1. Mortgage Loan Originator Temporary Authority Webinar
May 22, 2019
Presented by: Haydn Richards
For the Mortgage Compliance Professionals Association of America

2. Mortgage Loan Originator (MLO) Temporary Authority
Agenda
Temporary Authority: The Basics
Preparing for the Benefits of Temporary Authority
Updating Systems
Developing Monitoring Programs
Originating Investor-worthy Loans
Temporary Authority for Mortgage Servicers

3. Temporary Authority: The Basics

4. How does S.2155 work?
It extends temporary authority to act for qualified mortgage loan originators.
Will allow those MLOs to continue originating loans while completing certain state-specific requirements for licensure such as education and testing
A Mortgage Loan Originator does not need to pass the SAFE Act Test or meet pre-licensure education requirements in order to apply for a MLO License and to obtain authority.
Eligible Mortgage Loan Originators are able to enjoy temporary authority to operate
Which mortgage loan originators are “eligible?”
Must be employed and sponsored by a state-licensed mortgage company; and:
Be a Mortgage Loan Originator that was federally registered during the previous year prior to applying for licensure; or
Be a Mortgage Loan Originator that was state-licensed during the 30-day period prior to applying for licensure in another state
How are state regulators interpreting the requirement to be registered for the year prior to applying for licensure or to be state-licensed during the 30-day period prior to applying for licensure?

5. Who is not eligible for temporary authority under S.2155?
Mortgage Loan Originators are not eligible if they have:
Had a Mortgage Loan Originator License application denied or a Mortgage Loan Originator revoked or suspended in any jurisdiction;
Been subject to, or served with, a cease and desist order; or
Been convicted of a misdemeanor or felony that would preclude licensure under the law of the state where the individual is applying for licensure

6. How Long Can a MLO Operate Under Temporary Authority?
Temporary Authority commences on the date the MLO submits his or her license application with the required background check information
Such information includes fingerprints, personal history and experience, and authorization for a credit report)
Temporary Authority ends when the earliest of the following occurs:
The MLO withdraws the application;
The regulator denies or issues a notice of intent to deny the application;
The state grants the license; or
If, after 120 days from the date the application is submitted, the application is listed on the NMLS as incomplete

7. What authority does a state regulatory agency hold while a MLO holds Temporary Authority to Operate?
Any mortgage loan originator operating with Temporary Authority is subject to the requirements of the Federal SAFE Act
Of greater importance, availing oneself of Temporary Authority means that the MLO is subject to all applicable laws, regulations, and requirements of a particular jurisdiction that would apply to the MLO if he or she had an active license

8. When will S.2155 take effect?
November 24, 2019

9. Preparing for the Benefits of Temporary Authority

10. How to be prepared for Temporary Authority?
Mortgage Bankers Association
10/9/2019
How to be prepared for Temporary Authority?
Failing to be aware of and plan for the risks associated with conducting business with Mortgage Loan Originators can have significant consequences
What risks exist?
What internal systems must be updated in order to be ready to proceed?
What external systems must be updated in order to be ready to proceed?
Do you need to monitor the status of your mortgage loan originators operating with temporary authority?
How will you demonstrate that an individual maintained temporary authority?
What information and documentation will your investors demand with respect to loans originated pursuant to temporary authority?
Mortgage Bankers Association

11. What internal systems need to be updated?
Mortgage Bankers Association
10/9/2019
What internal systems need to be updated?
Temporary authority is conveyed immediately - meaning mortgage loan originators can operate immediately in a new state
This removes licensing as one of the “checks and balances” in ensuring that an individual is prepared to act in a new jurisdiction
How can your company be comfortable that the mortgage loan originator is prepared to act in a new jurisdiction?
Will your company require training before allowing the mortgage loan originator to operate?
Can applicable policies and procedures or training guides be used to educate mortgage loan originators?
Case Study: South Carolina Origination Activities/Attorney Preference Disclosure Form
Mortgage Bankers Association

12. What external/third party systems need to be updated?
Loan Origination System (LOS) and any relevant add-on features: Will the LOS be prepared to allow unlicensed parties to take loan applications in states where the MLOs maintain temporary authority?
How will the LOS distinguish between loan applications/files that are originated with temporary authority?
Quality Control/Loan Evaluation Software: How will such technology distinguish between a loan is originated pursuant to temporary authority or when it has not?

