The Mortgage Bankers Association is seeking relief from the dual tracking system under the Secure and Fair Enforcement for Mortgage Licensing Act that sets different qualification requirements for loans originators, depending on where they are employed.
Specifically, the MBA wants to amend the SAFE Act to allow for a transitional license for originators who want to move from federally regulated institutions to state-regulated entities. The association also wants the law changed to allow originators licensed in one state to work in another state pending the completion of the licensing requirements in the second jurisdiction.
Under the 2008 law, which is part of the broader Dodd-Frank Financial Reform legislation, originators employed by state-regulated companies must be both licensed and registered, whereas those who work for federally regulated banks, credit unions and savings and loans must only be registered because their employers already are subject to Uncle Sam's rules.
Now, the MBA wants to "form a bridge" from the federal system to the state system with a transitional license that would give applicants 120 days in which to complete any and all requirements a particular state would deem appropriate.
Otherwise, said Ken Markison, the group's regulatory counsel, state-regulated brokerage firms and lenders won't hire originators who are only registered or licensed in another state, "no matter how qualified they are," because they won't be able to work until they pass the new state's muster.
That means delays of "30 days or considerably longer" before "well-qualified" persons can start originating loans for their new employers, he said.
As Markison outlined the MBA's proposal to the American Association of Residential Mortgage Regulators at its annual meeting in San Francisco earlier this month, only qualified, already registered originators who are certified and sponsored by their new companies would be eligible for the three-month transitional license, which would authorize the applicant to work as a loan officer until he meets the state's licensing requirements and completes the licensing exams.
If he fails the tests, his temporary license would be rescinded on the spot.
The applicant would have to certify that he is registered and has been working for a "reasonable period" as an originator, has never had his originator's license revoked, and has not been convicted of a felony in the last seven years or ever been involved in fraud, dishonesty, money laundering or breach of trust.
He would have to maintain a valid unique National Mortgage Licensing System identifier and authorize the NMLS to obtain his credit report, and his new employer would have to cover him under its surety bond during the term of the transitional license.
Markison took the MBA's case to AARMR because it is the trade association for state mortgage regulators. The MBA also is petitioning the Conference of State Bank Regulators because it operates the NMLS through a subsidiary, the State Regulatory Registry. The group will be meeting soon with the new Consumer Financial Protection Bureau about its proposal.
Without the transitional licenses, Markison maintained, small enterprises and other state-regulated companies "are at a disadvantage in attracting and putting to work" good people from federally regulated institutions or other states. On the other hand, he pointed out, federal lenders have no problem attracting and hiring originators away from state-regulated entities, which can put their new hires to work immediately.
He also told AARMR that "consumers patronizing" the lenders its members oversee will suffer from decreased choices and potentially increased financing costs if a system is not created for temporary licenses.
The MBA executive came armed with a legal opinion from the Washington law firm Patton Boggs that holds that the SAFE Act does not supplant a state-licensing framework and is deferential to a state's power to implement a SAFE Act-compliant licensing scheme, including one with transitional licensing and the recognition of qualifications under the laws of another state.
Some states can create a transitional license via regulation, Markison said, while other may have to do so legislatively. But either way, he added, it is "a relatively small change that can reduce enormous pressure on state-regulated entities and aid consumers."
