22 Jun Federal Regulatory and Utah Regulatory Update
The Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (the “Agencies”) issued guidance on June 21, 2012 to mortgage servicers addressing risks related to military homeowners who have informed the servicer that they have received military Permanent Change of Station (“PCS”) orders (“homeowners with PCS orders”). The Utah Division of Real Estate (the “Division”) recently amended the Utah Residential Mortgage Practices and Licensing Rules (the “Rules”) pursuant to the Utah Residential Mortgage Practices and Licensing Act (the “Act”) effective June 7, 2012.
Interagency Guidance on Mortgage Servicing Practices Concerning Military Homeowners and Permanent Change of Station Orders (dated June 21, 2012)
Although PCS orders are non-negotiable and operate under short, strict timelines, homeowners with PCS orders remain obligated to honor their financial obligations, including their mortgages. The Agencies have particular concerns about the following practices, which have the potential to mislead or otherwise cause harm to homeowners with PCS orders:
- Failing to provide homeowners with PCS orders who notify their servicers of such orders with accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify based on the information known to the mortgage servicer. The options should be consistent with the servicer’s public representations and agreements with government agencies and others regarding the servicer’s intent to offer such assistance to all qualified homeowners. These options include the Making Home Affordable Program and programs offered by or through Fannie Mae, Freddie Mac, the Federal Housing Administration (“FHA”), the Department of Veterans Affairs (“VA”), and the Department of Agriculture-Rural Development (“USDA-RD”). Servicers are not obligated to offer any particular loss mitigation programs.
- Asking homeowners with PCS orders to waiver their legal rights under the Servicemembers Civil Relief Act (“SCRA”) or any other law as a prerequisite to the mortgage servicer either providing information to the homeowner about available options or evaluating the homeowner’s eligibility for assistance.
- Advising homeowners with PCS orders who are current on their loans and able to make the monthly payment to intentionally skip making payments in order to create the appearance that they are having financial difficulties in order to obtain assistance for which they would not otherwise qualify. Providing accurate, factual information to a homeowner about available loss mitigation programs for delinquent homeowners is not a practice that raises this concern.
- Failing to provide a reasonable means for homeowners with PCS orders to obtain information on the status of their request for assistance.
- Failing to timely communicate the servicer’s decision regarding requests for assistance from homeowners with PCS orders and failing to include an explanation of the reason for the denial, where required, so that the homeowner has an opportunity to address any deficiencies, if applicable. Timelines will be judged on all of the facts and circumstances.
Mortgage servicers should ensure that their employees are adequately trained about the options available for homeowners with PCS orders. Information provided to homeowners with PCS orders regarding any available assistance options, such as the Making Home Affordable Program and other programs offered by or through Fannie Mae, Freddie Mac, the FHA, the VA, and the USDA-RD, should be accurate and readily understandable. The Agencies expect the institutions they supervise will maintain mortgage servicing policies and procedures appropriate to achieve these objectives, commensurate with the institution’s customer base and the size and complexity of its operations.
If the Agencies determine that a servicer has engaged in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate federal consumer financial laws and regulations, the Agencies will take appropriate supervisory and enforcement actions to address violations that harm consumers and seek all appropriate corrective actions, including requiring the mortgage servicer to strengthen its programs and processes.
Utah Residential Mortgage Practices and Licensing Rules
“Incentive program” means a program through which a licensed entity may pay a licensed mortgage loan originator who is sponsored by the entity for bringing business into the entity.
“Lending manager” means an individual licensed under the Act as a lending manager to transact business of residential mortgage loans.
The acronym “LM” stands for lending manager and includes the following licensing designations:
- Principal lending manager;
- Associate lending manager; and
- Branch lending manager (“BLM”).
R162-2c-201. Licensing and Registration Procedures
To obtain a Utah license to practice as a mortgage loan originator, an individual who is not currently and validly licensed in any state must now:
- Prove financial responsibility;
- Authorize the Nationwide Mortgage Licensing System and Registry (“NMLSR”) to provide the individual’s credit report to the Division for review; and
- Record with the NMLSR a mailing address, if the applicant is not able to accept the mail at the physical location or street address that is required to be on record with the NMLSR.
In addition to the above requirements, in order to obtain a Utah license to practice as a mortgage loan originator, an individual who is currently and validly licensed in any state must successfully complete, within the 12-month period prior to the date of application 15 hours (previously 40 hours) of Utah-specific loan originator pre-licensing education.
