Oregon Regulatory Update

Oregon Regulatory Update

 

Oregon Rules Chapters 850 and 890

 

The Oregon Department of Consumer and Business Services (“Department”) recently amended its rules related to mortgage lending and mortgage servicing, effective April 17, 2018.

 

“Contract or agreement for servicing the residential mortgage loan” means an agreement for the ongoing servicing of a loan and does not include one-time transfers of funds such as those associated with the origination or closing of a loan.

 

“Liquidity” means an unrestricted cash and cash equivalents, investment grade securities that are available for sale or held for trade, and unused/available portion of committed servicing advance lines.

 

“NMLS Call Report” means a report of condition and loan activity accepted by the Nationwide Multistate Licensing System (“NMLS”) as of January 1, 2016.

 

“Originates” means providing a service involved in the creation of a residential mortgage loan, including but not limited to the taking of the loan application, loan processing, the underwriting and funding of the loan, and the processing and administrative services required to perform these functions.

 

“Tangible net worth” means total equity minus receivables due from affiliated entities, minus goodwill and other intangible assets, and minus the carrying value of pledged assets net of the associated liabilities of the pledged assets.

 

Each person applying for a mortgage servicer license must submit to the Director of the Department of Consumer and Business Services (“Director”) all the following required application materials and information:

  • A completed Form MU1 submitted through the NMLS and approved by the Director.
  • A completed Form MU2 submitted through the NMLS and approved by the Director for any individual required to submit biographical information.
  • Fingerprints and an authorization to conduct a criminal records check and obtain a credit report submitted through the NMLS from any individual that acts as a controller or manager for the mortgage servicer. Fingerprints need not be submitted for registered agents.
  • Either:
    • A corporate surety bond submitted through the NMLS that meets specified terms calculated using the appropriate loan servicing volume amounts; or
    • An irrevocable letter of credit filed with the Director through the NMLS that meets specified terms calculated using the appropriate loan servicing volume amounts.
  • Financial statements prepared in accordance with generally accepted accounting principles, including a balance sheet and a statement of income or operations, dated not more than six months prior to submission of the application through the NMLS.  The financial statements may be prepared by the mortgage servicer, except that if the Director finds it in the public interest, the Director may require that a mortgage servicer submit financial statements prepared by an independent accountant. If the financial statements are more than six months old, interim period financial statements prepared by the mortgage servicer for the period ending the last full month prior to the date of application shall also be submitted.
  • A statement with a detailed breakdown of the portfolio of mortgage loan servicing rights on a nationwide basis, as well as separately for Oregon. The information should reflect the composition of the portfolio based on mortgage servicing rights owned and aggregate number of loans and unpaid principal balance of all 1-4 family residential mortgage loans segregated by subservicer. The information provided should be as of the most recent quarter and reported in the form of an NMLS Mortgage Call Report.
  • The names and contact information of all subcontractors performing servicing activities on behalf of the mortgage servicer.
  • Biographical information required to be submitted through the NMLS.
  • The information required for each branch office submitted through the NMLS.
  • Payment of fees for application or renewal, as applicable paid through the NMLS.

 

A mortgage servicer license will expire on December 31 of each calendar year. At least 30 days prior to the expiration of a mortgage servicer license, the mortgage servicer must submit a renewal request for the license to the Director through the NMLS and must:

  • Complete a renewal request with an attestation that the records are true and accurate; and
  • Pay any applicable renewal fees.

 

A mortgage servicer seeking to renew its license shall each calendar year:

  • Submit, or confirm, through the NMLS a corporate surety bond meeting specified terms and calculated using the appropriate loan servicing volume amounts; or
  • File or have on file with the Director an irrevocable letter of credit which meets specified terms calculated using the appropriate loan volume amounts.

 

If a mortgage servicer submits an application for renewal which is incomplete in any respect, the Director will notify the mortgage servicer of the deficiencies on the application. The mortgage servicer will have 30 days from the date of the notice or the end of the renewal period, whichever occurs last, to complete the application for renewal. If the mortgage servicer fails to complete the application for renewal, the license will be terminated on the expiration date by reason of failure to renew.

 

An applicant or licensee operating as an approved servicer by one or more government sponsored enterprise (“GSE”) must maintain liquidity, operating reserves, and tangible net worth that meet the standards set by the GSE. If approved by more than one GSE, the applicant or licensee must meet the highest standard of the GSEs for which it is approved.

 

An applicant or licensee with a portfolio of only non-GSE loans must maintain a minimum tangible net worth of $1 million or maintain a $1 million surety bond.  An applicant or licensee with a portfolio of non-GSE loans must maintain liquidity, including operating reserves, of .00035 times the unpaid principal balance of the portfolio.

 

The Director may waive or adjust one or more of the requirements if it finds that doing so will be in the public interest. The Director will consider the servicer’s loan portfolio, operational risks, net worth, operating reserves, and degree of supervision by other regulatory entities.

 

Examination charges must be paid upon receipt of the invoice of examination fees.  In addition to the initial application and renewal fees, licensees must pay an examination charge in the amount of $75 an hour for each person used in performance of the examination.  If an employee of the Department is required to travel out of state to perform an examination, the rate of charge is $75 per hour plus costs for travel and subsistence for each such person.  If the examination is performed by a consultant hired by contract for the particular work, the charge payable by the licensee is the actual cost to the Director of the contract consultant.

 

A person need not obtain a mortgage servicer license if the person:

  • Is an employee of a licensed mortgage servicer or an exempt entity acting within the scope of the person’s employment;
  • Owns the rights to service a mortgage loan but does not otherwise service a residential mortgage loan, including having an ongoing contractual obligation to provide financial support to a subservicer;
  • Is an escrow agent licensed by the Oregon Real Estate Agency operating a collection escrow but does not otherwise service a residential mortgage loan;
  • Is a licensed money transmitter conducting a money transmission at the borrower’s request, and does not otherwise service a residential mortgage loan; or
  • Is a nonprofit organization that:
    • Has been granted a tax-exempt status under section 501(c)(3) of the Internal Revenue Code;
    • Promotes affordable housing, affordable housing financing, or other similar services approved by the Director; and
    • Has not violated a state or federal law and has not engaged in a course of dealing that is fraudulent, deceptive, or dishonest.

 

A person qualifies for the exemption for a particular calendar year if it, along with all affiliates in all operations within the United States, serviced fewer than 5,000 residential mortgage loans in the twelve-month period preceding September 30th of the prior year.   If a person exceeds the threshold in the twelve months prior to September 30th of a given year, the person does not qualify for the exemption for the following year and must comply with the licensing requirement beginning on January 1st of the following year.  A person that does not qualify for the exemption for a given year but has serviced fewer than 5,000 loans for six consecutive months may apply to the Director to surrender its license. The Director may approve a licensee to surrender its license after finding that:

  • The licensee has an adequate business plan to operate below the 5,000 loan threshold for at least the next twelve months;
  • The licensee’s business plan adequately protects the interests of borrowers; and
  • Surrender of the license is otherwise in the public interest.

 

Each statement or notice sent to a borrower after January 1, 2019, must include the following text: “Residential mortgage loan servicers are regulated by the Oregon Division of Financial Regulation. To file a complaint, call (866) 814-9710 or visit http://dfr.oregon.gov.”