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

November 5, 2008

SUPERVISORY PROCEDURE MB 108
APPROVAL AS PROVIDER OF EDUCATION COURSES FOR MORTGAGE LOAN ORIGINATORS; APPROVAL OF EDUCATION COURSES; OTHER EDUCATION REQUIREMENTS

(Statutory authority: Banking Law, Art. 12-E, § 599-d)

§ 108.1 Definitions.

(a) For purposes of this Supervisory Procedure:

  1. “Approved Provider” means an individual or entity approved by the Superintendent to offer approved Education Courses pursuant to section 599-b(4)(c) of the Banking Law.

  2. “Authorized Provider” means a trade association or institution of post-secondary education referred to in section 599-b(4)(a) or (b) of the Banking Law.

  3. “Course Records” means the timed course outline; faculty biographies, the computation of credit Hours, the breakdown of categories of credit; the attendance (sign-in and –out) sheet for the course or other attendance verification information; an official attendance list of students attending each Education Program, including the name, time, date and location of the Education Course, and any outlines or other materials distributed.

  4. "Education Course" means a formal course of learning, or instructional or training program that relates to the current business of Mortgage Loan Originating, including the statutory and regulatory requirements and judicial interpretations governing mortgage lending, banking and real estate transactions and practices in this state.

  5. “Experienced Originator” means an individual who has four or more years of full-time experience in Mortgage Loan Originating as of the date that he or she submits an application for (i) initial authorization as an MLO, or (ii) the latest annual renewal of such authorization.

  6. “Hour” means fifty minutes of education time, exclusive of non-education time such as breaks, meals and introductions.

  7. “Inexperienced Originator” means an individual who has fewer than four years of full-time experience in Mortgage Loan Originating as of the date that he or she submits an application for initial authorization as an MLO.

  8. “Instructor” means an individual who teaches one or more approved Education Courses.

  9. “Mortgage Loan Originator” (MLO) shall have the same meaning as is set forth in section 599-b(1) of the Banking Law.

  10. "Mortgage Loan Originating" shall have the same meaning as is set forth in section 599-b(2) of the Banking Law.

  11. “Provider” means an Authorized Provider or an Approved Provider.

  12. “Student” means an individual who has enrolled in an Education Course.

Other capitalized terms used herein without definition have the meanings set forth in Part 420 of the Superintendent’s Regulations.

§ 108.2 Application to be an Approved Provider.

(a) Providers. The Education Courses required by Article 12-E of the Banking Law may be offered by

  1. national, New York state or other state associations that are controlled by and whose membership comprises, but is not necessarily restricted to, mortgage bankers, mortgage brokers, or banking institutions (hereinafter, “trade associations”); provided, however, that any such association shall maintain supervision of such education courses satisfactory to the Superintendent;

  2. degree and non-degree granting institutions of post-secondary education chartered, approved or licensed by the New York Board of Regents (hereinafter, “education institutions” and, collectively with trade associations, “Authorized Providers”); or

  3. any other persons or entities as may be approved by the Superintendent (hereinafter, “Approved Providers”). Such approval shall remain in effect so long as the Education Courses offered by the Approved Provider evidence standards that are consistent with the purposes of Article 12-E of the Banking Law, as determined by the Superintendent.

(b) Application for Approved Provider status. Application by persons or entities seeking to become Approved Providers pursuant to Part 420.12(a)(3) and this Procedure shall be made in the form prescribed by the Superintendent, a copy of which is available on the Department’s website, and attested to by the applicant.

(c) Application content. A completed application shall include the following:

  1. The applicant’s business address and telephone and fax numbers.

  2. If the applicant is an individual or sole proprietorship, the name, business address and telephone and fax numbers of the applicant (or, if no separate business address and telephone number exists, the home address, telephone and fax numbers).
  3. If the applicant is a partnership, the name, residence address, telephone and fax numbers and percentage ownership of each controlling member of the partnership.

  4. If the applicant is a corporation, the name, residence address, telephone and fax numbers and percentage owned by each executive officer, director and each holder of 10% or more of its voting shares.

  5. If the applicant is a limited liability company, the name, residence address and telephone and fax numbers of each manager and each member controlling 10% or more of the membership shares.

