MBA Proposes Transitional License for Originators

If the ""Mortgage Bankers Association"":http://mbaa.org/default.htm (MBA) has its way, loan originators may soon have the ability to legally transition from entities under federal supervision and regulation to institutions under subject to state rules and authority. The trade group recently proposed amending the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) in a way that would supply originators with a transitional license.

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The MBA drafted the amendment to reshape language under the ""Conference of State Bank Supervisors"":http://www.csbs.org/Pages/default.asp and ""American Association of Mortgage Regulators"":http://www.aarmr.org/. If passed, it would also allow qualified originators to bypass onerous state licensing requirements that typically hold up other brokers and loan officers in the move to new states.

""Under SAFE, requirements for the qualification of mortgage loan originators differ depending on whether the mortgage loan originator works for a state or federally regulated company,"" the MBA said in a proposal provided to _MReport_. ""Loan originators for state-regulated companies must be both licensed and registered. Loan originators for federally regulated lenders, however, must only be registered.""

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The MBA made the argument that SAFE restrictions unfairly encumber companies subject to state regulations by delaying the transition of otherwise qualified originators to new jurisdictions. The proposal held that regulated institutions ""suffer from decreased choices and potentially increased financing costs"" as a result of the current law and related provisions.

The current amendment, under proposal, would rectify these concerns by supplying registered loan originators and well-qualified loan originators from other states with transitional licenses. These licenses would allow originators to serve other institutions while the certification and education required in new states moved forward.

To meet minimum requirements for a transitional license, these originators would need to follow a number of procedures. These include submitting an application via a standard national form, confirming employment with a company for at least two years, and keeping a unique identifying set of information available through the Nationwide Mortgage Licensing System and Registry.

Other qualifications: the originator would need to provide the NMLSR with permission to secure a credit report and pay a ""reasonable"" state fee, according to the proposal.

After securing the mortgage license, an originator would be able to operate in the new jurisdiction for a 120-day period, beginning once authorities approve the application.

Offering a legal opinion in the proposal, Ken Markison, the MBA's regulatory counsel, said, ""Consistent with the purposes of SAFE and in the absence of preemption, states may grant transitional licenses to registered and out-of-state licensed loan originators so they may work as loan originators within their states pending licensure.""