Frequently asked questions on Chapter 44 of the Acts of 2009, An Act Adopting the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008

The Division of Banks (DOB) offers answers to frequently asked questions (FAQ) on Chapter 44 of the Acts of 2009.

Background

On July 31, 2009, Chapter 44 of the Acts of 2009, "An Act Adopting the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act)" (Chapter 44), was signed into law. Chapter 44 amends G.L. Chapter 255F governing the licensing of mortgage loan originators and brings Massachusetts into compliance with the federal S.A.F.E. Act. Because the former Chapter 255F had originally gone into effect on July 1, 2008, there are a number of transitional issues for both existing licensees and new applicants. All mortgage loan originators and applicants should familiarize themselves with the revised Chapter 255F and the revisions to the regulations governing mortgage loan originators, 209 CMR 41.00. These FAQs are intended to address both the new requirements of Chapter 255F and their impact on mortgage loan originators and replace the prior Chapter 206 FAQs dealing with mortgage loan originators.

When did Chapter 44 of the Acts of 2009 (Chapter 44) become effective?

Chapter 44 had an emergency preamble. Therefore, the law became effective upon signing by the Governor on July 31, 2009. There is an outside section that allows for some delayed effective dates for both currently licensed mortgage loan originators and new loan originator applicants (discussed below).

Is my status as a licensed mortgage loan originator public information, and will such a listing appear anywhere?

Yes, to both questions. Your status as a mortgage loan originator is public information, as generally is your application filing. Beginning in the first quarter of 2010, the Nationwide Mortgage Licensing System (NMLS) will offer a consumer portal to allow the public to verify if an individual is licensed.

Will the regulations relative to the licensure of mortgage loan originators be changed?

Yes. On September 15, 2009, the DOB issued "emergency" amendments to its regulations relative to the licensing and supervision of mortgage loan originators which are set out in 209 CMR 41.00 et seq. These amendments are intended to ensure that the regulations are in compliance with Chapter 255F, as amended by Chapter 44. In order to make these emergency changes permanent, the DOB will follow the normal administrative procedures, including holding a public hearing and a public comment period.

Does a "loan processor or underwriter" need to obtain a mortgage loan originator license?

Generally no. The term "loan processor or underwriter" is defined under Chapter 255F as someone who performs mostly clerical or support duties under the direction of a licensed mortgage loan originator and does not hold themselves out in advertising or other means as being able to perform the duties of a mortgage loan originator. Such loan processors or underwriters are exempt from having to obtain a license as a mortgage loan originator unless they are working as an independent contractor, in which case they must obtain a license, regardless of the nature of their duties.

What does "independent contractor" mean?

The U.S. Department of Housing and Urban Development (HUD, the federal agency responsible for ensuring that the states are in compliance with the federal S.A.F.E. Act) has published a series of FAQs regarding the S.A.F.E. Act. In response to a separate question, HUD states that, "an individual who is an independent contractor is not an employee. An individual is generally considered to be an employee only if the manner and means of his or her performance of duties is subject to the control of an employer, and if his or her income is reported on a W-2 form". See HUD's FAQs, Question 8 for additional information.

Am I eligible for a mortgage loan originator license if I work as an originator on a part-time basis?

Yes. Every person meeting the definition of a "mortgage loan originator" set forth in G. L. c. 255F, §1 must obtain a license from the DOB. An individual may be working in such capacity on a full-time or part-time basis and must meet all applicable licensing standards and educational requirements. It is not required that your position as a loan originator be your primary occupation. However, in accordance with the statutory requirements, originators must work exclusively for only one licensed entity at a time.

Licensees are reminded that in instances where they are also engaged in other business activities related to the mortgage loan industry, inherent conflicts of interest may result if individuals are acting in dual capacities with respect to the same mortgage transaction.

Does a person engaged in loss mitigation or loan modification activities have to obtain a mortgage loan originator license?