  6. If the applicant is a trust, the name, residence address and telephone and fax numbers of each trustee and principal beneficiary of the trust.

  7. The name, business address and telephone and fax numbers of a principal contact person who shall be available to the Department between 9:00 a.m. and 5:00 p.m. New York time on days that are not weekends or New York banking holidays. Such contact person shall have knowledge of and authority to act with regard to all pertinent matters as determined by the Superintendent.

  8. A list of all states in which the applicant is licensed, registered or otherwise authorized to provide education, as well as the applicant’s license, registration and/or authorization number(s) in each such state.

  9. Whether it has submitted a prior application for approved provider status to the Department, as well as information regarding whether the application was approved, denied, withdrawn or otherwise acted upon.

  10. Information with respect to any refusal, revocation or suspension of license(s), registration(s) or authorization(s) to provide education in any other jurisdiction.

  11. Information with respect to any prior bankruptcy adjudications in this or any other jurisdiction.

  12. Information with respect to any prior criminal convictions in this or any other jurisdiction.

  13. Proof that the applicant, if required by statute, has made all required filings to engage in its business in New York and is in good standing with all relevant New York State regulatory entities, including but not limited to the New York State Department of State.

  14. Information as to the applicant’s experience in providing education courses. Generally, in determining whether to grant approval, the Superintendent expects that the applicant will have regularly sponsored or organized education courses in the past. The applicant shall demonstrate that it is capable of organizing education courses, including instructors with the requisite knowledge and experience, and is capable of administering the Education Course requirements of Article 12-E, as more fully described in Part 420 and this Supervisory Procedure. The Superintendent may request supporting information for one or more of those courses.

  15. Information as to the course format or formats in which the applicant intends to provide instruction and a description of the applicant’s facilities for conducting or distributing Education Courses in such formats.

  16. A copy of the applicant’s refund policy.

  17. Information as to the applicant’s procedures for verifying attendance at Education Courses.

(d) Information and documents required. The application shall include the information and documents required by this Procedure. In addition, the Superintendent may request such additional information and documents as may be necessary to determine whether the Education Courses provided by the applicant are consistent with the purpose of Article 12-E.

(e) In-person conferences. In the absence of a showing of undue hardship, the Superintendent may also require the applicant and any officers, directors and/or representatives of the applicant to appear at the Banking Department to present information about the qualifications of the applicant.

(f) Incomplete application.

  1. No application shall be determined to be complete until the Superintendent has received all required information and documents. If an application is determined by the Superintendent to be incomplete, the Superintendent shall inform the applicant of any items that must be addressed in order for the Department to continue the application review process.

  2. If a complete response fully addressing all the items identified is not received by the Banking Department within 30 days of providing such information (including the sending of any such notice), the Superintendent shall consider the application withdrawn. The Superintendent may, upon receipt of a written request setting forth good cause for the inability to meet this deadline, extend such deadline.

  3. Any individual or entity seeking provider approval following withdrawal of an application shall submit a new application that includes all required information and documents.

(g) Certificate of provider approval. Upon the approval of an application for approved provider status, the Banking Department shall issue a certificate of provider approval that shall remain in effect unless suspended or revoked pursuant to Part 420.12(i).

(h) Listing of Approved Providers and courses, etc. A listing of (i) Approved Providers, (ii) approved Education Courses, and (iii) each trade association and education institution that has notified the Superintendent that it intends to offer Education Courses to MLOs authorized in New York, are available at the Banking Department’s website (www.banking.state.ny.us).

§ 108.3 Education course approval.

(a) Application for course approval.

  1. Prior approval of the Superintendent is not required for any Education Course offered by an Authorized Provider defined in section 108.2(a) of this Procedure, provided that the Authorized Provider has determined that such Education Course is consistent with the purpose of Article 12-E of the Banking Law, and, provided further, that, at the discretion of an Authorized Provider, the Authorized Provider may apply for prior approval of any Education Course. Application for course approval shall be made in the form prescribed by the Superintendent, a copy of which is available on the Department’s website at www.banking.state.ny.us, and shall contain the information set forth in paragraph (d) of this section 108.3.

