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Banking Interpretations

NYSBL 590(2)
General Regulations Part 38

August 10, 2009

[---]

Dear [---]:

Your letter to the New York State Banking Department (the "Department"), has been referred to me for response. In your letter you asked for confirmations on certain activities relating to FHA mortgage loans, and also asked whether a registered mortgage broker needs any approval from the Department prior to brokering an FHA mortgage loan.

Firstly, you are correct in concluding that a registered mortgage broker only needs approval from the Department to issue commitments, or make FHA mortgage loans in the name of the broker. Note that in connection with New York properties, these activities - issuing commitments and making mortgage loans - are generally performed by mortgage bankers except as stated above, where mortgage brokers in connection with FHA mortgage loans, have received the Department's approval and any other approval, including approval from HUD, prior to issuing such commitment or making such FHA mortgage loan.

Further, it should be noted that unlike any other person or entity, who/which are generally permitted to make up to four mortgage loans in a calendar year without first being licensed as a mortgage banker, a mortgage broker is strictly prohibited, albeit indirectly, by 3 NYCRR General Regulations of Banking Board, Section 38.3(a)(i), from making any mortgage loan except as stated above and with all the necessary approvals in place.

Turning then to your question of whether a registered mortgage broker needs any approval from the Department prior to brokering (soliciting, processing, placing or negotiating)1 a mortgage loan; simply stated, the answer is no. A mortgage broker registered under Article 12-D of the Banking Law is not required to have a separate or any special approval from the Department prior to brokering an FHA mortgage loan. Of course, such mortgage broker must: (i) comply with all the relevant Banking Laws and Regulations, including 3 NYCRR 38.3(a)(i), which requires a mortgage broker to disclose to a borrower that the mortgage broker may not make or commit to make mortgage loans; and (ii) ascertain that the brokering activity would not violate any other federal or state law.

I trust the foregoing is responsive to your inquiry.

Very truly yours,

cc: Rholda Ricketts

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1.       New York Banking Law § 590(2)(b)