. A credit union must not permit an employee of the
credit union who is subject to the registration requirements of this
part to act as a mortgage loan originator for the credit union unless
such employee is registered with the Registry pursuant to this part.
(3) Implementation period for initial registration. An employee of
a credit union who is a mortgage loan originator must complete an
initial registration with the Registry pursuant to this part within 180
days from the date that the NCUA provides in a public notice that the
Registry is accepting registrations.
(4) Employees previously registered or licensed through the
Registry--(i) In general. If an employee of a credit union was
registered or licensed through, and obtained a unique identifier from,
the Registry and has maintained this registration or license before the
employee becomes subject to this part at this credit union, then the
registration requirements of the S.A.F.E. Act and this part are deemed
to be met, provided that:
(A) The employment information in paragraphs (d)(1)(i)(C) and
(d)(1)(ii) of this section is updated and the requirements of paragraph
(d)(2) of this section are met;
(B) New fingerprints of the employee are submitted to the Registry
for a background check, as required by paragraph (d)(1)(ix) of this
section, unless the employee has fingerprints on file with the Registry
that are less than 3 years old;
(C) The credit union information required in paragraphs (e)(1)(i)
(to the extent the credit union has not previously met these
requirements) and (e)(2)(i) of this section is submitted to the
Registry; and
(D) The registration is maintained pursuant to paragraphs (b) and
(e)(1)(ii) of this section, as of the date that the
[[Page 44706]]
employee is employed by the credit union.
(ii) Rule for certain acquisitions, mergers, or reorganizations.
When registered or licensed mortgage loan originators become credit
union employees as a result of an acquisition, merger, or
reorganization, the requirements of paragraphs (a)(4)(i)(A), (C), and
(D) of this section must be met within 60 days from the effective date
of the acquisition, merger, or reorganization.
(b) Maintaining registration. (1) A mortgage loan originator who is
registered with the Registry pursuant to paragraph (a) of this section
must:
(i) Except as provided in paragraph (b)(3) of this section, renew
the registration during the annual renewal period, confirming the
responses set forth in paragraphs (d)(1)(i) through (viii) of this
section remain accurate and complete, and updating this information, as
appropriate; and
(ii) Update the registration within 30 days of any of the following
events:
(A) A change in the name of the registrant;
(B) The registrant ceases to be an employee of the credit union; or
(C) The information required under paragraphs (d)(1)(iii) through
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
(2) A registered mortgage loan originator must maintain his or her
registration, unless the individual is no longer engaged in the
activity of a mortgage loan originator.
(3) The annual registration renewal requirement set forth in
paragraph (b)(1) of this section does not apply to a registered
mortgage loan originator who has completed his or her registration with
the Registry pursuant to paragraph (a)(1) of this section less than 6
months prior to the end of the annual renewal period.
(c) Effective dates--(1) Registration. A registration pursuant to
paragraph (a)(1) of this section is effective on the date the Registry
transmits notification to the registrant that the registrant is
registered.
(2) Renewals or updates. A renewal or update pursuant to paragraph
(b) of this section is effective on the date the Registry transmits
notification to the registrant that the registration has been renewed
or updated.
