Registration of Mortgage Loan Originators, 44656-44708 [2010-18148]
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Federal Register / Vol. 75, No. 144 / Wednesday, July 28, 2010 / Rules and Regulations
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
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.
AGENCY:
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
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SUMMARY:
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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
§ __.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
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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
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
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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).
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
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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.
The Federal banking agencies,
through the FFIEC, and the FCA are
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
https://www.hud.gov/offices/hsg/ramh/safe/
cmsl.cfm.
1 S.A.F.E. Act at section 1507(a) (12 U.S.C.
5106(a)).
2 74 FR 27386 (June 9, 2009).
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
https://www.stateregulatoryregistry.org.
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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 nonAgency-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
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.
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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
II. Overview of the Proposal and Public
Comments
The proposed rule required
individuals employed by Agencyregulated 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 Agencyregulated institutions. Pursuant to
§§ __.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 Agencyregulated institutions objected to the
registration requirement in general,
suggesting that the registration
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 Agencyregulated institutions are not subject to State
licensing or registration requirements for mortgage
loan originators.
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Federal Register / Vol. 75, No. 144 / Wednesday, July 28, 2010 / Rules and Regulations
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
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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 Agencyregulated 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 Agencyregulated 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
III. Section-By-Section Description of
the Final Rule
Section __.101—Authority, Purpose,
and Scope
The Agencies adopt paragraphs (a)
and (b) of § __.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).
As in the proposal, paragraph (c)(1) of
§ __.101 of the final rule identifies the
specific entities that employ individual
mortgage loan originators—entities
referred to in this SUPPLEMENTARY
INFORMATION section as Agencyregulated institutions—and that also are
covered by this rule. Under the S.A.F.E.
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.
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 ‘‘§ __.’’ 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.
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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.
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
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 Agencyregulated 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.
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.
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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
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
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the NCUA, this rule applies to credit
unions and their employees who are
mortgage loan originators. Because nonFederally insured credit unions
generally are not Federally regulated
institutions, special registration
conditions apply to them as discussed
below.
As discussed in Section II, a number
of commenters objected to the
application of this registration
requirement to employees of Agencyregulated 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, https://
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
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.
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44659
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.
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 nonFederally insured credit unions and
their employees who are mortgage loan
originators when certain conditions are
met and formal agreements reached.
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 ‘‘Agencyregulated institutions.’’ Unlike Federal
credit unions and Federally insured
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.
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)).
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State-chartered credit unions, nonFederally insured credit unions are
neither Federally insured nor subject to
NCUA’s oversight. In order for nonFederally 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 nonFederally 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 nonFederally 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
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employees.1 In addition, NCUA’s final
rule requires that the State supervisory
authorities who seek to have nonFederally 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.
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
§ __.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 Agency1 HUD published its proposed rule to establish
this system on December 15, 2009. See 74 FR
66548.
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.
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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.
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 lowvolume 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.
Other commenters wanted the
exception to be applied to institutions
1 12
U.S.C. 2801 et seq.
12 CFR 203.2 (Regulation C).
2 See
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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 Agencyregulated 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 § __.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
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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 antievasion 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 Agency1 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
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44661
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.
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
§ __.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.
will provide aggregate public data on unique
identifier information stored in the system to
Fannie Mae and Freddie Mac for compliance
purposes.
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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 Agencyregulated 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 Stateand 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
1 The S.A.F.E. Act defines ‘‘real estate brokerage
activity’’ to mean any activity that involves offering
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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
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
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.
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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
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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 twoprong 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 Agencyregulated 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
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the requirements of the S.A.F.E. Act and
this final rule.1
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 Agencyregulated 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 Agencyregulated 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 § __.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
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 twoprong test set forth in the statute.
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
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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.
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 Statelicensed 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
regulatory definition of mortgage loan originator is
met and the S.A.F.E Act does apply.
1 See footnote 26.
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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.
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 sellersponsored 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
1 TILA defines ‘‘dwelling’’ as a residential
structure or mobile home which contains one-tofour 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).
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rule, the FCA emphasizes that section
1503(8) of the S.A.F.E. Act (12 U.S.C.
5102(8)) and § __.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
§ __.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 Agencyregulated 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 Webbased 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-
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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 commonlaw 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
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).
2 See § __.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 § 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
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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 Agencyregulated 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, § __.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, § __.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.
The Agencies did not receive
substantive comments specifically on
this section and therefore adopt it as
proposed.
Institution requirement. Proposed
paragraph (a)(2) of § __.103 provided
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.
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.
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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
§§ __.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 Agencyregulated 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
§ __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
§ __.103(a)(2)(ii) with this one change.