Under both Chapter 255F and the federal S.A.F.E. Act, the definition of a mortgage loan originator is very broad and includes anyone who, for compensation or gain, "(i) takes a residential mortgage loan application; or (ii) offers or negotiates terms of a residential mortgage loan", regardless or whether the offer or negotiation involves a new mortgage or is concerning an existing mortgage. However, given the current economic environment and the public policy goal to encourage as many responsible loan modifications as possible, the Conference of State Bank Supervisors has requested that HUD delay the effective date to license anyone involved in loan modifications who meets the definition of mortgage loan originator. The DOB and the NMLS will post information on their websites when HUD responds to the request. See HUD's FAQs, Question 5 for additional information.

If a mortgage loan originator works for a bank or a wholly-owned subsidiary of a bank, do they need to obtain a license as a mortgage loan originator?

No. Under both Chapter 255F and the federal S.A.F.E. Act, employees of banks and credit unions and their subsidiaries are required to register pursuant to requirements established by the federal banking regulators and are exempt from state licensing requirements. The federal banking regulators have issued proposed regulations governing the registration process and the DOB expects them to issue final rules in the near future. Please be advised that agents of banks (independent contractors or other individuals that are not employees) do not qualify under this exemption. See HUD's FAQs, Question 8 for additional information.

If a mortgage loan originator works for a licensed mortgage lender or broker that is a bank chartered in another state or a subsidiary of such a bank, do they need to obtain a license as a mortgage loan originator in Massachusetts?

No. See above.

If a mortgage loan originator works for a credit union service organization (CUSO), do they need to obtain a license as a mortgage loan originator?

Yes. Since federally-chartered and state-chartered credit unions do not have the authority to establish operating subsidiaries, a CUSO is not considered a subsidiary of a credit union. Therefore, a CUSO is not a subsidiary of a credit union under chapter 255E and is not exempt from licensure as a mortgage broker and /or lender. Accordingly, a CUSO's employees must obtain a mortgage loan originator license and be properly sponsored by the CUSO.

If a mortgage loan originator is working for a company that is exempt from being licensed as a mortgage lender or mortgage broker, do they need to obtain a license as a mortgage loan originator in Massachusetts?

Yes. Other than the specific exemptions in Chapter 255F, a person working for a company exempt from licensing as a mortgage lender or mortgage broker under Chapter 255E cannot claim an exemption from licensing as a mortgage loan originator. The most relevant company exemptions are insurance companies, manufactured housing finance companies, and entities making fewer than 5 mortgage loans in any 12 consecutive month period.

Will the fees required in order to be licensed as a mortgage loan originator change?

No. The Executive Office for Administration and Finance and the DOB have previously set the license fee at $500. In addition, the annual renewal fee is $500 per year.

Are there any other fees?

Yes. There are two other fees charged by the DOB: a one-time investigation fee and a fee if you seek to transfer your license to be employed by another entity.

The Executive Office of Administrative and Finance and the DOB have set the one-time investigation fee at $115, consistent with the investigation fee for other licensees under the jurisdiction of the DOB.

Another fee will be charged if you seek to transfer your license from one entity to another. The amount of that fee is $70.

Finally, the NMLS also charges a processing fee for certain transactions. Please consult the NMLS web site for additional information.

Are fees refundable?

No. All fees are non-refundable and are collected through the Nationwide Mortgage Licensing System (NMLS).

Where do I find information on the pre-licensing and continuing education requirements?

All information relative to mortgage loan originator education requirements, including a listing of approved course providers, approved pre-licensing and continuing education courses, and instructions for provider and course approval are posted on the NMLS education page.

When will new applicants have to take NMLS approved courses?

For any mortgage loan originator who submits an application through October 31, 2009, they can take either a DOB approved pre-license education course or an NMLS approved pre-license education course. After November 1, 2009, all DOB approved pre-license education courses will no longer be in effect and a mortgage loan originator applicant must take only NMLS approved pre-license education courses. (Also, see Transition Timeframes, below.)

If a licensed mortgage loan originator took a pre-license education course that had been approved by the DOB prior to the enactment of Chapter 44, do they have to take another pre-licensing course that has been approved by the NMLS?

