NYSBL 590(1) and 590(2)
To: Examiner Weinkrantz
From: Assistant Counsel Christine M. Tomczak
Date: May 19, 2005
Subject: [ ] — Licensing Issue
Is [ ]required to register as a mortgage broker in New York State?
It is the Legal Division's opinion that [ ] is required to register as a mortgage broker.
On April 20, 2005, [ ] counsel, [ ] wrote to the Department concerning the activities of his client, [ ] In relating to mortgages on owner occupied housing in New York State and the licensing and registration provisions of Article 12-D of the New York State Banking Law and Part 410 of the Superintendent of Banks Regulations.
In that letter, [ ] argued that, [ ] is not a mortgage broker, bank or lender and therefore is not required to obtain a license or register under the New York Banking Law and the Superintendent's Regulations. He explained that it is an advertising and marketing company similar in scope to a search engine such as Google, the Yellow Pages and newspapers that advertise products and services to the public. He stated that its business is to provide consumers with information about a network of mortgage brokers and bankers throughout the United States. It is a free website that operates as an information portal for a consumer to locate a mortgage broker or banker. It receives no fee or compensation from any consumer for this service.
He further explained that it does not require any consumer to fill out information nor does it enter into contractual or other relationship with consumers with regard to obtaining a mortgage loan on their behalf. It does not request or earn any commissions from any broker or banker for its services. [ ] is paid a fee at a fixed rate by its advertising and marketing customers including mortgage brokers and bankers without regard to whether any consumer uses the broker's services or the broker's success or failure in providing any services to the consumer.
[ ] concluded that for all of the foregoing reasons, the licensing and registration requirements of Article 12-D of the New York Banking Law and Part 410 of the Superintendent's Regulations do not apply to [ ].
New York Banking Law § 590.2(b) provides that "no person, partnership, association, corporation or other entity shall engage in the business of soliciting, processing, placing or negotiating a mortgage loan or offering to solicit, process, place or negotiate a mortgage loan in this state without first being registered with the superintendent as a mortgage broker in accordance with the registration procedure provided in this article......"
Section 590.1(d) defines "soliciting, processing, placing or negotiating a mortgage loan" shall mean for compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, assisting or offering to assist in the processing of an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a third party......"
Part 38.1(r) of the General Regulations of the Banking Board provides that "the terms soliciting, processing, placing and negotiating a mortgage loan shall mean performing or offering to perform such activities for compensation or gain, either directly or indirectly, with a lender on behalf of a third party.
After a review of [ ] arguments, [ ] website and the above mentioned sections of the law, I conclude that [ ] appears to be in the business of soliciting mortgage loans and therefore is required to be registered. While [ ] states that [ ] does not require any consumer to fill out information, according to their website, in order for the consumer to be "matched" with participating mortgage companies to receive rate quotes and other information, the consumer must enter certain personal information such as annual household income, debt level, prospective down payment amount, etc. to be contacted by participating mortgage companies. Only if this information is provided will the consumer be contacted by mortgage companies and receive information such as quotes. [ ] compensation is paid by the mortgage brokers and bankers which are included in their advertising and marketing customer base. Based on the procedures described above, [ ] is soliciting mortgage loans on behalf of third party mortgage companies and therefore is subject to Article 12-D of the Banking Law.