General Industry Letters
Mortgage Banking Letters
New York Banking Law Article 12-E and Superintendent’s Regulation Part 420 revised draft
January 8, 2010
To: The Individual or Institution Addressed
RE: New York Banking Law Article 12-E and Superintendent’s Regulation Part 420 revised draft
On July 11, 2009, Article 12-E of the New York Banking Law (“Banking Law”) was repealed and a new Article 12-E was introduced to comply with the provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE”).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”), which includes requirements for pre-licensure education and testing, bond requirements, and regulatory oversight. Additionally, a revised draft of Part 420 of the Superintendent’s Regulations has been posted on our website for public comment. The draft of Part 420 implements the licensing requirement of the new Article 12-E.
An overview and some background information about this new statute follow. For a more detailed review of the new Article 12-E and the draft of 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 located 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 Education and Testing
All MLOs are required 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. For specific details on taking the SAFE Test and other educational course requirements, please visit the Department’s website.
In addition to passing the SAFE Test, MLOs are required to 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 training related to lending standards for nontraditional mortgage products.
The Department is participating in the National Mortgage Licensing System (“NMLS”) education certification process and may audit at no cost to the MLO each approved pre-license or continuing education course at any time.
Transition Rules and Deadlines
Approved MLOs: Individuals who received approval to act as authorized MLO Loan Originators prior to July 11, 2009 under the previous version of Article 12-E must satisfy the pre-licensure education, testing, and bond requirements by August 31, 2010.
Pending MLOs: Applicants with an application listed as “Pending Accepted” or “Pending Incomplete” on the NMLS must satisfy the pre-licensure education and testing and bond requirements by May 31, 2010.
Manufactured Homes MLOs: Individuals who originate manufactured home loans were required to file an application with the Superintendent by December 31, 2009 and must satisfy the pre-licensure education and testing, and bond requirements by May 31, 2010.
Previously Exempt MLOs: MLOs who were engaged in mortgage loan origination activities prior to July 11, 2009 and exempted under the prior version of Article 12-E must immediately submit an application through NMLS and must satisfy the pre-licensure education and testing, and bond requirements by May 31, 2010.
New MLO Applicants: Other than individuals previously exempted from license requirements, all 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 Banking 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.
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 to the Mortgage Loan Originator Licensing section of the Department’s website at www.banking.state.ny.us. Your attention is also directed to the Nationwide Mortgage Licensing System website at www.mortgage.nationwidelicensingsystem.org.
Should you have any questions regarding the matters addressed in this letter, please contact Assistant Deputy Barreiro at (212) 709-5596.
Very truly yours,
Rholda L. Ricketts
Deputy Superintendent of Banks