(d) Required employee information--(1) In general. For purposes of
the registration required by this section, a credit union must require
each employee who is a mortgage loan originator to submit to the
Registry, or must submit on behalf of the employee, the following
categories of information, to the extent this information is collected
by the Registry:
(i) Identifying information, including the employee's:
(A) Name and any other names used;
(B) Home address and contact information;
(C) Principal business location address and business contact
information;
(D) Social security number;
(E) Gender; and
(F) Date and place of birth;
(ii) Financial services-related employment history for the 10 years
prior to the date of registration or renewal, including the date the
employee became an employee of the credit union;
(iii) Convictions of any criminal offense involving dishonesty,
breach of trust, or money laundering against the employee or
organizations controlled by the employee, or agreements to enter into a
pretrial diversion or similar program in connection with the
prosecution for such offense(s);
(iv) Civil judicial actions against the employee in connection with
financial services-related activities, dismissals with settlements, or
judicial findings that the employee violated financial services-related
statutes or regulations, except for actions dismissed without a
settlement agreement;
(v) Actions or orders by a State or Federal regulatory agency or
foreign financial regulatory authority that:
(A) Found the employee to have made a false statement or omission
or been dishonest, unfair or unethical; to have been involved in a
violation of a financial services-related regulation or statute; or to
have been a cause of a financial services-related business having its
authorization to do business denied, suspended, revoked, or restricted;
(B) Are entered against the employee in connection with a financial
services-related activity;
(C) Denied, suspended, or revoked the employee's registration or
license to engage in a financial services-related activity; disciplined
the employee or otherwise by order prevented the employee from
associating with a financial services-related business or restricted
the employee's activities; or
(D) Barred the employee from association with an entity or its
officers regulated by the agency or authority or from engaging in a
financial services-related business;
(vi) Final orders issued by a State or Federal regulatory agency or
foreign financial regulatory authority based on violations of any law
or regulation that prohibits fraudulent, manipulative, or deceptive
conduct;
(vii) Revocation or suspension of the employee's authorization to
act as an attorney, accountant, or State or Federal contractor;
(viii) Customer-initiated financial services-related arbitration or
civil action against the employee that required action, including
settlements, or which resulted in a judgment; and
(ix) Fingerprints of the employee, in digital form if practicable,
and any appropriate identifying information for submission to the
Federal Bureau of Investigation and any governmental agency or entity
authorized to receive such information in connection with a State and
national criminal history background check; however, fingerprints
provided to the Registry that are less than 3 years old may be used to
satisfy this requirement.
(2) Employee authorization and attestation. An employee registering
as a mortgage loan originator or renewing or updating his or her
registration under this part, and not the employing credit union or
other employees of the credit union, must:
(i) Authorize the Registry and the employing institution to obtain
information related to sanctions or findings in any administrative,
civil, or criminal action, to which the employee is a party, made by
any governmental jurisdiction;
(ii) Attest to the correctness of all information required by
paragraph (d) of this section, whether submitted by the employee or on
behalf of the employee by the employing credit union; and
(iii) Authorize the Registry to make available to the public
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii)
through (viii) of this section.
(3) Submission of information. A credit union may identify one or
more employees of the credit union who may submit the information
required by paragraph (d)(1) of this section to the Registry on behalf
of the credit union's employees provided that this individual, and any
employee delegated such authority, does not act as a mortgage loan
originator, consistent with (e)(1)(i)(F) of this section. In addition,
a credit union may submit to the Registry some or all of the
information required by paragraphs (d)(1) and (e)(2) of this section
for multiple employees in bulk through batch processing in a format to
be specified by the Registry, to the extent such batch processing is
made available by the Registry.
(e) Required credit union information. A credit union must submit
the following categories of information to the Registry:
[[Page 44707]]
(1) Credit union record. (i) In connection with the registration of
one or more mortgage loan originators:
(A) Name, main office address, and business contact information;
(B) Internal Revenue Service Employer Tax Identification Number
(EIN);
(C) Research Statistics Supervision and Discount (RSSD) number, as
issued by the Board of Governors of the Federal Reserve System;
(D) Identification of its primary Federal regulator;
(E) Name(s) and contact information of the individual(s) with
authority to act as the credit union's primary point of contact for the
Registry;
(F) Name(s) and contact information of the individual(s) with
authority to enter the information required by paragraphs (d)(1) and
(e) of this section to the Registry and who may delegate this authority
to other individuals. For the purpose of providing information required
by paragraph (e) of this section, this individual and their delegates
must not act as mortgage loan originators unless the credit union has
10 or fewer full time or equivalent employees.
(ii) Attestation. The individual(s) identified in paragraphs
(e)(1)(i)(E) and (F) of this section must comply with Registry
protocols to verify their identity and must attest that they have the
authority to enter data on behalf of the credit union, that the
information provided to the Registry pursuant to this paragraph (e) is
correct, and that the credit union will keep the information required
by this paragraph (e) current and will file accurate supplementary
information on a timely basis.
(iii) A credit union must update the information required by this
paragraph (e) of this section within 30 days of the date that this
information becomes inaccurate.
