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Information Regarding New Regulation

November 5, 2008

RE: New Supervisory Procedure MB 108 (Approval as Provider of Education Courses for Mortgage Loan Originators; Approval of Education Courses; Other Education Requirements)

The Superintendent has adopted the attached new Supervisory Procedure MB 108 as a final rule. 

The new regulation implements Article 12-E of the Banking Law, as amended by the Legislature in 2007, which creates a framework for the regulation of mortgage loan originators (MLOs) and authorizes the Superintendent to make such rules and regulations as may in his or her judgment be necessary or appropriate for the effective administration or enforcement of that article.

Prospective Education Providers should also be aware that there are new Federal requirements for state-licensed mortgage loan originators, including requirements for pre-license education courses, as well as continuing education.  Those requirements may be found in Title V of the Housing and Economic Recovery Act of 2008 (“HR 3221”).  When that new law becomes effective, education courses will have to be approved by the National Mortgage Licensing System and Registry (NMLSR).  It is our understanding that, until the NMLSR has adopted procedures for course approvals, it will rely on approvals by states with educational requirements.  Consequently, the Banking Department has proceeded with the adoption of the attached Supervisory Procedure.

Article 12-E requires individuals to obtain authorization from the Superintendent of Banks before engaging in mortgage loan origination with respect to New York residential real estate.  As a condition to initial authorization and subsequent annual authorization, Section 599-d of the Banking Law requires MLOs to take courses that must include education in the legal and regulatory requirements governing the mortgage industry and mortgage practices in New York, as well as courses in the ethics of mortgage loan originating and mortgage lending.

The continuing education requirements of Article 12-E, like those imposed on insurance brokers and real estate brokers, ensure that individuals engaged in the business of mortgage loan origination have a solid understanding of the mortgage business as well as an understanding of ethical business practices and relevant federal and state laws and regulations.  In addition, the continuing education component of the law recognizes that laws, regulations and practices governing the mortgage industry are subject to continuing change and requires those individuals involved in mortgage origination to maintain an understanding of these changes.

The Banking Law designates certain educational institutions and trade associations as “Authorized Providers” of Education Courses for MLOs.  The Banking Law also authorizes the Superintendent to approve other providers of such courses (“Approved Providers”).

The new regulation implements these statutory provisions.  It establishes an application process for authorization as an Approved Provider of Education Courses for MLOs.  Applicants must submit an application for provider approval and separate applications for course approval.  Providers must retain certain records with respect to each course for at least four years.

Under Article 12-E, individuals who engaged in mortgage loan origination before January 2008 will have until January 1, 2010 to comply with the initial education requirements.  Those who became employed on or after January 1, 2008 must complete the initial education requirements by the end of the year in which the first anniversary of their authorization occurs.  Approved Providers may not give Education Courses (or accept money for Education Courses) until they have been approved by the Superintendent.  Under HR 3221, all mortgage loan originators, as defined in HR 3221, must comply with the new registration requirements, including the pre-registration course work, by July 30, 2009.  It is possible, although not assured, that this deadline, as applied to MLO’s in New York, will be extended by the U.S. Department of Housing and Urban Development.

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