No. The DOB will certify to the NMLS that the prior pre-license education requirements in Massachusetts met or exceeded the requirements under the federal S.A.F.E. Act and will provide the names of all licensed mortgage loan originators that have taken the approved pre-license courses. Therefore, all licensed loan originators who took a pre-license education course that was approved by the DOB at the time of their application will be deemed in compliance with the federal S.A.F.E. Act pre-license education requirements in conjunction with a process established by the NMLS. (Also, see Transition Timeframes, below.) .) Individuals who took pre-licensing courses prior to 2010 will be required to complete the continuing education requirements in accordance with the DOB's regulation 209 CMR 41.08.

Will Regulatory Bulletin 5.1-105 (Educational Requirements for Mortgage Loan Originators) continue to be in effect?

No. Concurrent with the release of these FAQs, the DOB has repealed Regulatory Bulletin 5.1-105 which governed the education requirements for mortgage loan originators and the process for DOB approval of education course providers and their pre-license and continuing education courses. After October 31, 2009, the DOB will no longer accept any pre-license course other than NMLS approved courses.

If a currently licensed mortgage loan originator was "grandfathered" for pre-license education requirements under the former Chapter 255F, are they "grandfathered" under the S.A.F.E. Act?

No. The federal S.A.F.E. Act has no grandfather provisions to exempt any currently licensed mortgage loan originator from the pre-license education requirements. Because the individuals who met the grandfather provisions have never taken a pre-license education course for a license in Massachusetts, the DOB will be unable to certify them as having satisfied the pre-license education requirements. However, if a mortgage loan originator has taken a pre-license education course in another state, they may be eligible to be certified by the other state, depending on that state's procedures. In addition, the DOB will establish a procedure for "grandfathered" mortgage loan originators to provide evidence of their continuing education credits in both calendar years 2009 and 2010 (a minimum of 8 DOB-approved continuing education hours may be taken in 2009 and a minimum of 8 NMLS-approved hours must be taken in 2010). If those credits meet or exceed 20 hours, the DOB will certify that they have met the pre-license education requirements under the S.A.F.E. Act. Currently licensed mortgage loan originators also have the option of taking an NMLS approved pre-license course. However, all previously "grandfathered" mortgage loan originators must fulfill their education requirements no later than September 15, 2010. (Also, see Transition Timeframes, below.)

When will the annual requirements for continuing education begin for mortgage loan originators?

Mortgage loan originators must complete at least 8 hours of NMLS-approved continuing education courses annually. In calendar year 2010, all licensed mortgage loan originators must complete the required continuing education prior to having their licensed renewed for the following year.

I qualify to have my education certified as S.A.F.E. Act compliant by the DOB. Where can I find more information regarding the procedures to complete this process?

Please read: SAFE Compliant Certification Process for Education.

Where do I find information on the pre-license testing requirements?

All information relative to pre-license testing requirements, including a testing handbook, the location of test administrators, and test scheduling information can be found at the NMLS testing page.

When will new applicants have to take the NMLS approved test(s)?

For any mortgage loan originator who submits an application through the NMLS beginning November 1, 2009, they will have to have first taken an NMLS-approved pre-license course (see above) and pass the NMLS approved test, including both the national test and the Massachusetts test. (Also, see Transition Timeframes, below.)

Does a mortgage loan originator who took a non-NMLS-approved test in another state have to take the NMLS-approved test?

Yes. Only the NMLS-approved test will be acceptable.

If a mortgage loan originator took the national portion of the NMLS-approved test, do they have to take it again to obtain a license in Massachusetts?

No. Once a mortgage loan originator applicant has taken and passed the national portion of the NMLS-approved test, they do not have to take it again. They only have to take and pass the Massachusetts portion of the test to apply for a license in Massachusetts.

Does a currently licensed mortgage loan originator still have to take the NMLS-approved test?

