New applications submitted by month for MLO licenses (State) and registration (Fed)

0

3,000

6,000

9,000

12,000

15,000

2014 2015 2016 2017

Fed Actual State Actual

Active MLO Licenses (State) and registrations (Fed) by month

200

250

300

350

400

450

500

550

600

650

2014 2015 2016 2017 2018

Tho

usa

nd

s

Fed Actual Fed Forecast State Actual State Forecast

MLO Growth – Past and Projected

+9%

+21%

+18%

+15%+7%

MBA Mortgage Originations Forecast

0

500

1,000

1,500

2,000

2013 2014 2015 2016 2017 2018

Bill

ion

$

Purchase RefinanceSource: Mortgage Bankers Assoc., July 2017

Tracking inactive (unemployed) state-licensed MLOs

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Approved-Inactive MLO licenses (nationwide)

2011

2012

2013

2014

2015

2016

2017

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

% of approved MLO licenses that are Approved-Inactive (nationwide)

2011

2012

2013

2014

2015

2016

2017

V i s i o n 2 0 2 0

The Path Forward for State Regulation

Enable banks to

service non-banksAttack de-risking and dispel

uncertainties of regulatory

regimes for BSA-AML

Improve third-party

supervision

Support federal legislation that

improves state-federal

coordination

Assist state banking

departmentsAutomate exam process,

introduce better analytics,

adopt higher standards

Redesign NMLSEnhance reg-tech to automate

multi-state licensing and

streamline supervision

Harmonize multi-state

supervisionAdopt best practices and drive

towards uniform examinations

Fintech advisory panelIdentify pain points and

possible solutions

5 64

2 31

V i s i o n 2 0 2 0

Six Steps to Success

Fintech Industry Advisory Panel

CSBS advisory panel that provides input that help

states to modernize regulatory regimes

The panel will:

• Focus on lending and money transmission

• Identify points of friction in licensing and multi-

state regulation

• Discuss a wide array of solutions

• Some states already engaging in dialogue

V i s i o n 2 0 2 0

Six Steps to Success

Redesign Nationwide Multistate Licensing System

CSBS is enhancing NMLS – the common platform for

state regulation – to remove points of friction

NMLS 2.0 will apply reg-tech to fintech:

• Transform licensing process thru data/analytics

• Automate vast majority of new applicants

• Enable states to focus more on higher-risk cases

• Upload multi-state information in a single action

• Streamline state regulation on a multi-state basis

• Allow consumers to check on companies

NMLS Comparison NMLS 1.0 NMLS 2.0

Form driven Data driven

Difficult to navigate Intuitive

“One Size Fits All” Driven by “User Personas”

Limited audit capabilities Verification/authentication of users

Individualized application review

Data driven, risk-based analytics

Manual data verification Automated data verification

14

Key to Success

• Using NMLS 2.0 as designed

• Automating manual verifications

• Using system data to focus risk

• Set business rules

• Triage applications

• Manage application pipeline

• Leverage other state approvals/exams

• Share information among regulators

• Auto renewal where appropriate

15

Business Process Management (BPM) software: configurable, low-code product with native mobile capabilities.

Appian will serve as the core product underlying NMLS 2.0, SES, Profile, Certification and Accreditation

17

NMLS 2.0 Focus on Users

From Features To Users

NMLS 1.0 (representative list)

Account Management

M&A

Industry Workflow

Application Submission

Credit Review Period Reporting

Accounting & Invoicing

Complaint Submission

Proposed timeline for NMLS and EMTS releases

Calendar Year 2017 2018 2019

Calendar Month Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

NMLS 2.0

Requirements Definition

DevOps Setup

Design Sprint

Agile Sprints (monthly sprints)

System Test

UAT/Integrated Test

Data Migration

Training / Change Management

Operational Transition/Deploy *9/1/18: Go Live

Ongoing Operations5 years

total --->

Stakeholder Engagement

SES Release 1: Exam Workflow & CFPB Integration

Requirements Definition phase 0 detailed reqs

Agile Sprints (monthly sprints)

System Test

UAT/Integrated Test

Stakeholder Engagement AARMR NMLS

Training / Change Management

Operational Transition/Deploy 12/12/18 - Tentative Go-live date (to be refined after Phase 0)

Ongoing Operations5 years

total --->

Functional and Non-functional Requirements

Design Build Review Sprint

System Test

UAT/Integrated Test

Stakeholder Engagement

Training / Change Management

Operational Trainsition/Deploy

Ongoing Operations

High-level NMLS 2.0 Timeline

Stakeholder Engagement2.0 Steering Committee

Leadership

Co-Chair: K.C. Schaler, Idaho DOF

Co-Chair: Jim Payne, Kansas OFSBC

Mick Campbell

Missouri

Felicia Faison-Holmes

Georgia

Valerie Carbone

Massachusetts

Bob Mednikov

Virginia

Chris Romano

Montana

20

NMLS 2.0 Transition Assistance• To help state agencies undertake a change management

plan, SRR will focus on:

➢Communication on NMLS 2.0 for review➢Documentation on all new processes➢Training on NMLS 2.0 functionality

➢Especially how to set business rules to comply with state requirements

➢ Technical Assistance➢ Access to NMLS 2.0 training environment

• Work with agencies to review all current state specific requirements

21

Change Management

• “Change management is a structured approach for ensuring that changes are thoroughly and smoothly implemented, and that the lasting benefits of change are achieved.”

