General Industry Letters
Mortgage Banking Letters
Article 12-E of the New York Banking Law and Revised Part 420 of the Superintendent’s Regulation
December 17, 2009
To the Institution Addressed
RE: Article 12-E of the New York Banking Law and Revised Part 420 of the Superintendent’s Regulation
On July 11, 2009, Article 12-E of the New York Banking Law (“Banking Law”) was repealed and a new Article 12-E was introduced to comply with the provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE”). Specifically, the new Article 12-E establishes minimum standards for licensing Mortgage Loan Originators (“MLOs”), including pre-licensure testing and education; bond requirements; and regulatory oversight. Additionally, a draft revised Part 420 of the Superintendent’s Regulations was posted on our website for public comment in August. A slightly revised version was adopted on an emergency basis today, December 16th, and has been updated on the website. Revised Part 420 implements the licensing requirements of the new Article 12-E.
This letter provides an overview and some background information about this new statute. For a more detailed review of the new Article 12-E and revised Part 420 of the Superintendent’s Regulations, please visit our website at www.banking.state.ny.us and select the Mortgage Loan Originator Licensing link on the left navigation bar.
Definition of Mortgage Loan Originator
The definition for MLOs and individuals exempt from licensing has been updated. For full details on possible exemptions, please review the statute and draft regulation on the Department’s website.
Pre-licensing Testing and Education
The new Article 12-E requires all MLOs to comply with national testing standards. Applicants must pass the SAFE Mortgage Loan Originator Test (“SAFE Test”), by achieving 75 percent in the two components of the test: the National Component and the New York State Component. MLOs can now enroll for both components of the SAFE Test. Although the National test component is immediately available, the first appointment available for the New York State test component was December 10, 2009. For specific details on taking the SAFE Test and other educational courses and requirements, please visit the Department’s website.
In addition to passing the SAFE Test, MLOs are required take 20 hours of pre-licensure education courses, which must include three hours of federal laws and regulations; three hours of New York
State laws and regulations; three hours of ethics training; and two hours of lending standards for nontraditional mortgage products.
The Department is participating in the National Mortgage Licensing System (“NMLS”) education certification process and
Transition Rules and Deadlines
Approved MLOs: MLOs who received approval to act as authorized MLOs prior to July 11, 2009 under the previous version of Article 12-E must satisfy the bonding and pre-licensure testing and education requirements by August 31, 2010.
Pending MLOs: Applicants with an application listed as “Pending” on the NMLS, that have not been denied or withdrawn, must satisfy the bonding and pre-licensure testing and education requirements by May 31, 2010.
Manufactured Homes MLOs: Individuals who originate manufactured home loans must file an application with the Superintendent by December 31, 2009 and satisfy the bonding and pre-licensure testing and educational requirements by May 31, 2010.Previously Exempt MLOs: MLOs who were engaged in mortgage loan origination activities prior to July 11, 2009 but were previously exempted from having to be “authorized” under the prior version of Article 12-E must immediately submit an application through the NMLS to begin the licensing process and must satisfy the bonding and pre-licensing testing and education requirements by May 31, 2010.
New MLO Applications: Other than individuals previously exempted from licensing, all new applicants must submit an application 120 days prior to the date the individual intends to engage in mortgage loan origination activities.
Any individual with a criminal record should contact the Department before beginning the application process. Under the newly enacted Article 12-E, individuals may not be licensed as mortgage loan originators if they have been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court during the seven-year period preceding the date of the application for licensing; or at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering.
MLO Annual Renewal
MLOs whose NMLS status is listed as “Approved” on that system must renew their license by December 31, 2009 through the NMLS. Failure to renew by December 31, 2009 may result in the expiration of their license.
The Department strongly encourages all MLOs and individuals unsure if they are required to file an application to review the Small Business Regulation Guide or Frequently Asked Questions posted in the Mortgage Loan Originator Licensing section of our website at www.banking.state.ny.us.mbmlo.htm Your attention is also directed to the NMLS website at www.mortgage.nationwidelicensingsystem.org.Should you have any questions regarding the matters addressed in this letter, please contact Assistant Deputy Joseph Barreiro at (212) 709-5596.
Very truly yours,
Rholda L. Ricketts