To obtain a Utah license to practice as a lending manager or LM (previously principal lending manager or PLM), an individual must now:
- Show financial responsibility;
- Provide to the Division:
- The individual’s unique identifier as assigned through the NMLSR; and
- Prove that the individual has taken and passed:
- The 20-hour national mortgage loan originator pre-licensing course; and
- The mortgage loan originator examinations that meet the requirements of the Act, are approved and administered through the NMLSR, and consist of a national component and a Utah-specific state component;
- Obtain approval from the Division to take Utah-specific LM pre-licensing education by evidencing that the applicant has satisfied, during the 5-year period preceding the date of application, the experience requirement of the Act through:
- 3 years full-time experience originating first-lien residential mortgages under a license issued by a state regulatory agency or as an employee of a depository institution, and evidence of having originated a minimum of 45 first-lien residential mortgages; or
- 2 years full-time experience originating first-lien residential mortgages under a license issued by a state regulatory agency or as an employee of a depository institution, and additional full-time experience as explained later in this memo; and evidence of having originated a minimum of 30 first-lien residential mortgages, and up to 15 additional points according to the experience points schedule as explained later in this memo;
- Record with the NMLSR a mailing address, if the applicant is not able to accept the mail at the physical location or street address that is required to be on record with the NMLSR; and
- Designate in the NMLSR whether the individual will be acting for the sponsoring entity as:
- The principal manager, an associate lending manager, or a branch lending manager;
- Authorize a criminal background check and submit fingerprints through the NMLSR; and
- Authorize the NMLSR to provide the individual’s credit report to the Division for review.
The requirements for licensing of an associate lending manager have been deleted.
To obtain a Utah license to operate as a mortgage entity, a person must now include in the MU1 form submitted to the NMLSR the name of any LM who will serve as branch lending manager.
R162-2c-204. License Renewal, Reinstatement, and Reapplication
To reapply for licensure after the reinstatement deadline passes, an individual now must complete only 15 hours of Utah-specific mortgage loan originator pre-licensing education if the terminated license was a mortgage loan originator license (previously 40 hours).
An individual who holds a license as a mortgage loan originator may perform loan processing activities regardless of whether:
- The individual’s license is sponsored by a licensed entity at the time the loan processing activities are preformed; or
- The individual is employed by a licensed entity.
R162-2c-301a. Unprofessional Conduct
A LM who is designated as a branch lending manager in the NMLSR must:
- Work from the branch office the LM is assigned to manage;
- Personally oversee all mortgage origination activities conducted through the branch office; and
- Personally supervise all mortgage loan originators and unlicensed staff affiliated with the branch office.
A mortgage entity must notify the Division of the location from which the entity’s principal lending manager (“PLM”) will work, and if the entity originates Utah loans from a location where the PLM is not present to oversee and supervise activities related to the business of residential mortgage loans, assign a separate LM to serve as the BLM. If the mortgage entity is using an incentive program, it must strictly comply with the requirements under the Rules.
R162-2c-301b. Employee Incentive Program
A licensed entity may pay an incentive to a mortgage loan originator who is sponsored by the entity and licensed in Utah or another state. A licensed entity may not pay an incentive to an unlicensed employee.
A PLM or entity that uses an incentive program must:
- Prior to paying an incentive to an individual, specifically describe in the individual’s employment contract the methodology by which the incentive will be calculated and the circumstances under which an incentive will be paid (including the limitations);
- Limit the dollar amount or value of any single incentive to $300 or less;
- Limit the sponsored mortgage loan originator to receiving no more than 3 incentive payments in a calendar year; and
- Keep complete records of all incentive payments made (which must be made available to the Division for audit or inspection upon request), including:
- Borrower name;
- Property address;
- Transaction closing date;
- Date of incentive payment;
- Name of employee receiving incentive payment; and
- Amount paid.
Before paying an incentive to a mortgage loan originator who is not licensed in Utah, the PLM or entity must ensure that the individual did not:
- Solicit or advertise to the client regarding financing for a Utah property; or
- Perform any other activity that constitutes the business of residential mortgage loans.
R162-2c-302. Requirements for Record Retention and Disposal
An entity licensed under the Act must now maintain and safeguard the name and contact information for the borrower in the transaction in its records.
R162-2c-501a. Optional Experience Equivalency Calculation
Thirty months of full-time experience in the following activities will be considered equivalent to one year of experience as a first-lien residential mortgage loan originator:
- Loan underwriter;
- Mortgage loan manager;
- Loan processor;
- Certified mortgage pre-licensing instructor; and
- Second-lien residential loan originator.
An applicant who wishes to receive experience credit but who cannot demonstrate experience equivalent to a full year of first-lien residential mortgage loan origination will:
- Be awarded experience credit as deemed appropriate by the Division; and
- Complete the experience requirement through additional experience as a first-lien residential mortgage loan originator, as determined by the Division.