Implementation period for initial
registrations. Proposed § __.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 180day period. After this 180-day period
expires, any existing employee or
newly-hired employee of an Agencyregulated institution who is subject to
the registration requirements would be
prohibited from originating residential
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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
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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 Agencyregulated 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
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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
§ __.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 § __.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-
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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 § __.103(e)(1)(i), to
the extent the institution has not
previously met these requirements, and
§ __.103(e)(2)(i); 1 and (4) the registration
is maintained pursuant to the
requirements of §§ __.103(b) and
(e)(1)(ii) as of the date that the employee
becomes employed by the institution.
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 Agencyregulated 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
§ __.103(a)(4)(i)(B) to provide that new
fingerprints are not required to be
submitted, pursuant to
§ __.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
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.
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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
§ __.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 § __.103
apply.
In order to reduce regulatory burden
and to prevent an interruption in
mortgage origination activity, the
proposed § __.103(a)(4)(ii) provided a
60-day grace period to comply with the
§ __.103(a)(4)(i) requirements when a
registered mortgage loan originator
becomes an employee of an Agencyregulated institution as a result of an
acquisition, merger, or reorganization.
Some commenters agreed that this 60day 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 § __.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
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mortgage loan originators comply with
the requirements of § __.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
§ __.103(a)(4) with the addition of the
language discussed above related to
fingerprints in § __.103(a)(4)(i)(B). The
Agencies also have modified
§ __.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 Agencyregulated 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 § __.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
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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 § __.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
§ __.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 § __ .103(b)(1)(ii),
described below.
In addition to the annual renewal,
proposed § __.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
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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 § __.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 § __.103(b)(1)(ii) includes a 30-day
update requirement, as proposed.
Proposed § __.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
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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-bycase basis.
Effective date of registrations and
renewals. Proposed § __.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 § __.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 § __.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
§ __.103(c)(2) regarding renewals and
updates.
We note that, except as provided by
the 180-day implementation period in
§ __.103(a)(3) or the 60-day grace period
provided in § __.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
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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 § __.103(d)
and (e) must be submitted, and, in order
to renew or update a registration, the
information required by § __.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
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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
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
§ __.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 § __.103(d)(2), and described below,
for the registration to be complete.
Under proposed § __.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 Agencyregulated institution; financial servicesrelated employment and financial
history for the past 10 years; criminal
history involving certain felonies and
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 https://www.state
regulatoryregistry.org for information regarding fees
imposed on State originators.
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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 § __.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
§ __.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
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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 § __.103(b)(1)(ii).
The Agencies also have revised the
requirement in proposed
§ __.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
§ __.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
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).
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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.
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 servicesrelated 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, publiclyadjudicated regulatory and disciplinary
actions or orders, financial servicesrelated professional license revocations
or suspensions, and financial servicesrelated 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 § __.103(d)(xii)
(redesignated as § __.103(d)(ix) in the
final rule) also required employees to
provide fingerprints, in digital form if
2 See
Id. and 12 CFR 303.220–223.
3 Id.
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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.
In order to ensure that fingerprints are
up-to-date, we have amended the
redesignated § __.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
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.
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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 Agencyregulated 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
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
§ __.103 requires the employee to
provide authorization for the Registry
and the employing Agency-regulated
2 Further information on the Registry’s fingerprint
and background check procedures can be found on
the Registry’s Web site at https://
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.
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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
§ __.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 § __.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 § __.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
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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
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
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
1 SRR plans to make this public information
stored on the Registry available on an aggregate
basis to interested parties for compliance purposes.
2 CJISD–ITS–DOC–08140–4.5, December 2008.
3 See https://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
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44671
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 § __.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 § __.103(d)(1).
Second, we have amended
§ __.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
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.
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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 § __.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 § __.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 § __.103(e)(1) with the
following amendments, discussed
below.
Paragraph (e)(1) of § __.103 of the final
rule requires the employing Agencyregulated 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
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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
§ __.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 Agencyregulated 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
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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
§ __.103(e).
We also have amended proposed
§ __.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 Agencyregulated 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
§ __.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 § __.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, § __.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 Agencyregulated 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 Agencyregulated 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
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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 § __.103(d)(3) to
specifically permit institutions to
submit a portion of the information
required by paragraphs (d)(1)(i) and
(e)(2) of § __.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 Agencyregulated 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.
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Section__.104—Policies and Procedures
Proposed § __.104 required Agencyregulated 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 Agencyregulated 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 § __.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
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44673
comments on this requirement and
therefore adopt § __.104(a) as proposed.
Second, proposed § __.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 § __.104(b) as proposed.
Third, proposed § __.104(c) required
that policies and procedures must
establish procedures to comply with the
unique identifier requirements in
§ __.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 § __.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 § __.104(e) required
institutions to establish reasonable
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procedures and tracking systems for
monitoring compliance with registration
requirements and procedures. Under
this regulatory provision, Agencyregulated 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 § __.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 Agencyregulated 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 § __.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 § __.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
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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. Agencyregulated 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
§ __.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
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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 §§ __.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 § __.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 § __.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 Agencyregulated 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
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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 § __.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 § __.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
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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.
