Relates to the regulation of mortgage loan originators; repealer

In addition, applicants with a felony conviction for fraud, dishonesty" breach of trust, or money laundering (or any other felony within seven years of the date of application) cannot be licensed under the SAFE Act or this bill The SAFE Act also will change the definitions applicable to MLOs.

A short summary of revised Article 12-E follows:

a. Section 599-a contains the legislative purpose, which is to be consistent with the SAFE Act.

b. Section 599-b defines terms used in the Article, including "Loss processor or underwriter," "clerical or support duties," "mortgage loan originator," "residential mortgage loan" and "Nationwide MortgageLicensing System and Registry."

c. Section 599-c requires individuals who engage in the business of a mortgage loan originator with respect to any "dwelling" or "residential real property" to be licensed as a mortgage loan originator ("MLO"), and contains a transition rule for individuals licensed under the existing version of Article 12- E. It also contains exemptions from registration for certain persons, including licensed attorneys who negotiate mortgage loans as an ancillary matter to the attorney's representation of the client (unless they are compensated by the lender). Finally, this section requires independent contractors who are loan processors or underwriters to be licensed under the article. (Current article 12-E exempts them, but the SAFE Act specifically covers them.)

d. Section 599-d lays out the process for registering to be an MLO, including application forms and what must be disclosed on them, charges to mortgage banker and broker firms to cover the cost of registering MLOs that work for them, fee collection by the NMLSR, and electronic filing.

e. Section 599-e contains the findings the Superintendent must make before issuing a license to be an MLO. The principal change from current Article 12-E is that an applicant may not be granted a license if he or she has been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign or military court: (i) during the past 7 years, or (ii) at any time preceding the date of the application, in the case of a felony involving fraud, dishonesty or a breach of trust, or money laundering. This section also requires the written test and surety bond.

f. Section 599-f requires prospective licensees to complete at least 20 hours of education courses that have been approved by the NMLSR.

g. Section 599-g requires applicants to pass a written test before they are licensed.

h. Section 599-h requires mortgage bankers or brokers to submit to the NMLSR reports of condition in such form as the NMLSR may require.

i. Section 599-i specifies that, in order for a license to be renewed, the MLO must continue to meet the minimum standards for issuance of a license, must satisfy the annual continuing education requirements and must have paid the required renewal fees.

j. Section 599-j sets forth the annual continuing education requirements.

k. Section 599-k sets out the requirement for MLOs, or their employing firms, to maintain a mortgage loan originator.

l. Section 599-1 requires the superintendent to report on a regular basis all violations of the Article.

m. Section 599-m requires mortgage bankers and brokers to retain documentation of the completion of education courses.

n. Section 599-n sets forth the authority of the superintendent to revoke or suspend a license for certain violations of the law.

o. Section 599-o authorizes the superintendent to make rules and regulations for licensing.

p. Section 599-p requires that MLOs put their unique identifier on all residential mortgage loan application forms and other documents required by the superintendent.

q. Section 599-q provides for the confidentiality of information provided to the superintendent.

r. Section 599-r provides rules of construction that ensure that nothing in Article 12E will be deemed to impair any of the provisions of article 12-D.

Sections 2 and 3 of the bill make certain technical changes to the Banking Law.

Section 4 of the bill provides that the Superintendent may charge fees for the licensing of MLOs and may use any reasonable methods necessary to timely implement Article 12-E of the Banking Law.

Section 5 of the bill provides for the effective date of the bill.

Effects of present law which this bill would alter

Article 12-E was originally added to the Banking Law by Chapter 744 of the Laws of 2006. It was substantially amended by Chapter 553 of the laws of 2007. The current version of Article 12-E, which was effective at the beginning of 2008, provides for the "authorization" of individuals seeking to act as MLOs in New York.

Justification

This bill would demonstrate the commitment of New York to maintain its regulation of MLOs. Indeed, absent this regulation, New York would cede this important responsibility to the federal government. The bill also would make New York's system of MLO regulation consistent with that used in other states, thus reducing the cost of regulation for all entities, particularly those operating in multiple states. The legislation also will serve as a model of interstate cooperation, thus serving to enhance the dual regulatory system for financial services providers in the United States.

Prior legislative history

This is a new bill.

Fiscal implications for state and local governments

This bill will not have an impact on state finances.

Effective date

This act shall take effect immediately; provided, however, that sections two and three of this act shall take effect on the same date and the same manner as sections 15 and 16 of chapter 472 of the laws of 2008 take effect, respectively, and provided, further, that the superintendent of banks may delay the implementation of any provision of this act if consistent with title V of The Housing and Economic Recovery Act of 2008, Pub. L. No. 110-287.