Which Federal Act Requires Mortgage Loan Originators To Be Licensed Or Registered?

December 5, 2008		2008-R-0651
CONNECTICUT MORTGAGE ORIGINATOR LICENSE REQUIREMENTS
By: Soncia Coleman, Associate Legislative Analyst

You wanted to know the requirements for obtaining a Connecticut mortgage originator license.

SUMMARY

Connecticut law defines a mortgage originator equally an individual who is employed or retained by, or otherwise acts on behalf of, a mortgage lender or broker licensee for, or with the expectation of, valuable consideration, to accept an application for or negotiate, solicit, adjust or find a mortgage loan. In order to obtain a mortgage originator license in Connecticut, a person has to submit an application on the Nationwide Mortgage Licensing System (NMLS). They must submit to a criminal background bank check and pay the licensing fee (currently $130).

A 2007 public human activity (PA 07-156) immune the Connecticut banking commissioner to participate in the NMLS established in 2004 past the Conference of Country Banking concern Supervisors and the American Clan of Residential Mortgage Regulators. PA 08-176 moved up the participation appointment from September 30 to July ane, 2008 and made information technology mandatory. Public Act 07-156 required originators to be licensed rather than simply "registered," equally was previously required. However, originators, because they piece of work on behalf of brokers or lenders, practice not have to run into the financial and experience requirements that lenders and brokers accept to meet.

A recent federal law sets out a number of requirements for "loan originators," including education and testing, that must be met in the future. It appears every bit if both mortgage originators and mortgage brokers, every bit they are defined in the Connecticut statutes, would fall within the federal definition of "loan originator." However, it is unclear whether Connecticut mortgage originators would have to meet these requirements because they work on behalf of Connecticut mortgage lenders and mortgage brokers.

CONNECTICUT LAW

Mortgage Brokers and Lenders

A mortgage broker in Connecticut, which is defined by and large as a person or entity who, for valuable consideration, negotiates, solicits, arranges, places or finds a residential mortgage loan that is to be made past a lender, has to meet cyberspace worth ($25,000), bail ($40,000), and fingerprint/background check requirements. Banks and credit unions are non required to obtain this license. However, subsidiaries of these institutions, other than operating subsidiaries of federal banks and federally-chartered out-of-state banks, are required to obtain a license.

A mortgage lender, which is generally a person or entity who is engaged in the business of making mortgage loans or issuing extensions of credit which are secured by a mortgage on an interest in residential property, has to meet similar requirements (lenders have a higher net worth requirement of $250,000). There are a number of entities that are exempt from mortgage lender licensing requirements.

The law also requires lenders and brokers to have a qualified private at a chief role and a branch manager at a branch role, with supervisory authority over the lending or brokerage activities, who has at least 3 years of experience in the mortgage business concern in the previous 5 years. The police force defines this experience to include paid experience in the origination, processing; or underwriting of mortgage loans; the marketing of such loans in the secondary market or in the supervision of such activities; or any other relevant experience every bit determined by the banking commissioner. There are currently no testing or education (initial or continuing) requirements for licensure.

FEDERAL LAW

The federal Housing and Economic Recovery Act of 2008 (P. L. 110-289), encourages, merely does not require, participation in the NMLS. However, information technology requires licensing of all "loan originators" which it defines every bit an individual who (1) takes a residential mortgage loan awarding and (2) offers or negotiates terms of a residential mortgage loan for compensation or gain.

Specifically, the act prohibits people from engaging in the business of a loan originator without get-go (1) obtaining a unique identifier and (2) annually maintaining a registration as a registered loan originator or a license and registration as a state-licensed loan originator. These requirements are subject to the being of a registration authorities.

Loan Originator Licensing Requirement south

The act establishes requirements for loan originator licensing or registration, including fingerprint and groundwork checks; 20 hours of pre-licensing education; a written test; and eight hours of standing instruction annually. Information technology as well prevents the issuance of a license to an applicant who:

ane. has had a loan originator license revoked in any governmental jurisdiction;

2. has been convicted of, or pled guilty or no contest to, a felony (a) during the seven-yr menses before the date of the awarding for licensing and registration; or (b) at any fourth dimension preceding application, if the felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering; and

3. has not met either a net worth or surety bond requirement, or paid into a state fund, as required by the land.

Finally, the applicant has to demonstrate fiscal responsibleness, character, and general fitness such as to command the confidence of the community and to warrant a decision that the loan originator volition operate honestly, adequately, and efficiently.

HUD Licensing System

The act requires the Section of Housing and Urban Development (HUD) to establish a fill-in licensing organization for a state if, after one year (or 2 years for biennial legislatures), a state does not (i) participate in the Nationwide Mortgage Licensing Organisation or (two) take a system in place that addresses the requirements above. A state with its own arrangement must also have a state loan originator supervisory authority that:

i. is maintained to provide effective supervision and enforcement of the law, including the suspension, termination, or nonrenewal of a license for a violation of land or federal law;

2. ensures that all state-licensed loan originators operating in the state are registered with NMLSR;

3. is required to regularly written report violations of the law, equally well equally enforcement actions and other relevant information, to the NMLSR;

4. has a procedure in place for challenging information contained in the NMLSR;

v. has established a mechanism to appraise ceremonious money penalties for individuals interim every bit mortgage originators in their State without a valid license or registration; and

6. has established minimum net worth or surety bonding requirements that reverberate the dollar corporeality of loans originated by a residential mortgage loan originator, or has established a recovery fund paid into by the loan originators.

The HUD secretary tin extend this period past up to two years. The Act likewise requires federal bank regulators to institute a parallel registration system for FDIC-insured banks.

SC:ts

Which Federal Act Requires Mortgage Loan Originators To Be Licensed Or Registered?,

Source: https://www.cga.ct.gov/2008/rpt/2008-R-0651.htm

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