  2. An Approved Provider shall not give any Education Course unless the Superintendent has first approved such course. Application for course approval shall be made in the form prescribed by the Superintendent, a copy of which is available on the Department’s website at www.banking.state.ny.us, and shall contain the information set forth in paragraph (d) of this section 108.3.

(b) No payment before approval. No Approved Provider shall accept payment from any individual or entity for enrollment in any Education Course until such course has received approval from the Superintendent.

(c) Course approval procedure.

  1. Initial request with application for provider approval. Request(s) for approval of at least one and no more than five Education Courses shall be made as part of the application for approved provider status.

  2. Subsequent requests. Following submission of an application for approved provider status, the applicant shall make no further requests for course approval unless the applicant has been notified by the Superintendent that the application has been approved. If the application for Approved Provider status is approved, the Approved Provider may make additional requests for course approval as necessary for as long as its Approved Provider status remains in effect. Such additional requests for course approval shall be subscribed by the Approved Provider or its representative under penalty of perjury.

(d) Content of request for course approval. A request for approval of an Education Course by any Provider shall be made in such form as may be prescribed by the Superintendent. Such request shall:

  1. state the length of the course in minutes (do not include time allotted for breaks, introductory remarks, meals and other non-educational activities);

  2. state the number of Hours that a student who completes the course may apply toward the education course requirements of Article 12-E of the Banking Law under Part 420.12 of the Superintendent’s regulations;

  3. supply a detailed course outline that describes the topics covered and the time devoted to each topic;

  4. state the method of presentation (i.e., whether the course will be presented in a traditional live classroom format or another format such as online instruction). If such formats require electronic transmission or recording, describe the production methodology and the resources that the applicant will devote to ensure the quality of the transmission or production medium. The Superintendent may require the applicant to demonstrate its capability of producing high quality education materials in this format; and

  5. state the method applicant will use to determine whether course instructors satisfy the requirements of Section 108.8 of this Part, regarding the qualifications and criminal history of course instructor(s).

(e) Assignment and use of course approval number. The Superintendent shall assign a course approval number to each approved Education Course. The course approval number shall be clearly stated on each course completion certificate for such course..

(f) Duration of approval, changes to a course. Unless suspended or revoked by the Superintendent, a course approval shall remain in effect so long as there have been no material changes to the course content, other than updates.

(g) No promotional use of Education Courses. A Provider may not use any Education Course to promote any particular loan product or any Originating Entity or any Exempt Article 12-D.

(h) Invalidation, revocation, etc. If a course approval is suspended or revoked by the Superintendent, the Provider shall immediately cease offering such course and provide notice to students enrolled in future presentations of the course along with a refund of any fees for such course unless the Provider has received prior written approval from the Superintendent to proceed in another manner.

  1. Audit by Superintendent. Each Provider shall provide the Superintendent with a schedule of its course offerings. The Superintendent or his or her representative may audit at no cost each approved course at any time. If the Provider has not complied with the requirements of Article 12-E of the Banking Law, Part 420.12 of the Superintendent’s Regulations or this Supervisory Procedure, or if the Superintendent finds that the course does not conform to the requirements of Article 12-E and Part 420.12 of the Superintendent’s Regulations, the Superintendent shall notify the Provider of the deficiencies. If the Provider does not rectify such deficiencies within 30 days, or such longer period as the Superintendent may approve, the Superintendent may suspend or revoke its approval of any course, may revoke the authorization of such Provider or may take such other action as may be permitted by Article 12-E,
  2. Part 420 or this Procedure.

§ 108.4 Course Formats.

(a) Inexperienced MLOs. In the case of an MLO with less than four years’ experience as a Mortgage Loan Originator, all credit Hours in any continuing education period shall be in Education Courses given in the following formats: (i) a traditional live classroom setting, (ii) fully interactive video or audio conferences, where there is an opportunity for students to ask questions, or (iii) a format where the student cannot progress from one course segment to another or complete the course without answering questions that test the student’s comprehension of subjects previously covered.

