28 Aug New York Legislative and Florida and Nevada Regulatory Update
The New York legislature recently amended the Banking Law governing licensed mortgage bankers, high-cost home loans, and subprime home loans relating to lender and broker compensation and yield spread premiums. The Florida Department of Financial Services recently amended its regulations governing the Mortgage Brokerage and Lending Transaction Journal (the “Journal”). The Nevada Division of Mortgage Lending (the “Division”) recently issued a memorandum regarding the clarification of licensing requirements under the Nevada Mortgage Brokers and Mortgage Agents Act (the “Act”) for wholesale lenders making loans secured by liens on real property in Nevada.
New York Assembly Bill 7329/Senate Bill 886 (effective August 17, 2012)
The following provision applies to the laws governing licensed mortgage bankers, high-cost home loans, and subprime home loans: In connection with making or brokering of a home loan, a person may not provide, and a mortgage broker or mortgage lender may not receive, directly or indirectly, any compensation that is based on, or varies with, the terms of any home loan. This does not prohibit compensation based on the principal balance of the loan.
The following provisions have been deleted from the high-cost laws and subprime home loan laws: In arranging a high-cost home loan or subprime home loan, the mortgage broker must, within three days after receipt of an application, disclose the exact amount and methodology of total compensation that the broker will receive. Such amount may be paid as direct compensation from the lender, direct compensation from the borrower, or a combination of the two if permitted by applicable law. The provisions of this paragraph will not restrict the ability of a borrower to utilize a yield spread premium in order to offset any up front costs by accepting a higher interest rate if permitted by applicable law. If the borrower chooses this option, any compensation from the lender that exceeds the amount of total compensation owed to the broker must be credited to the borrower. The superintendent will prescribe the form that such disclosure will take. This provision will not restrict a broker from accepting a lesser amount of compensation.
FLORIDA RULES 69V-40.265 (effective July 30, 2012)
In lieu of maintaining the Journal form (Form OFR-494-10), a mortgage lender or mortgage broker may maintain the Home Mortgage Disclosure Act loan/application register, Form FR HMDA-LAR, found at www.gpoaccess.gov/cfr/ under 12 C.F.R., part 1003, Appendix A (2010).
NEVADA DIVISION OF MORTGAGE LENDING MEMORANDUM (dated August 20, 2012)
The term “wholesale lender” means a lender that uses an origination strategy by which it purchases loans from mortgage brokers, mortgage bankers, or other loan originators. Depending upon its business model, a wholesale lender may purchase the loan before, during, or after closing.
Unless a person is exempt, a person must not offer or provide any of the services of a mortgage broker or engage in, carry on, or hold himself or herself out as engaging in or carrying on the business of a mortgage broker without first obtaining a mortgage broker license under the Act. A wholesale lender’s business activities generally meet the definition of “mortgage broker” under the Act and would require licensure, unless the wholesale lender is otherwise exempt from the licensing requirements.
There is no licensing exemption for a person acting as a wholesale lender in Nevada. The Nevada Administrative Code (the “Regulation”) provides that a person is not acting as a mortgage broker if the person only offers to provide money to invest in loans secured by an interest in real property to a person licensed or exempt from licensure under the Act.
The Division interprets the language in the Regulation to exclude a person that is a wholesale lender that only provides a funding source for a licensed or exempt mortgage broker to close and fund as the lender of record, a loan secured by real property in Nevada. After closing the loan in its own name as the lender of record, the licensed or exempt broker may assign the closed or funded loan to the wholesale lender. In this scenario, the wholesale lender is excluded from the definition of mortgage broker because it is only providing funds to a licensed or exempt mortgage broker to invest in loans secured by an interest in real property, and, therefore, would not be required to obtain a mortgage broker license. However, if the wholesale lender buys the note or purchases the assignment of the note from the licensed or exempt mortgage broker, rather than taking an assignment, the wholesale lender is acting as a mortgage broker, and is required to be licensed as a mortgage broker because it has held itself out as “being able to buy or sell notes secured by liens on real property”.
On or before October 1, 2012, any person operating as a wholesale lender that is conducting its business in a way that requires a mortgage broker license, must apply for and obtain a mortgage broker license. Any person continuing to conduct wholesale lender activity after December 31, 2012, that is required to be licensed as a mortgage broker and that has not applied for the license, will be subject to administrative disciplinary action.
A licensed mortgage broker in Nevada must provide its name and NMLS Unique Identifier Number and return a copy of the Division’s Memorandum to the address provided below. The Memorandum may be found at http://mld.nv.gov/Documents/2012/2012-08-20_Memo_ClarificationLicensingReqWholesaleLenders.pdf. The Division can be contacted for questions concerning this Memorandum at (702)-486-0782.
The Department’s address is:
Nevada Department of Business and Industry, Division of Mortgage Lending
7220 Bermuda Road, Suite A
Las Vegas, NV 89119