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10/8/2010
S.A.F.E. Act Secure and Fair Enforcement
Financial Institution Implementation
1
IF YOU CAN’T HEAR US…DIAL
THE NUMBER ON YOUR
INVITATION EMAIL OR
DASHBOARD.
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QUESTIONS…WE’VE GOT
ANSWERS.
Please type your questions in
here and we will address them.
WELCOME
2
Housekeeping
Use the chat feature to ask your questions
Questions will be answered throughout
session
Email additional questions:
3
WELCOME
Theresa Ballard Compliance Specialist – BFO Solutions
Ginger Bell Education Specialist-Go2Training
4
Introduction
Interagency Final Rule effective October 1, 2010
• New employee designation “MLO”
Federally insured credit unions and employees
who act as an MLO
• Registration requirement for MLO
• Adopt and follow written policies and procedures
• Federal regulations
National Credit Union Administration
o 12 CFR Part 741 and 761
5
Goals
Important dates
Understand changes
Why duties of employee are important
Who is considered to be a MLO
De Minimis Exception
Who is not considered to be an MLO
MLO info required for registration
Institution’s requirements
6
Why the changes???
Housing and Economic Recovery Act
• Title V S.A.F.E. Act
Amendment made July 21, 2010
• Dodd-Frank Wall Street Reform and
Consumer Protection Act
7
Dodd-Frank Amendment
Expanded definition of “mortgage originator”
• Any person who for direct or indirect compensation or gain:
Takes a residential loan application (RML)
Assists a consumer in obtaining or applying to obtain an RML
Offers or negotiates terms of a RML
Represents to public that he/she can or will perform any such
services
Residential Mortgage Loan (RML) expanded from
primary residence to include 2nd home
MLO must include on all “loan docs” unique identifier
8
What’s required?
Policies to assure each MLO is registered.
• Both institution and individual is responsible
for compliance.
• Both institution and individual must submit
information to NMLSR
Renewal required annually
• Annual renewal period November 1 through
December 31
9
Important dates
October 1, 2010
• All credit unions that originate any mortgage
loans must have written policies and procedures
that address the requirements of the SAFE Act
2011
• All credit unions must have MLOs identified and
registered within 180 days of the date NCUA
provides public notification that registry is open.
10
Purpose of Registration
Enhancement of consumer protection • Provides consumers free information about Originator
Employment history
Publicly adjudicated disciplinary history
Enforcement Actions
Reduce fraud in residential mortgage
originations
Increased accountability and tracking
Flow of information to and from Regulators
improved and combined
11
Mortgage Loan Originator
“MLO”
An individual who:
• Takes a residential mortgage loan application;
and
• Offers or negotiates terms of a residential
mortgage loan for compensation or gain
12
Registered Mortgage Loan
Originator
An individual who:
• Meets the definition of a MLO and
• Employee of a Federal Credit Union and
• Registered with National Mortgage Licensing
System Registry (NMLSR) and
• Maintains a unique identifier
13
Unique Identifier
A number assigned by NMLSR*
Number is a permanent identifier of MLO
Will be used for electronic tracking of MLO
Will be required on loan applications
• FNMA 1003
• FHLMC 65
*National Mortgage Licensing System and Registry
14
De Minimis Exception
Any employee of credit union who:
• Has never been registered or licensed
through the Registry and
• Acted as a MLO for 5 or fewer residential
mortgage loans during the past 12 months
15
CUSO Employees
NCUA does not have direct regulatory
oversight or enforcement authority
CUSO employees engaging in loan
origination activities, whether owned by a
state or a federal credit union:
• Need to be licensed in accordance with
applicable state requirements
16
Others considered NOT
to be an MLO?