(b) Experienced MLOs. In the case of an MLO with four or more years’ experience as mortgage loan originators, half of the credit Hours in any continuing education period shall be in of Education Courses given in the following formats (i) a traditional live classroom setting, (ii) fully interactive video or audio conferences, where there is an opportunity for students to ask questions, or (iii) a format where the student cannot progress from one course segment to another or complete the course without answering questions that test the student’s comprehension of subjects previously covered. The remaining credit Hours may be satisfied in any of the preceding formats or any of the following formats, (i) online programs (ii) webcasts; (iii) audio and video recordings, (iv) video conferencing (v) teleconferencing; (vi) computer based learning software, (vii) live satellite broadcasts, or (vii) such other format as may have been approved by the Superintendent; provided that, in the case of an Approved Provider, the Provider has established to the satisfaction of the Superintendent the ability to produce Education Courses of high quality in that format. Providers who use a format that does not involve a live classroom monitor who ensures accurate attendance monitoring shall adopt independent attendance verification procedures as set forth in Section 108.7(b).

108.5 Course requirements for Inexperienced Originators.

(a) In general. Education Course requirements shall vary depending upon an individual’s originating experience.

(b) Format Requirement. All Education Courses taken by Inexperienced Originators shall comply with the format requirements set forth in Section 108.4(a).

(c) Course requirements for Inexperienced Originators. Education courses taken by Inexperienced Originators shall emphasize the fundamental tasks performed by Mortgage Loan Originators and must provide students with basic knowledge and competency in areas of Mortgage Loan Origination and lending including but not limited to the following :

  1. Loan procedures and processes;

  2. Real property sales transactions;

  3. Relevant New York State laws and legal developments governing mortgages, lending, credit, real property and proceedings, consumer protection, fraudulent and deceptive business practices, advertising, predatory lending, fair lending and privacy;

  4. Relevant federal laws and legal developments governing mortgages, lending, credit, real property, consumer protection, fraudulent and deceptive business practices, advertising, predatory lending, fair lending and privacy, including the Equal Credit Opportunity Act (ECOA); Fair and Accurate Transaction Act (FACTA), Fair Credit Reporting Act (FCRA), Home Mortgage Disclosure Act (HMDA), Home Ownership and Equity Protection Act (HOEPA), Gramm-Leach Bliley Act, Federal Trade Commission Safeguard Rules, Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act, Federal Trade Commission Act relating to deceptive practices and false advertising, and Federal Trade Commission Safeguard rules;

  5. Ethical business practices in the mortgage industry (and at least three Hours of the total for each biennial or quadrennial education period shall consist of instruction in ethical conduct in the area of Mortgage Loan Originating or lending practices);

  6. Detection and elimination of fraud in the mortgage industry; and

  7. Such other areas and subjects as the Superintendent may prescribe or approve.

§ 108.6 Course requirements for Experienced Originators.

(a) Course Requirements. Education courses taken by Experienced Originators shall reflect the activities performed by Mortgage Loan Originators and provide students with advanced knowledge of the laws and business practices applicable to the mortgage industry. Subjects may include, but are not limited to, the areas set forth in section 108.5, provided that (i) the Education Courses shall be geared to those who have already mastered the basics of the subject, and (ii) at least three Hours of the total for each biennial or quadrennial education period shall consist of instruction in ethical conduct in the area of Mortgage Loan Originating or lending practices.

(b) Format Requirement. All credit Hours for each biennial or quadrennial continuing education period shall comply with the format requirements set forth in Section 108.4(b).

§ 108.7 Certificate of course completion; education course credit.

(a) Certificate of course completion. Each Provider shall issue to each student who completes an Education Course, within 60 days of such completion, a certificate of course completion.

  1. The certificate of course completion shall identify the following:

    1. name of student who completed the course;

    2. name of the Provider that offered the course;

    3. business address of Provider that offered the course;

    4. course name;

    5. in the case of an Approved Provider, the course approval number assigned by the Department;

    6. number of Hours of course credit in accordance with Section 108.7(c) of this Supervisory Procedure, including the allocation of such Hours into the categories set forth in Section 108.5(b);

    7. course location;

    8. course format;

    9. course start date and completion date;

    10. affirmation to be executed by the student verifying student’s completion of course;

    11. the signature of an authorized representative of the Provider (which may be a facsimile signature);

    12. such other information as may be prescribed by the Superintendent as necessary or appropriate for the effective administration or enforcement of Article XII-E.

