Federal and Massachusetts Regulatory Update

Federal and Massachusetts Regulatory Update

The Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the National Credit Union Administration recently issued an interagency advisory that discusses two existing options to help insured depository institutions address shortages of state-certified and licensed appraisers, particularly in rural areas.  The Massachusetts Division of Banks (“Division”) has issued an opinion letter dated May 10, 2017, regarding the exclusivity requirement for mortgage loan originators.


OCC Bulletin 2017-19


Two existing options that may address appraiser shortages are temporary practice permits and temporary waivers.


The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) requires a state appraiser certifying or licensing agency to recognize the certification or license of an appraiser issued by another state on a temporary basis for federally related transactions.  A federally related transaction includes any real estate-related financial transaction which a federal financial institutions regulatory agency regulates and which require the services of an appraiser.  Subject to limitations in states’ laws, temporary practice permits could allow state certified or licensed appraisers to provide their services in states where they are not certified or licensed, including those experiencing a shortage of appraisers.


FIRREA also authorizes the Appraisal Subcommittee, after making certain findings and with the approval of the Federal Financial Institutions Examination Council, to grant temporary waivers of any requirement relating to certification or licensing of individuals to perform appraisals in states or geographic political subdivisions of any states where there is a short of appraisers leading to significant delays in obtaining appraisals in connection with federally related transactions.  These temporary waivers may provide regulated institutions lending in affected areas with access to more individuals eligible to complete the required appraisals, which may help alleviate some of the cost and burden associated with having a shortage of state certified or licensed appraisers in affected areas.


The bulletin also sets forth the process of obtaining a temporary waiver.  Requests for temporary waivers can be submitted by any of the following:

  • A state appraiser certifying or licensing agency;
  • A federal bank regulatory agency;
  • A regulated financial institution or credit union; or
  • Other persons or institutions with a demonstrable interest in appraiser regulation.


Massachusetts Division of Banks Opinion


Massachusetts law ALM GL ch. 255F §4(b) requires exclusivity for mortgage loan originators providing that a mortgage loan originator may be employed by no more than one entity at a time.  “Entity” is defined as a person or entity that is licensed as a mortgage lender or broker under ALM GL ch. 255E.


The Division was asked whether the activities of ADP Total Source (“ADP”) are in violation of the exclusivity requirement of 255F for mortgage loan originators.  ADP is a professional employer organization (“PEO”) that provides human resources services to its small business clients, including health insurance plans as well as retirement plans.  ADP enters into client services agreements with its clients whereby ADP assumes certain responsibilities with regard to the client’s employees.  These responsibilities include paying the client’s employees, paying and withholding payroll taxes, maintaining workers’ compensation coverage, providing employee benefit programs, and administering HR compliance functions.  The client maintains exclusive control over the day-to-day activities of its employees and its business.  ADP is deemed the employer of the client’s employee solely for the designated HR functions; the client remains the employer for all other purposes.


The U.S. Department of Housing and Urban Development (“HUD”) recently issued Mortgagee Letter 2016-18 which indicates that PEO’s such as ADP may provide services to Federal Housing Administration (“FHA”) approved mortgage lenders.  The mortgagee letter specifically permits mortgage lenders to use outside contractors for human resources services provided by a PEO or a similar entity.


The Division provides in their opinion letter that the exclusivity provision operates to limit a mortgage loan originator to a single licensed mortgage broker or lender for purposes of the originator’s mortgage industry work.  In the example provided, ADP assumed only limited human resources functions and therefore acts only as a co-employer of a mortgage loan originator with regard to functions that are unrelated to the originator’s mortgage industry work.  The Division indicates that ADP may provide its services, as described, to Massachusetts licensed mortgage lenders and brokers without violating the exclusivity provisions in 255F.  The Division does have the right to review a client’s agreement with ADP and to require specific language in an addendum specifying that ADP is not an employer for the purposes of 255F.