New York DFS Adopts A Number of New Mortgage Licensing Initiatives

The New York Department of Financial Services (NYDFS) has issued proposed regulations that would eliminate certain mortgage-related application requirements and clarify other requirements. Comments on the proposed regulations are due 45 days from publication in the State Register. The proposed regulations come in conjunction with a number of changes announced by Superintendent for Financial Services Benjamin Lawsky in a statement to the Mortgage Bankers Association and in a recent press release. The changes are intended to streamline the mortgage licensing process and to provide more clarity to applicants.

Proposed Regulations

Among the new proposed provisions to the New York Code of Rules and Regulations (NYCRR) and General Supervisory Policies and Procedures, the NYDFS has offered the following changes:

• Employee who meets experience requirements . For mortgage banker and broker applicants, the regulations clarify the requirement that a mortgage banker or broker applicant have verifiable experience. Applicants may now demonstrate that they have a person in their employ who is a licensed mortgage loan originator (MLO) with the required experience.
• Repeal of FHA mortgage loan correspondents application . The proposed regulations would repeal Part 413 of the NYCRR and Supervisory Procedure MB 106, which regulates the application process and authority for mortgage brokers to be approved as FHA mortgage loan correspondents.
• Provisions for Mortgage Bankers/Brokers to have fewer than three officers . The proposed regulations would allow a mortgage banker applicant that does not have three executive officers to provide information for two executive officers plus a compliance officer. For a mortgage broker applicant that does not have three executive officers, personal and financial information for all executive officers would be required.
• Additional Business Compliance Documents Required . In addition to other documents to be submitted as part of a mortgage banker or mortgage broker license application, the proposed regulations would require applicants to submit a detailed business plan outlining marketing strategy, compliance program, and fair lending plan that meet certain requirements.
• Incomplete application prohibited . Under the proposed regulations, applicants could no longer submit placeholder applications. Applicants would be required to submit all documents at the time of license application. The NYDFS will provide a consolidated written notification to applicants identifying all of the items and matters that must be addressed in order for the NYDFS to continue the application review process. A complete response would be required within 30 days of the NYDFS sending such notice. Any applicant seeking to submit a license application after withdrawal would be required to submit a new application complete with all required information, documents, and fees.

Uniform State Test

Beginning September 2, 2014, the NYDFS will adopt the Uniform State Test (UST), currently used by federal MLO registrants and 40 states. The UST replaces the separate, state-specific test currently required for aspiring New York MLOs. The new test requirements will not change the educational requirements for MLOs.

MLO Transitional Licensing

The NYDFS is changing its procedure regarding an MLO working in another state or for a federal bank and who wants to move to a New York licensed mortgage banker or broker. Under the new procedure, an individual may now apply for an MLO license before being hired by a New York licensed entity. Once the applicant satisfies the requirements to become an MLO, other than affiliation with a New York licensed entity, the NYDFS will issue the applicant a letter that the applicant can then take to potential employers. The NYDFS will then promptly license the MLO provided that the new employer is disclosed to the NYDFS within 30 days of the issuance of the letter.

Additional Resources and Process Changes

Finally, the NYDFS has announced a number of changes designed to streamline the application process and provide guidance for applicants, including the following:

• More efficient mortgage license processing : the NYDFS has cut out some of the layers of review that will be required in order to approve an application.
• Dedicated Encrypted Mailboxes : the NYDFS has established dedicated, encrypted mailboxes to directly respond to licensing-related questions. The For mortgage bankers or mortgage banker applicants, the address is mortgage.banker@dfs.ny.gov; for mortgage brokers or applicants, the address is mortgage.broker@dfs.ny.gov; for mortgage loan servicers or applicants, the address is mls@dfs.ny.gov; and for mortgage loan originators or applicants, the address is mlo@dfs.ny.gov.
• Electronic Submission of Application Materials . The NYDFS will now accept applications via the department-dedicated email boxes listed above and will acknowledge receipt of the received materials. The NYDFS will also accept secure file transfers and will soon establish a secure online portal for accepting materials as well. When applicants must submit original documents to the NYDFS, they may first provide those documents via email and then follow up by mail.
• Industry Guidebooks : According to the NYDFS Banking Industry webpage, the NYDFS will soon publish industry guidebooks that will help companies and individuals to apply for and maintain a license.
• Dedicated Webpage : The NYDFS has also compiled information pertinent to the mortgage industry in one place, including information regarding applications, proposed regulations, industry guidance, recent NYDFS developments, filings and reporting, and industry letters.