Industry Letters

Mortgage Banker/Broker Branches

December 5, 1997

TO THE INSTITUTION ADDRESSED:

RE: Mortgage Banker/Broker Branches

In connection with the recent annual license/registration billing which the Banking Department sent to your organization, you should be aware that there have been important regulatory changes implemented in 1997 regarding branches. These changes may affect the amount of fees, which you will be required to pay as part of your annual bill.

As most of you are aware Part 38, Section 38.11 was revised by eliminating the then-existing definition of a "branch" as a place "routinely" open to the public and adopting sections 38.1 (u) and (v) which created two new types of branches:

With respect to the "loan solicitation branch", the intended benefit is to allow lower operating costs by reducing the annual branch fee. The change is also intended to lower overhead costs by eliminating the requirement that the office be directly supervised by a branch manager who possesses significant experience in the mortgage banking industry.

At the same time, the amendments were intended to bring processing centers under the closer supervision of the Mortgage Banking Division. In order to accomplish this, a greater emphasis has been placed on the "loan processing" operation of the branch.

The final result of this change in the definitions will be to require some backroom operations, wherein the banker or broker processes loan applications, to be licensed even if the site is not "routinely available to the consumer", as formerly required by under Part 38, section 38.11.

In determining the accuracy of your 1998 bill, you must consider the following factors:

• If you have an existing branch or branches, where only loan solicitation and no loan processing takes place, you may wish to have these re-classified as "loan solicitation offices".

• If you have a loan processing office or offices, which previously were not required to be licensed since they were not "routinely available to the consumer", you must now apply for licenses for these locations as "full service branches."

If, after reviewing your branch offices and loan processing offices, you determine that the bill does not reflect the correct status of your business, please contact Pauline DeVita at the New York State Banking Department at (212) 618-6690. It may be necessary to provide lease documentation for loan processing offices and, in the case of branches that you wish to re-classify as loan solicitation offices, you will have to turn in existing licenses, which will be replaced by "loan solicitation office" licenses.

Very truly yours,

Walter J. O’Meara
Deputy Superintendent of Banks
Mortgage Banking Division