(b) Verification of completion. The Provider shall be responsible for verifying that the student named on the certificate of course completion attended all required classes and sessions of the education course named on such certificate. Such verification may be accomplished by use of sign-in sheets, if the Provider monitors the sign-in and -out process, and, in the case of a course given by electronic means, by use of independent verification procedures to verify the identity of the student and to determine whether the student was present for the entire program or complete portion thereof, such as security questions and one or more randomly placed identification codes.

(c) Calculation of Credit Hours. For purposes of determining course credits, an “Hour” means at least fifty minutes of instruction, exclusive of introductory remarks, breaks, meals and other non-educational activities. Credit hours shall be calculated in no less than 25-minutes (.5-hour) increments. Instruction for under 25 minutes shall be rounded down to zero. Credit shall be awarded only for attendance at an entire Education Course or individual segment of an Education Course. No credit hours shall be awarded for attending a portion of a course that is less than a complete segment.

(d) Make-up classes and sessions. If a student misses a class or session of an approved education course, a make-up class or session may be held by the approved provider. No student required to attend such a make-up class or session shall receive education course credit hours prior to completing such make-up class or session.

(e) No repeat attendance. Unless otherwise provided by the Superintendent and specified at the Banking Department’s website (www.banking.state.ny.us), no credit hours toward the completion of the education requirements of Article 12-E of the Banking Law shall be earned for repeating any education course for which a student has already earned any such credit hours, even if the Education Course is in a different format or a subsequent time period. This provision shall not prohibit awarding of credit where a course has significant new content, such as updates to reflect changes in the law or regulations or new court interpretations or where a course is geared to a more in-depth or advanced treatment of the subject matter.

(f) Multiple courses and providers allowed. A student may take one or more courses from one or more Approved Providers to meet his or her Education Course requirements.

(g) Internet list of requirements. Detailed Education Course credit requirements are available at the Banking Department’s website (www.banking.state.ny.us).

§ 108.8 Instructor qualifications.

(a) Each instructor of an Education Course shall meet all requirements that may be prescribed by the Superintendent. These requirements shall include but not be limited to relevant and sufficient experience in the subject(s) being taught. Evidence of such relevant and sufficient experience shall include:

  1. a bachelor’s degree or other advanced degree in such subject(s) as may be prescribed by the Superintendent;

  2. a valid teaching credential or certificate from New York or another state in a subject which the Superintendent has determined is sufficiently related to the subject that will be taught in the approved education course(s); or

  3. five years full-time experience in mortgage loan originating or as a lawyer for mortgage bankers, mortgage brokers or banking institutions.

(b) Ineligibility due to financial services-related convictions, etc. An individual shall be ineligible to teach approved education courses if he or she within the past 10 years has been convicted of a crime involving an activity that is a felony under the Banking Law or under any of the other laws listed in Section 592-a(2) of the Banking Law or has had a license, registration or authorization to conduct a financial services business revoked, or has such a license, registration or authorization that is then suspended.

(c) Internet list of requirements. Detailed requirements for instructors shall be available at the Banking Department website (www.banking.state.ny.us).

§ 108.9 Obligations of Providers

  1. Each Provider shall retain (i) Course Records, for at least four years from the date the course was given, and (ii) advertisements, catalogues, bulletins and other publications distributed to students or posted on a website, for at least four years from the last date on which they were distributed.

  2. At the conclusion of each Education Course, the Provider shall distribute a written evaluation questionnaire that may be completed by students to evaluate the course content, instruction and materials of the particular course, and, where applicable, the physical setting and/or technology. The Provider shall retain the completed questionnaires for at least three years.

  3. Each Provider shall ensure that all advertisements, catalogues, bulletins and other publications distributed to prospective students or posted on a website and describing an individual Education Course state whether the course is appropriate for Inexperienced or Experienced Originators.

§ 108.10 Instructions and assistance.  

(a) Forms, instructions and assistance relating to this Supervisory Procedure may be obtained

  1. at the Banking Department’s website (www.banking.state.ny.us);

  2. by e-mail (MLO@banking.state.ny.us);

  3. by mail addressed to: Mortgage Banking Division, New York State Banking Department, One State Street, New York, NY 10004-1417; or

  4. by calling the Mortgage Banking Division at (212) 709-3535.

Summary of Text
Information Regarding Regulation