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
1 See https://www.federalreserve.gov/newsevents/
press/bcreg/20090723a.htm.
1 See footnote 26.
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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
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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 Agencyregulated 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
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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,
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and would not, therefore, meet the twoprong 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
15
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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.
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
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
2 13
CFR 121.201.
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.
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.
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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
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,
§ 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
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.
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obtain a unique identifier. Under
§ 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
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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 Agencyregulated 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
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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.
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
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).
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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
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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.
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
1 See
13 CFR 121.201.
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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
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44679
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 FDICsupervised 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).
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OTS: The RFA1 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.
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
15
U.S.C. 601–612.
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.
1 In
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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 § 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
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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.
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,
§ 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
§ 563.103(b), an association must
require each mortgage loan originator
employee to comply with these
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.
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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
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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 Agencyregulated 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
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44681
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
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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
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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, nonFederally 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, nonFederally 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, nonFederally 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
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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 § 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.
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C. OCC Executive Order 12866
Determination
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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:
• 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
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 § 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
§ 3(e).
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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 https://
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
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 § 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
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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:
• 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
notices of proposed rulemaking.’’ E.O. 12866 at
§ 3(e).
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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 https://
www.regulations.gov, Docket No. OTS–
2010–0021.
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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
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
1 See
2 U.S.C. 1531.
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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 wellbeing 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.
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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
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
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.
2. Add Subpart F to part 34 to read as
follows:
■
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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
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§ 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.
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§ 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:
(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
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.
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(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.
§ 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.
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(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:
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(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);
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(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 servicesrelated 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 servicesrelated 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
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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
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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.
§ 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 § 34.105;
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(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.
§ 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
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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
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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.
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Board of Governors of the Federal
Reserve System
12 CFR Chapter II
Authority and Issuance
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)
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.
2. Subpart I, consisting of §§ 208.100
and 208.101, is redesignated as Subpart
J, consisting of §§ 208.110 and 208.111.
■ 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
§ 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
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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.
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§ 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:
(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
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.
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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:
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(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.
§ 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,
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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
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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 servicesrelated 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
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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 servicesrelated 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
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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
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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.
§ 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 § 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)
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44691
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.
§ 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;
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(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
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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.
4. Newly designated § 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:
■
§ 208.111 Obligations concerning
institutional customers.
*
*
*
*
*
9 See
footnote 8 in paragraph (d) of this
section.
PART 211—INTERNATIONAL
BANKING OPERATIONS
(REGULATION K)
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.
6. Section 211.24 is amended by
adding new paragraph (k) to read as
follows:
■
§ 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
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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
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
1. The authority citation for part 365
is revised to read as follows:
■
Authority: 12 U.S.C. 1828(o) and 5101 et
seq.
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
3. Section 365.1 is amended by
removing ‘‘part’’ and adding ‘‘subpart’’ in
its place.
■
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
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
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Subpart B—Registration of Residential
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§ 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.
§ 365.102
Definitions.
For purposes of this subpart, the
following definitions apply:
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(a) Annual renewal period means
November 1 through December 31 of
each year.
(b)(1) Mortgage loan originator 1
means an individual who:
(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,
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.
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44693
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.
§ 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
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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;
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(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);
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(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 servicesrelated 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 servicesrelated 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
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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
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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.
§ 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
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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 § 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.
§ 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.
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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,
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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 productrelated 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
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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
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
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.
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
§ 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.
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(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.
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§ 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:
(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
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.
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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.
44697
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)
§ 563.103 Registration of mortgage loan
and (e)(2)(i) of this section is submitted
originators.
to the Registry; and
(D) The registration is maintained
(a) Registration requirement—(1)
Employee registration. Each employee of pursuant to paragraphs (b) and (e)(1)(ii)
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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
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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 servicesrelated 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 servicesrelated business;
(vi) Final orders issued by a State or
Federal regulatory agency or foreign
financial regulatory authority based on
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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.
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(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
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(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.
§ 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 § 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
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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.
§ 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;
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(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
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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
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.
§ 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
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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.
§ 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:
(i) Takes a residential mortgage loan
application; and
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.
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(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
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that meet the qualifications listed in this
definition. This definition does not
amend or supersede § 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.