Yes. The federal S.A.F.E. Act has no grandfather provisions to exempt any currently licensed mortgage loan originator from the pre-license test requirements. Currently licensed mortgage loan originators who have not taken the NMLS-approved national and Massachusetts tests will have until October 31, 2010 to fulfill their testing requirements. However, all currently licensed mortgage loan originators are encouraged to take the test as soon as possible since there is a mandatory 30 day waiting period to retake a test if they have failed the test. After the fourth time failing any portion of a test (either the national or Massachusetts) there is a mandatory 180 waiting period. (Also, see Transition Timeframes, below.)

How does a mortgage loan originator working for a licensed mortgage lender or mortgage broker meet the requirement to be covered by a surety bond?

Licensed mortgage lenders or mortgage brokers sponsoring licensed mortgage loan originators must provide a evidence of surety bond meeting Massachusetts requirements as part of their company license (see Regulatory Bulletin 5.2-101 - Bond Requirements for Licensed Mortgage Lenders and Mortgage Brokers). Therefore, any mortgage loan originator that is an employee of a licensed mortgage lender or mortgage broker does not need to obtain a separate surety bond.

How does a mortgage loan originator working for a company that is exempt from the mortgage lender and broker provisions meet the requirement to be covered by a surety bond?

On September 15, 2009, the DOB released proposed amendments to Regulatory Bulletin 5.2-101 to include proposed surety bond requirements for individual mortgage loan originators working for a company that is exempt from licensing as a mortgage lender or mortgage broker. The two proposed solutions are for each mortgage loan originator to provide a surety bond for a flat amount or for the exempt entity to provide a bond to cover all licensed mortgage loan originators employed by the company. The DOB is seeking comments on the proposed changes.

What are the timeframes for compliance with the new mortgage loan originator license requirements?

Chapter 44 basically divides mortgage loan originators into two classes: those who had a license as of July 31, 2009, and those who obtained a license after July 31, 2009. Anyone who had a license as of July 31, 2009 have varying deadlines to fulfill all licensing requirements of the amended Chapter 255F, including pre-license education and testing, submission of fingerprints for a national criminal background check, and the authorization for the NMLS to pull a credit report (information on fingerprinting and credit reports will be made available once functionality is complete in the NMLS). Individuals in this class are advised to consult the top row of the chart below to determine the different timeframes in which to complete the various tasks. Individuals who are licensed after July 31, 2009 will have until July 31, 2010 to fulfill all of the revised requirements.

Because of the former "grandfather" provisions and the fact that certain functionality is not yet available in the NMLS, there will be some requirements that are staggered. Please see the chart below for clarification on when certain requirements become mandatory.

NOTE: If a currently licensed mortgage loan originator does not meet all requirements for licensure under Chapter 44 by the stated deadlines, it will be unable to approve the mortgage loan originator for continued licensure.

Transition Timeframes

  Must take pre-license education course Must take and pass both the National and Massachusetts components of the NMLS approved test Must submit fingerprints to the NMLS for a criminal background check Must authorize the NMLS to obtain a credit report
Individuals licensed on or before July 31, 2009 who met the "grandfather" provision By September 15, 2010, MLO must either: take an NMLS-approved pre-license course OR demonstrate to the DOB that they have met or exceeded the 20 hours in continuing education in 2009 and 2010 (no less than 8 hours in each year). Alternatively, the DOB will accept a certification from another state, if applicable. Yes, no later than October 31, 2010. Yes, no later than December 31, 2010. Yes, no later than December 31, 2010.
Individuals licensed on or before July 31, 2009 who were not "grandfathered" No. The DOB will certify that pre-license education requirements have been met. Yes, no later than October 31, 2010. Yes, no later than December 31, 2010. Yes, no later than December 31, 2010.
Individuals licensed after July 31, 2009 but who apply for a license by October 31, 2009 Yes, must take either DOB-approved or NMLS-approved pre-license course prior to submitting an application. Yes, no later than July 31, 2010. Yes, no later than July 31, 2010. Yes, no later than July 31, 2010.
Individuals who apply for a license after October 31, 2009 Yes, must take only NMLS-approved pre-license course prior to submitting an application. Yes, prior to submitting an application. Yes, no later than July 31, 2010. Yes, no later than July 31, 2010.

 

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