UST: State Law and Regulation Definitions

Question 1

What is the Nationwide Mortgage (Multistate) Licensing System and Registry?

Answer 1

A mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of state-licensed loan originators and the registration of registered loan originators.

Question 2

What is a state?

Answer 2

Any state of the United States; the District of Columbia; any territory of the United States; and Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands.

Question 3

What is an individual?

Answer 3

A natural person.

Question 4

What is a person?

Answer 4

A natural person, corporation, company, limited liability company, partnership, or association.

Question 5

What is a mortgage loan originator?

Answer 5

An individual who, for compensation or gain:

• Takes a residential mortgage loan application, and
• Offers or negotiates terms of a residential mortgage loan

Question 6

What does the term MLO not include?

Answer 6

The term mortgage loan originator does not include:

• An individual engaged solely as a loan processor or underwriter, or any individual who performs purely administrative or clerical tasks on behalf of a person who is licensed as a loan originator
• A person or entity that only performs real estate brokerage activities and is licensed or registered with the state, unless the person is compensated by a lender, a broker or other loan originator
• A person or entity solely involved in extensions of credit relating to timeshare plans

Question 7

What is an application?

Answer 7

• A request, in any form, for an offer, or a response to a solicitation of an offer, of residential mortgage loan terms, and
• The information about the borrower or prospective borrower that is customary or necessary in a decision on whether to make such an offer

Question 8

What is a residential mortgage loan?

Answer 8

Any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.

Question 9

What is a dwelling?

Answer 9

A residential structure that contains one to four units, whether or not that structure is attached to real property. The term “dwelling” includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.

Question 10

What is residential real estate?

Answer 10

Any real property located in a state upon which is constructed, or intended to be constructed, a dwelling.

Question 11

What is real estate brokerage activity?

Answer 11

Any activity that involves offering or providing real estate brokerage services to the public, including:

• Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property
• Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property
• Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property (other than in connection with providing financing with respect to such transaction), and
• Engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law

Question 12

What does advising a consumer in obtaining a residential mortgage loan include?

Answer 12

Includes:

• Advising on loan terms, including rates, fees, and other costs
• Preparing loan packages, or
• Collecting information on behalf of the consumer with regard to a residential mortgage loan

Question 13

What is a loan processor or underwriter?

Answer 13

An individual who performs clerical or support duties at the direction of and subject to the supervision and instruction of a state-licensed loan originator or a registered loan originator.

Question 14

What do clerical or support duties include?

Answer 14

• The receipt, collection, distribution, and analysis of information common for the processing and underwriting of a residential mortgage loan, and
• Communicating with a consumer to obtain the information necessary for processing and underwriting a loan as long as such communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms

Question 15

What can a loan processor/underwriter not do when it comes to advertising?

Answer 15

An individual engaging solely in loan processor or underwriter activities may not represent to the public, through advertising or other means of communicating or providing information (e.g., through the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that he/she can or will perform any of the activities of a mortgage loan originator.

Question 16

What is the origination of a residential mortgage loan?

Answer 16

Involves all residential mortgage loan-related activities from the taking of the loan application through the completion of all required loan closing documents and funding of the residential mortgage loan.

Question 17

What is a registered loan originator?

Answer 17

• An individual who meets the definition of a loan originator
• Is an employee of:
  1. A depository institution (i.e., any bank, savings association, or credit union)
  2. A subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or
  3. An institution regulated by the Farm Credit Administration, and
• Is registered with, and maintains a unique identifier through, the NMLS

Question 18

What is an employee?

Answer 18

• Manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and
• Compensation, for federal income tax purposes, is reported, or required to be reported, on a W-2 form issued by the controlling person

Question 19

What are all of the federal banking agencies?

Answer 19

• The Board of Governors of the Federal Reserve System
• The Comptroller of the Currency
• The National Credit Union Administration, and
• The Federal Deposit Insurance Corporation

Question 20

What is a state-licensed loan originator?

Answer 20

• A loan originator
• Not an employee of:
  1. A depository institution
  2. A subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency, or
  3. An institution regulated by the Farm Credit Administration, and
• Licensed by a state (or by the CFPB if the loan originator is seeking licensure in a state that has failed to establish a licensing system) and maintains a unique identifier through the NMLS

Question 21

What is a unique identifier?

Answer 21

A number or other identifier that:

• Permanently identifies a loan originator
• Is assigned by protocols established by the NMLS and the federal banking agencies to facilitate:
• Electronic tracking of loan originators, and
• Uniform identification of, and public access to, the employment history of, and any publicly adjudicated disciplinary actions against, a loan originator

Question 22

Where must the unique identifier be shown?

Answer 22

The unique identifier of any person originating a residential mortgage loan must be clearly shown on all residential mortgage loan application forms; solicitations or advertisements, including business cards or websites; and any other documents as established by rule, regulation, or order of the state licensing agency (MSL.210).

Question 23

Who are those exempt from licensing requirements of the S.A.F.E. Act?

Answer 23

A loan processor or underwriter
A registered loan originator who is an employee of:
A national bank
Member banks of the Federal Reserve System and their respective subsidiaries
Insured state nonmember banks
Savings associations and their operating subsidiaries
The Farm Credit System lending institutions, or
Any federally-insured credit union
Any individual who performs only real estate brokerage activities
Any individual who is only involved in extensions of credit related to timeshare plans
An individual who offers or negotiates terms of a residential mortgage with or on behalf of an immediate family member (i.e., a spouse, child, sibling, parent, grandparent, or grandchild, including step- and adoptive relationships)
An individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence
A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to representation of the client, unless the attorney is compensated by a lender, broker, or other loan originator
An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator in carrying out official duties as an employee
A housing finance agency is any authority whose activities make it eligible to be a member of the National Council of State Housing Agencies and that is state-chartered to help meet affordable housing needs of state residents, directly or indirectly supervised by the state government, and subject to audit and review by the state (12 C.F.R. §1008.103(e)(6)(ii))
An employee of a bona fide nonprofit organization who acts as a loan originator as part of job responsibilities and makes residential mortgage loans with terms that are favorable to the borrower. A bona fide nonprofit:
Is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986
Promotes affordable housing or provides homeownership education or similar services
Conducts its activities in a manner that serves public or charitable purposes rather than commercial purposes
Receives funding and revenue and charges fees in a manner that does not incentivize acting in any way other than the best interests of its clients
Compensates its employees in a manner that does not incentivize employees to act other than in the best interests of its clients
Provides or identifies for the borrower residential mortgage loans with favorable terms and comparable to mortgage loans and housing assistance provided under government housing assistance programs, and
Meets any other standards as determined by individual states