44701
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
§ 610.103 Registration of mortgage loan
institution information required in
originators.
paragraphs (e)(1)(i) (to the extent the
(a) Registration requirement—(1)
Farm Credit System institution has not
Employee registration. Each employee of previously met these requirements) and
a Farm Credit System institution who
(e)(2)(i) of this section is submitted to
acts as a mortgage loan originator must
the Registry; and
register with the Registry, obtain a
(D) The registration is maintained
unique identifier, and maintain this
pursuant to paragraphs (b) and (e)(1)(ii)
registration in accordance with the
of this section, as of the date that the
requirements of this part. Any such
employee becomes subject to this part.
employee who is not in compliance
(ii) Rule for certain acquisitions,
with the registration and unique
mergers, or reorganizations. When
identifier requirements set forth in this
registered or licensed mortgage loan
part is in violation of the S.A.F.E. Act
originators become employees of
and this part.
another Farm Credit System institution
(2) Farm Credit System institution
as a result of a consolidation, merger, or
requirement—(i) In general. A Farm
reorganization, only the requirements of
Credit System institution that employs
paragraphs (a)(4)(i)(A), (C), and (D) of
one or more individuals who act as a
this section must be met, and these
residential mortgage loan originator
requirements must be met within 60
must require each such employee to
days from the effective date of the
register with the Registry, maintain this
consolidation, merger, or reorganization.
registration, and obtain a unique
(b) Maintaining registration.
identifier in accordance with the
(1) A mortgage loan originator who is
requirements of this part.
registered with the Registry pursuant to
(ii) Prohibition. A Farm Credit System paragraph (a) of this section must:
institution must not permit an employee
(i) Except as provided in paragraph
who is subject to the registration
(b)(3) of this section, renew the
requirements of this part to act as a
registration during the annual renewal
mortgage loan originator for the Farm
period, confirming the responses set
Credit System institution unless such
forth in paragraphs (d)(1)(i) through
employee is registered with the Registry (viii) of this section remain accurate and
pursuant to this part.
complete, and updating this
(3) Implementation period for initial
information, as appropriate; and
registration. An employee of a Farm
(ii) Update the registration within 30
Credit System institution who is a
days of any of the following events:
mortgage loan originator must complete
(A) A change in the name of the
an initial registration with the Registry
registrant;
pursuant to this part within 180 days
(B) The registrant ceases to be an
from the date that the Farm Credit
employee of the Farm Credit System
Administration provides in a public
institution; or
(C) The information required under
notice that the Registry is accepting
paragraphs (d)(1)(iii) through (viii) of
registrations.
(4) Employees previously registered or this section becomes inaccurate,
incomplete, or out-of-date.
licensed through the Registry—(i) In
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(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,
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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 servicesrelated 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 servicesrelated 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
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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
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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.
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§ 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
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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 § 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.
§ 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;
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44703
(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
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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 productrelated 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
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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
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
1. The authority citation for part 741
continues to read as follows:
■
Authority: 12 U.S.C. 1757, 1766, 1781–
1790, and 1790d.
2. Add a new § 741.223 to subpart B
to read as follows:
■
§ 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.
■ 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
§ 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
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(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 nonFederally insured credit unions to pay
various fees related to oversight costs
and registration costs for the non-
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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 nonFederally 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.
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§ 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:
(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
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.
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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.
44705
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
§ 761.103 Registration of mortgage loan
the Registry; and
originators.
(D) The registration is maintained
pursuant to paragraphs (b) and (e)(1)(ii)
(a) Registration requirement—(1)
Employee registration. Each employee of of this section, as of the date that the
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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,
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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 servicesrelated 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 servicesrelated 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;
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(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:
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(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.
§ 761.104
Policies and procedures.
A credit union that employs one or
more mortgage loan originators must
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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 § 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.
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§ 761.105
44707
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
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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;
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(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
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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
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]]>Agencies
[Federal Register Volume 75, Number 144 (Wednesday, July 28, 2010)]
[Rules and Regulations]
[Pages 44656-44708]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-18148]
[[Page 44655]]
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Part IV
Department of the Treasury
Office of the Comptroller of the Currency
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Federal Reserve System
Federal Deposit Insurance Corporation
Department of the Treasury
Office of Thrift Supervision
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Farm Credit Administration
National Credit Union Administration
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12 CFR Part 34, 208, 211, et al.
Registration of Mortgage Loan Originators; Final Rule
Federal Register / Vol. 75, No. 144 / Wednesday, July 28, 2010 /
Rules and Regulations
[[Page 44656]]
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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.
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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).
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\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 https://www.hud.gov/offices/hsg/ramh/safe/cmsl.cfm.
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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).
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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.
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\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 https://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\
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\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.
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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\
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\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.
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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).
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\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.
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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.
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\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.
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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.
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\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,
https://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.
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\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.
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\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)).
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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.
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\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.
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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.
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\1\ 12 U.S.C. 2801 et seq.
\2\ See 12 CFR 203.2 (Regulation C).
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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.
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\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.
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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\
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\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.
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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\
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\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.
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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