(iv) A credit union must renew the information required by
paragraph (e) of this section on an annual basis.
(2) Employee information. In connection with the registration of
each employee who acts as a mortgage loan originator:
(i) After the information required by paragraph (d) of this section
has been submitted to the Registry, confirmation that it employs the
registrant; and
(ii) Within 30 days of the date the registrant ceases to be an
employee of the credit union, notification that it no longer employs
the registrant and the date the registrant ceased being an employee.
Sec. 761.104 Policies and procedures.
A credit union that employs one or more mortgage loan originators
must adopt and follow written policies and procedures designed to
assure compliance with this part. These policies and procedures must be
appropriate to the nature, size, complexity, and scope of the mortgage
lending activities of the credit union, and apply only to those
employees acting within the scope of their employment at the credit
union. At a minimum, these policies and procedures must:
(a) Establish a process for identifying which employees of the
credit union are required to be registered mortgage loan originators;
(b) Require that all employees of the credit union who are mortgage
loan originators be informed of the registration requirements of the
S.A.F.E. Act and this part and be instructed on how to comply with such
requirements and procedures;
(c) Establish procedures to comply with the unique identifier
requirements in Sec. 761.105;
(d) Establish reasonable procedures for confirming the adequacy and
accuracy of employee registrations, including updates and renewals, by
comparisons with its own records;
(e) Establish reasonable procedures and tracking systems for
monitoring compliance with registration and renewal requirements and
procedures;
(f) Provide for independent testing for compliance with this part
to be conducted at least annually by credit union personnel or by an
outside party;
(g) Provide for appropriate action in the case of any employee who
fails to comply with the registration requirements of the S.A.F.E. Act,
this part, or the credit union's related policies and procedures,
including prohibiting such employees from acting as mortgage loan
originators or other appropriate disciplinary actions;
(h) Establish a process for reviewing employee criminal history
background reports received pursuant to this part, taking appropriate
action consistent with applicable Federal law, including section 206 of
the Federal Credit Union Act (12 U.S.C. 1786(i)) and implementing
regulations with respect to these reports, and maintaining records of
these reports and actions taken with respect to applicable employees;
and
(i) Establish procedures designed to ensure that any third party
with which the credit union 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.
Sec. 761.105 Use of unique identifier.
(a) The credit union shall make the unique identifier(s) of its
registered mortgage loan originator(s) available to members in a manner
and method practicable to the credit union.
(b) A registered mortgage loan originator shall provide his or her
unique identifier to a member:
(1) Upon request;
(2) Before acting as a mortgage loan originator; and
(3) Through the originator's initial written communication with a
member, if any, whether on paper or electronically.
Appendix A to Part 761--Examples of Mortgage Loan Originator Activities
This Appendix provides examples to aid in the understanding of
activities that would cause an employee of a credit union to fall
within or outside the definition of mortgage loan originator. The
examples in this Appendix are not all inclusive. They illustrate
only the issue described and do not illustrate any other issues that
may arise under this part. For the purposes of the examples below,
the term ``loan'' refers to a residential mortgage loan.
(a) Taking a loan application. The following examples illustrate
when an employee takes, or does not take, a loan application.
(1) Taking an application includes: receiving information
provided in connection with a request for a loan to be used to
determine whether the member qualifies for a loan, even if the
employee:
(i) Has received the member's information indirectly in order to
make an offer or negotiate a loan;
(ii) Is not responsible for further verification of information;
(iii) Is inputting information into an online application or
other automated system on behalf of the member; or
(iv) Is not engaged in approval of the loan, including
determining whether the member qualifies for the loan.