• The NMLS 2.0 focus on risk and reducing or automating processes will require state agency change management.

• It puts the focus on how people, as individuals and teams, move from the current situation to the new one and involves all levels of the organization.

24

Elements of Change Management

• Sponsorship

• Buy-in

• Involvement

• Impact

• Communication

• Readiness

Change Management Assistance• To help state agencies undertake a change

management plan, SRR will focus on:

➢Communication on NMLS 2.0 for review➢Documentation on all new processes➢Training on NMLS 2.0 functionality

➢Especially how to set business rules to comply with state requirements

➢ Technical Assistance

• Work with agencies to review all current state specific requirements

26

Change Management

• State Agencies will need to:

➢Implement agency changes to align with NMLS 2.0 processes

➢Appoint a lead agency contact to manage the NMLS 2.0 change management

➢Review new functionality as available and identify impact on current state policies

➢Review how staffing resources can be redeployed from manual process that will no longer be necessary

➢Determine if regulatory changes are necessary to implement NMLS 2.0.

27

Change Management

• Help us to use NMLS as it was intended:➢Analytics and business rules aid in expediting licensing decisions➢Focus agency staff time on higher-risk applications➢Change of internal processes

• Change Management within your agency➢SRR will focus on training

➢More automated workflows➢More up-front information validation

• Agencies need to stay informed and involved in the process

28

State Agency Use of NMLS 2.0

• Issuing Multiple Licenses Under a Common Framework

• Each agency can set specific business rules to triage license applications

• Each agency will manage their own filters

• For example:• Set standards that will trigger a flag on an application for issues such as: financial

responsibility standards, regulatory actions, criminal rapsheet

• Give an “easy pass through” for those with no flags (e.g., no credit issues, hold licenses in good standing in other jurisdictions, no “yes” disclosure questions)

• Ability to take out the friction of the process without compromising state standards

NMLS 2.0 – Get Involved

• Communications and Stakeholder Engagement• NMLS Policy Committee

• NMLS 2.0 Regulator Steering Committee

• State Regulator Working Groups

• NMLS Modernization Update

• Monthly Open Forum Meetings

• Yammer Communication Tool for Direct Feedback

• Updates on “new.nmls.org” and the NMLS Resource Center

30

NMLS Call Center

• Priority on Training

• Rewarding of Excellent Service

• SRR staff supports the call center and SRR obtains a great deal of information through the software, past calls, etc.

• Software used to record caller information, store notes, link to email addresses, store/send checklists, etc.

• All callers are offered an email with detailed resources to use, or refer to in the future

• Stay on the call “as long as it takes”

• The state agencies greatly rely on call center staff to field calls, questions, frustrations, etc. allowing us to do our jobs better and more efficiently.

VISION 2020State Regulator Initiatives SES in Vision 2020

Harmonize Multi-state Supervision

Uniformity in Exams

Facilitate Best

Practices

Capture and Report Non-Bank Exam

Data

Streamline Supervision

within a Common Platform

Guided by Regulators

and Industry

• Redesign the NMLS

• Harmonize Multi-state Supervision

• Form an Industry Advisory Panel

• Assist State Banking Departments

• Make it easier for banks to provide services to non-banks

• Make supervision more efficient for third parties

WHY SES?

Standardize

• Workflow

• Business Rules

• Technology

Collaborate

• Examiner to Company

• Agency to Agency

• State to Federal

Optimize

• Resources

• Processes

• Data Analytics

Share

• Examination Content

• Schedules and Scope

• Improve Regulator/Industry Information Sharing

• Best Practices

Safeguard

• Confidentiality

• Data Integrity

• Record Maintenance

STANDARDIZE

• Workflowo Standard vs Customo Data

• Business Ruleso System Controls and Integration

• Technologyo Automation and New Efficiencies

Drive Best Practices

COLLABORATE

• Examiner to Companyo Managing the Information Request

• Agency to Agencyo Work together within the Exam

• State to Federalo Examination Coordination

OPTIMIZE

• Resourceso Scheduling and Availability

• Processeso Performing Taskso Creating Documents

• Data Analyticso Reportingo Risk Factors

SHARE

• Examination Content Between Agencies

• Schedules and Scope• Improve Agency/

Industry Information Sharing

• Agency Best Practices

SAFEGUARD

Confidentiality Data Integrity

Record Maintenance