13. Monitoring in the Age of Temporary Authority
With temporary authority, responsibility shifts to the licensee to ensure that its mortgage loan originators have the ability to act in a particular state
Let’s recall: Temporary Authority for a MLO ends when the earliest of the following occurs:
The state grants the license;
The MLO withdraws the application;
The regulator denies or issues a notice of intent to deny the application; or
If, after 120 days from the date the application is submitted, the application is listed on the NMLS as incomplete
Each of the final three items adds a new layer of complexity and risk to account for

14. Monitoring in the Age of Temporary Authority
Mortgage Loan Originator Withdrawal of License Application
Must monitor notifications to understand when a MLO withdraws an application
Do your licensing personnel receive and/or monitor these notices?
Individual MLO status must be updated in the LOS to remove access to that particular state
All pending loans must be transferred to licensed mortgage loan originators or other mortgage loan originators operating with temporary authority
How to address compensation for loans in the middle of the process?
Any and all activities in that particular state following the withdrawal of the application is unlicensed activity

15. Monitoring in the Age of Temporary Authority
The regulator denies or issues a notice of intent to deny the application
As with the withdrawal, appropriate monitoring will be necessary
How will the notices of intent to deny occur?
Could state regulatory agencies elect to send a notice of intent to deny directly to the MLO without the company being made aware of it?
Private criminal history or credit history issues could be particularly sensitive
Will certain regulatory agencies be more inclined to deny applications rather than work them through the traditional “back and forth” process because they may view temporary authority negatively?

16. Monitoring in the Age of Temporary Authority
Termination after 120 days because application is identified as incomplete on the NMLS
When does the 120 day period start and end
Is this automatic or if a state and a MLO have been going back and forth can this be extended?
Can a state intentionally wait to act on an application because of the 120-day window?
Temporary authority takes some of the urgency in processing MLO license applications
Positives and Negatives
Case Study: New York

17. How to Demonstrate a MLO Maintained Temporary Authority?
Publicly, NMLS Consumer Access will not evidence that a MLO operating under Temporary Authority is Licensed
Why? Because they aren’t licensed!
NMLS Consumer Access will evidence that an individual is Authorized to Operate in a jurisdiction.
At the time a loan application is taken and on the closing date, is it wise to capture screenshots of an individual’s NMLS record to demonstrate that he or she maintains Temporary Authority to operate in a jurisdiction?
If you do not, how will you be in a position to evidence authority to operate?
NMLS reporting?
NMLS versus NMLS Consumer Access

18. Information and Documentation for Investors
Check with all investors regarding how they intend to treat loans originated with Temporary Authority
Will any investor take issue with loans made pursuant to Temporary Authority?
Presumably not. Loans are validly made pursuant to federal law
Think like an investor. How can you paper the file so that a repurchase or indemnity demand cannot be asserted
Demands will follow months and years after origination
Enhanced Quality Control reviews appropriate for loans originated under Temporary Authority?
Often, MLOs using Temporary Authority will be new to the company – so scrutiny on their origination practices may be appropriate
Special documentation in each file for a loan originated pursuant to Temporary Authority?

19. Technical Issues Relating to S.2155

20. Technical Issues Relating to Temporary Authority
Can a MLO with a state license in a state who transfers employment from one non-depository to another take advantage of Temporary Authority?
No. Unfortunately, S.2155 does not convey authority to the state regulatory agencies to extend temporary authority to operate to individuals who already are licensed but who are simply changing employers
Why? Wouldn’t this make sense?
In S.2155 in the section that creates Temporary Authority for MLOs who move wish to operate in another state, Temporary Authority is conveyed if: (1) the MLO meets the minimum requirements for authority; (2) is employed by a company licensed in the state in question; and (3) was licensed in a State that is not the application State during the 30-day period preceding the date on which submission takes place.
Application state means a State in which a State-licensed MLO seeks to be licensed. Here, the MLO is already licensed – and is just seeking sponsorship approval.

21. Technical Issues Relating to Temporary Authority
So, what can be done?
Many states already focus on and prioritize requests relating to sponsorship to minimize the delay when switching employers
Requests to state regulators to increasingly turn to those sponsorship approval requests, particularly in light of the 120 day “padding” that is provided with S.2155 and Temporary Authority?
Should priority be given to those files where individuals do not enjoy Temporary Authority, knowing that those files typically are the most challenging?

22. Technical Issues Relating to Temporary Authority
The Denial Conundrum
The Denial of a MLO License Application ends the ability of that MLO to have Temporary Authority in ALL states
The filing of a Notice of Intent to Deny an Application only ends the ability of that MLO to have Temporary Authority in that particular state
How will state regulators use the denial versus notice of intent to deny function?

23. Temporary Authority for Mortgage Servicers

24. Is S.2155 Relevant to Mortgage Servicers?
Recapture programs utilized by most residential mortgage servicers and subservicers require the use of licensed mortgage loan originators
Transitional authority will allow an easier expansion of the existing origination workforce in call centers
Can limit hiring of new personnel while expanding licensing footprints of existing personnel
Allows for evaluation of and expansion of loss mitigation personnel who may need to be licensed as mortgage loan originators
A limited universe of states (approximately 17) require licensing of loss mitigation/loan modification personnel as mortgage loan originators
Transitional authority can allow for increased numbers of such personnel or can more quickly allow for gap-filling if departures occur

25. Questions?
Haydn Richards