(2) Taking an application does not include any of the following
activities performed solely or in combination:
(i) Contacting a member to verify the information in the loan
application by obtaining documentation, such as tax returns or
payroll receipts;
(ii) Receiving a loan application through the mail and
forwarding it, without review, to loan approval personnel;
(iii) Assisting a member who is filling out an application by
clarifying what type of information is necessary for the application
or otherwise explaining the qualifications or criteria necessary to
obtain a loan product;
(iv) Describing the steps that a member would need to take to
provide information to be used to determine whether the member
qualifies for a loan or otherwise explaining the loan application
process;
(v) In response to an inquiry regarding a prequalified offer
that a member has received from a credit union, collecting only
basic identifying information about the member
[[Page 44708]]
and forwarding the member to a loan originator; or
(vi) Receiving information in connection with a modification to
the terms of an existing loan to a borrower as part of the credit
union's loss mitigation efforts when the borrower is reasonably
likely to default.
(b) Offering or negotiating terms of a loan. The following
examples are designed to illustrate when an employee offers or
negotiates terms of a loan, and conversely, what does not constitute
offering or negotiating terms of a loan.
(1) Offering or negotiating the terms of a loan includes:
(i) Presenting a loan offer to a member for acceptance, either
verbally or in writing, including, but not limited to, providing a
disclosure of the loan terms after application under the Truth in
Lending Act, even if:
(A) Further verification of information is necessary;
(B) The offer is conditional;
(C) Other individuals must complete the loan process; or
(D) Only the rate approved by the credit union's loan approval
mechanism function for a specific loan product is communicated
without authority to negotiate the rate.
(ii) Responding to a member's request for a lower rate or lower
points on a pending loan application by presenting to the member a
revised loan offer, either verbally or in writing, that includes a
lower interest rate or lower points than the original offer.
(2) Offering or negotiating terms of a loan does not include
solely or in combination:
(i) Providing general explanations or descriptions in response
to member queries regarding qualification for a specific loan
product, such as explaining loan terminology (i.e., debt-to-income
ratio); lending policies (i.e., the loan-to-value ratio policy of
the credit union); or product-related services;
(ii) In response to a member's request, informing a member of
the loan rates that are publicly available, such as on the credit
union's Web site, for specific types of loan products without
communicating to the member whether qualifications are met for that
loan product;
(iii) Collecting information about a member in order to provide
the member with information on loan products for which the member
generally may qualify, without presenting a specific loan offer to
the member for acceptance, either verbally or in writing;
(iv) Arranging the loan closing or other aspects of the loan
process, including communicating with a member about those
arrangements, provided that communication with the member only
verifies loan terms already offered or negotiated;
(v) Providing a member with information unrelated to loan terms,
such as the best days of the month for scheduling loan closings at
the credit union;
(vi) Making an underwriting decision about whether the member
qualifies for a loan;
(vii) Explaining or describing the steps or process that a
member would need to take in order to obtain a loan offer, including
qualifications or criteria that would need to be met without
providing guidance specific to that member's circumstances; or
(viii) Communicating on behalf of a mortgage loan originator
that a written offer, including disclosures provided pursuant to the
Truth in Lending Act, has been sent to a member without providing
any details of that offer.
(c) Offering or negotiating a loan for compensation or gain. The
following examples illustrate when an employee does or does not
offer or negotiate terms of a loan ``for compensation or gain.''
(1) Offering or negotiating terms of a loan for compensation or
gain includes engaging in any of the activities in paragraph (b)(1)
of this Appendix in the course of carrying out employment duties,
even if the employee does not receive a referral fee or commission
or other special compensation for the loan.
(2) Offering or negotiating terms of a loan for compensation or
gain does not include engaging in a seller-financed transaction for
the employee's personal property that does not involve the credit
union.
Dated: December 23, 2009.
John C. Dugan,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, July 13, 2010.
Jennifer J. Johnson,
Secretary of the Board.
By order of the Board of Directors.
Dated at Washington, DC the 14th day of July, 2010.
Robert E. Feldman,
Executive Secretary,
Federal Deposit Insurance Corporation.
Dated: May 12, 2010.
By the Office of Thrift Supervision.
John E. Bowman,
Acting Director.
Dated: April 15, 2010.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
Dated: April 10, 2010.
Mary F. Rupp,
Secretary to the Board, National Credit Union Administration.
Editorial Note: This document was received in the Office of the
Federal Register on July 20, 2010.
[FR Doc. 2010-18148 Filed 7-27-10; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P; 6720-01-P, 6705-01-P,
7535-01-P