Any individual who performs purely administrative or
clerical tasks on behalf of an MLO
Any individual who only performs real estate brokerage
activities and is licensed or registered as a real estate
broker in accordance with applicable State law
• Unless individual is compensated by a lender, mortgage broker,
or other MLO and meets the definition of mortgage loan
originator
Any individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined
in 11 U.S.C. 101(53D)
17
Administrative or Clerical
Tasks
Receipt, collection, and distribution of
information common for
• Processing or underwriting of a loan in the
residential mortgage industry and
• Communication with a member to obtain
information necessary for the processing or
underwriting of a residential mortgage loan
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Duties –vs- Title
MLO definition based on activities NOT job
classification!
Individual who engages in activities of
mortgage loan origination is considered an
MLO
Examples of MLO activities found in
Appendix A of Final Rule
19
Does Employee take
Loan Applications?
Does individual receive information provided in
connection with a request for a loan to offer or
negotiate loan terms?
• Can be directly or indirectly
Does individual input info into an online application
system on behalf of consumer?
Individual does not make loan approval decision
• If answer is “YES” then individual must Register!
20
Offering or Negotiating
Loan Terms
Verbally or in writing presenting a loan
offer to a consumer
• Not limited to providing disclosure of terms
after application under TILA, even if:
Further verification info is necessary
Offer is conditional
Other individuals must complete loan process
Responding to request from consumer for
a lower rate on a pending application
21
Offering or Negotiating
Loan Terms –
For compensation or gain
Offering or negotiating terms of a loan for compensation
or gain includes
• Engaging in any of the activities of an MLO in the course of
carrying out employment duties, even if the employee does not
receive a referral fee or commission or other special
compensation for the loan.
Offering or negotiating terms of a loan for compensation
or gain does not include engaging in a seller-financed
transaction for the employee's personal property that
does not involve the credit union.
22
What’s not considered to be
“Taking a Loan Application”
Contacting borrower to verify info on
application (i.e. pay stubs or tax returns)
Receiving loan application in the mail and
then forwarding to appropriate personnel
with no action
Clarifying or explaining to borrower what
type of information is necessary
23
What’s not considered to be
“taking a Loan Application” (continued)
Responding to an inquiry regarding a
prequalified offer that borrower received
• Collecting only basic identifying info about
borrower
• Forwarding the borrower to the MLO or
Receiving info in connection with a
modification of an existing loan
• Existing Borrower
• Part of Credit Union’s loss mitigation efforts
24
What’s not considered to be
“Offering/Negotiating Terms”
Providing general explanations in response to borrower
questions about specific loan products
Responding to borrowers request about publicly
available loan rates
• Applicable only if there’s no discussion of whether or not
borrower qualifies for loan product
Arranging loan closing or processing loan as long as:
• Communication only verifies loan terms already offered or
negotiated
25
What’s not considered to be
“Offering/Negotiating Terms” (Continued)
Provide borrower with info unrelated to loan
terms
Make underwriting decision
Explain loan process
Describe criteria necessary to qualify without
providing guidance specific to borrower
Providing disclosures or communication on
behalf of MLO.
26
Employee requirements
Any employee considered to be an MLO
must obtain a Unique Identifier
Register with NMLSR within 180 days
from date that NCUA provides in a public
notice that the Registry is accepting
registrations
27
MLO information required
for Registration
Name (to include all names previously
used and variations)
Home address and contact info
Address of employee’s principal business
and business contact
Social Security number
Gender
Date and place of birth
28
MLO information required
for Registration (Continued)
Financial Services related employment
history for past 10 years
• including date of employment with credit
union
Convictions of any criminal offense
involving:
• dishonesty, breach of trust, money laundering
or agreements to enter a pretrial diversion
29
MLO information required
for Registration (Continued)
Civil judicial actions against employee with
financial services related activities,
dismissals with settlements,
Judicial findings that the employee
violated financial services related statutes
or regulations
• Exception made for actions dismissed without
a settlement agreement
30
MLO information required
for Registration (Continued)
Actions or orders by State or Federal regulatory
agency or foreign financial regulatory authority
that found employee to have:
• Made false statement or omission, been
dishonest, unfair or unethical
• Been involved in a violation of a financial
services related business that had its
authorization to do business denied,
suspended, revoked or restricted.
