Pub. 9 2021 Issue 2

13 The Community Banker collection, and distribution of information standard for the processing or underwriting of a loan in the mortgage industry). Nor does a “mortgage loan originator” obtain the information necessary to process or underwrite a residential mortgage loan. Also excluded are individuals who perform only real estate brokerage activities. These are duly licensed individuals or entities solely involved in extensions of credit related to timeshare plans, employees engaged in loan modifications or assumptions, and employees involved in mortgage loan servicing. “Compensation or gain” includes salaries, commissions or other incentives, or any combination of these types of payments. MLO registration An MLO must be federally registered if the individual is: 1) an employee of a depository institution; 2) an employee of any subsidiary owned and controlled by a depository institution and regulated by a federal banking agency: or 3) an institution regulated by the FCA. The final rule, as required by the SAFE Act, prohibits an individual who is an employee of an agency-regulated institution from engaging in the business of a loan originator without registering as a loan originator with the national registry, maintaining that registration annually, and obtaining a unique identifier through the registry. Employer financial institutions must require adherence to this rule by their employee MLOs. MLOs may submit their registration information individually, or their employer institution may do it for them (by a non-MLO employee). Management should decide which approach will ensure consistency within the institution, especially since prescribed institution information must be submitted to the registry. This MLO information must include financial services-related employment history for the 10 years before the date of registration or renewal, including the date the employee became an employee of the bank – not just the time they have worked for their current employer. Employers of MLOs must remember to renew registrations annually for as long as an individual operates as an MLO. The renewal period opens November 1 and ends December 31 each year. If an MLO or bank registration lapses, it may be reinstated during a reinstatement period that begins January 2 and closes February 28 each year. Other requirements Bank and thrift managers also should remember that there are specific requirements in this rule for the institution to have policies and procedures to implement SAFE Act requirements and the use of a unique identifier (NMLS number) by MLOs. At a minimum, the bank’s SAFE Act policies and procedures must: • Establish a process for identifying which employees have to be registered MLOs • Inform all MLOs of SAFE Act registration requirements and instruct how to comply with those requirements and procedures • Establish procedures to comply with the unique identifier requirements • Establish reasonable procedures for confirming the adequacy and accuracy of employee registrations, including updates and renewals, by comparisons with its records • Establish reasonable procedures and tracking systems for monitoring compliance with registration and renewal requirements and procedures • Provide independent testing for compliance with this part conducted at least annually by covered financial institution personnel or by an outside party • Provide for appropriate action in the case of any employee who fails to comply with SAFE Act registration requirements or the bank’s related policies and procedures, including prohibiting such employees from acting as MLOs or other appropriate disciplinary action • Establish a process for reviewing SAFE Act employee criminal history background reports, taking appropriate action consistent with applicable federal law, and maintaining records of these reports and actions taken concerning relevant employees, and • Establish procedures designed to ensure that any third party with which the bank has arrangements related to mortgage loan origination has policies and procedures to comply with the SAFE Act, including appropriate licensing and registration of individuals acting as MLOs The bank or thrift also must make the unique identifiers (NMLS numbers) of its registered MLOs available to consumers “in a manner and method practicable to the institution.” The bank has the latitude to implement this requirement. It may choose to make the identifiers available in one or more of the following ways: • Directing consumers to a listing of registered MLOs and their unique identifiers on its website • Posting this information prominently in a publicly accessible place, such as a branch office lobby or lending office reception area, and • Establishing a process to ensure that bank personnel provide the unique identifier of a registered MLO to consumers who request it from employees other than the MLO In addition, a registered MLO must provide his or her unique identifier to a consumer: • Upon request • Before acting as a mortgage loan originator, and • Through the MLO’s initial written communication with a consumer, if any, whether on paper or electronically (often by incorporating it into the signature information for standard letter and email formats) Banks, thrifts, and their registered MLOs often also make their NMLS numbers available in other ways – such as including them in advertising or on business cards. As with any compliance rule, banks and thrifts need to ensure they have systems in place to maintain compliance with SAFE Act requirements, including appropriate training for employees involved in the mortgage origination process. William J. Showalter, CRCM, CRP, is a Senior Consultant with Young & Associates, Inc. ( younginc.com) , with over 35 years of experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He has authored or co-authored numerous compliance publications and articles and developed and conducted compliance training programs for individual banks and their trade associations. Bill can be reached at (330) 678-0524 or wshowalter@younginc.com . The final rule, as required by the SAFE Act, prohibits an individual who is an employee of an agency-regulated institution from engaging in the business of a loan originator without registering as a loan originator with the national registry, maintaining that registration annually, and obtaining a unique identifier through the registry.