It’s about to get much easier for mortgage loan originators to switch jobs and continue originating mortgages without any license-related delays.
Under the current rules of the Secure and Fair Enforcement for Mortgage Licensing Act, an LO who moves between states or from a bank to a nonbank is required to wait for a new license before they can begin originating at their new job.
But after a years-long push from the mortgage industry, those rules are about to change.
Later this year, new LO licensing rules will take effect that will allow originators to move from a bank to a nonbank or to a new state and keep originating new mortgages without having to wait for a new license.
The changes to the LO licensing rules were part of the Economic Growth, Regulatory Relief and Consumer Protection Act, which President Donald Trump signed into law last year.
In addition to rolling back many Dodd-Frank Act regulations, the bill also included changes to the LO rules, which the mortgage industry has lobbied several years for.
Beginning Nov. 24, 2019, LOs who change corporate affiliation from a federally insured institution to a nonbank lender, or move across state lines, will be granted “transitional authority” that will allow them originate mortgages while they work to meet the SAFE Act’s licensing and testing requirements.
LOs will then have 120 days to complete the SAFE Act licensing requirements.
As with these types of regulations, the rules are much more complicated than that, but luckily the Nationwide Multistate Licensing System & Registry recently published an “FAQ” that provides answers to many relevant questions about the new rules.
For example: Who is eligible for the temporary licensing authority?
The answer: LOs must be: 1) employed and sponsored through NMLS by a state-licensed mortgage company, and 2) either: A. registered in NMLS as an MLO during the one year preceding the application submission; or B. licensed as an MLO during the 30-day period preceding the date of application.
Compliance provider MQMR also recently published a bulletin on the matter, which sheds additional light on the new LO rules.
From MQMR’s bulletin, which references the NMLS FAQ:
Importantly, the FAQs explain that a MLO will not have to submit a separate application for temporary authority. Rather, an MLO applies for a MLO license through NMLS and, if eligible, will automatically receive temporary authority as the applicable state processes the license application. NMLS will be programmed to check certain eligibility requirements, such as criminal history and whether an applicant has had an MLO license application denied, revoked, or suspended. Before a licensing decision is made by the applicable state, an individual with temporary authority will show as being “authorized to conduct business” in the state – the actual license status will not be updated until the state makes a decision with regard to the license application.
An individual with temporary authority may originate loans as if he/she possesses a license in that state. The individual and the loans originated by that individual will be subject to the same rules and regulations as applicable to a licensed MLO.
One important piece of these new rules to note is that lenders “must monitor” the status of their LOs’ licensing status and temporary authority to originate. If an LO’s application is denied, the lender “must reassign any active loans in the pipeline originated by that MLO to a licensed MLO in that state.”
Additionally, if the lender “knew or should have known” of a “disqualifying event” that would cause the LO’s application to be denied, the lender may face enforcement action from their state.
For the full FAQ on the new LO licensing rules from the NMLS, click here.