31
MLO information required
for Registration (Continued)
Actions or orders by State or Federal regulatory
agency or foreign financial regulatory authority
that:
• Deny, suspend or revoke the employees registration
or license to engage in financial service related
activity
• Barred the employee from association with an entity
or its officers regulated by the agency or authority or
from engaging in financial service related business.
32
MLO information required
for Registration (Continued)
Revocation or suspension of employee’s
authorization to act as an attorney,
accountant or State or Federal contractor
Customer initiated financial services
related arbitration or civil settlements
• Includes settlements and judgments
33
MLO information required
for Registration (Continued)
Fingerprints
• Submitted to FBI
• Used for back ground check
• Prints previously provided not acceptable.
New set of prints to be provided
• Fingerprinting to be completed through a
nationwide vendor to be determined.
There is no Grandfathering!
34
Institution’s requirements
Determine which employees are
considered to be an MLOs
• Remember it’s DUTIES not title
Require each employee MLO to register
with NMLSR
Not allow any employee who is considered
to be an MLO to act as an MLO until
Registered!
35
Institution’s requirements
Develop, adopt and follow written policies and
procedures to assure compliance
Required by October 1, 2010.
P&P must be appropriate to the:
• Nature
• Size
• Complexity and scope of mortgage lending activities
• Must be approved by Board of Directors
36
Institution’s requirements
Policy & Procedures
Establish process for identifying MLO
Require all MLOs to be registered
Instruct each MLO on how to comply
Establish procedures on compliance with
unique identifier
Establish procedures for confirming
adequacy and accuracy of employee
registration
37
Institution’s requirements
Policy & Procedures (Continued)
Establish procedures and tracking
systems for monitoring compliance
• Registration
• Renewal (must renew annually)
Provide for independent testing for
compliance
• At least annually by bank personnel or by an
outside party
38
Institution’s requirements
Policy & Procedures (Continued)
Provide action steps for employee who
fails to comply with registration
requirements
Establish process for review of employee
criminal history background reports
received from Registry
Establish procedures to ensure third party
MLO is in compliance with SAFE Act
39
Development of
SAFE Act Policy & Procedures
Can prepare your Policy and
Procedures for you!
Phone: 619-397-5191
www.go2comply.com
Email: [email protected]
40
Resource Materials
AGENCY WEB ADDRESS
Federal Reserve Board www.federalreserve.gov
National Credit Union Administration www.ncua.gov
Department of Housing and Urban
Development
www.hud.gov
Conference of State Bank Supervisors www.csbs.org
American Association of Residential
Mortgage Regulators
www.aarmr.org
State Regulatory Registry, LLC www.stateregulatoryregistry.org
Financial Industry Regulatory Authority www.finra.org
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Phone - 619-397-2603
Email - [email protected]
www.bfosolutions.com
Services offered
*Quality Control Program Development and Review
*Due Diligence Review
*Loan Guaranty (VA) and Loan Endorsement (FHA) Submissions
*Post Closing and Delivery of Files to Investor
Theresa Ballard
42
Thank You!
American Family
Funding
12/7/2009
43
Disclaimer This publication is designed for use in conjunction with Go2Comply and BFO Solutions Incorporated training programs, and is believed to be accurate and current as of the date of printing, but is not guaranteed, and due to industry and regulatory changes is subject to change at any time. This information is provided with the express understanding that BFO Solutions Incorporated, its agents and/or representatives are not engaged in the providing of financial, legal or accounting advice. Users should consult with appropriate professionals for further clarification of contents contained within if desired, and agrees to hold harmless BFO Solutions Incorporated, its employees, representatives, trainers, consultants, program sponsors and affiliates from any liability resulting from use or reliance of any material contained within.
Sources used in this presentation: Go2Training BFO Solutions Incorporated National Credit Union Association (NCUA) Federal National Mortgage Association (FNMA) Federal Home Loan Mortgage Corporation (FHLMC) Bankers On Line Pegasus Educational Services, LLC Metavante Regulatory Services