Explanatory All Institutions Letter
September 15, 2010
TO THE INDIVIDUAL OR INSTITUTION ADDRESSED:
RE: Proposed New Part 418 of the Superintendent’s Regulations and Supervisory Procedures MB 109 and MB 110 (Mortgage Loan Servicer Registration and Financial Responsibility Requirements)
The Superintendent has proposed for public comment the attached new Part 418 of the Superintendent’s Regulations and Supervisory Procedures MB 109 and MB 110. Emergency regulations in substantially similar form were most recently adopted effective September 6, 2010.
The proposed regulations implement certain provisions of the Subprime Lending Reform Law, which was enacted in August, 2008 (Chapter 472 of the Laws of 2008). That law, among other things, amended Article 12-D of the Banking Law to create a framework for the regulation of mortgage loan servicers (MLSs).
Effective July 1, 2009, no person or entity, except those exempted by law, may engage in the business of servicing New York residential mortgage loans without first being registered with the Superintendent of Banks as a MLS.
Exempted institutions must notify the Superintendent that they act as a servicer and comply with any regulations regarding servicing issued by the Department. The Department has separately promulgated regulations dealing with business conduct and consumer protection requirements for MLSs, including those exempted from the registration requirement.
MLS registration is required by any non-exempt company or person which receives scheduled periodic payments from a borrower pursuant to the terms of any covered mortgage loan, including amounts for escrow accounts, and makes payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage loan documents. In the case of a reverse mortgage, servicing includes making payments to the borrower.
The proposed regulations provide a transitional period for mortgage loan servicers which were doing business in this state on June 30, 2009 and which filed an application for registration by July 31, 2009. Such servicers will be deemed in compliance with the registration requirement until notified by the Superintendent that their application has been denied.
The proposed regulations implement the first component of the mortgage servicing statute – the registration of mortgage servicers. In doing so, the proposed rule utilizes the authority provided to the Superintendent to set standards for the registration of such entities. For example, the proposed rule requires that a potential loan servicer would have to provide evidence of its character and fitness to engage in the servicing business and demonstrate to the Superintendent its financial responsibility. The proposed rule also utilizes the authority provided by the Legislature to revoke, suspend or otherwise terminate a registration or to fine or penalize a registered mortgage loan servicer.Consistent with this requirement, the proposed rule authorizes the Superintendent to refuse to register an applicant if he or she shall find that the applicant lacks the requisite character and fitness, or if any person who is a director, officer, partner, agent, employee, substantial stockholder of the applicant has been convicted of certain felonies. These are the same standards as are applicable to mortgage bankers and mortgage brokers in New York.
Further, in carrying out the Legislature’s mandate to regulate the mortgage servicing business, the proposed regulation sets out certain application requirements for prior approval of a change in control of a registered mortgage loan servicer and notification requirements for changes in the entity’s executive officers and directors. Collectively, these various provisions implement the intent of the Legislature to register and supervise mortgage loan servicers.The New York Banking Department began managing mortgage loan servicer registrations using the Nationwide Mortgage Licensing System (NMLS), effective May 4, 2009. Companies and sole proprietors will need to submit a Form MU1 through NMLS and choose the Mortgage Servicer Registration type to apply for this registration. The Department expects to approve or deny applications within 90 days of the Department’s receipt (through NMLS) of a completed application. The NMLS system may be accessed at mortgage.nationwidelicensingsystem.org/Pages/default.aspx.
A section of the Banking Department website (www.banking.state.ny.us) provides information about the new regulatory framework for MLSs, including an outline of the application process.
The Notice of Proposed Rule Making was published in the September 15, 2010 issue of the State Register.
The Department will accept comments received before Monday, November 1, 2010. Comments should be sent to Sam L. Abram, Secretary of the Banking Board, at the above address or by email at email@example.com.
Very truly yours,
Sam L. Abram
Secretary of the Banking Board