NMLS Mortgage Licensing Overview

Nationwide Mortgage Licensing System and Registry (NMLS)

• Designed to enhance consumer protection and reduce mortgage fraud
• Requires national minimum standards for mortgage training (pre-licensing and continuing education)
• All mortgage loan originators (MLOs) needing compensation must obtain an NMLS unique identifier (NMLS number)
• Depository institutions must register their MLOs, maintain their NMLS records, and keep them current
• MLOs for state-licensed lenders/brokers need a state license for each state for mortgages they originate
• NMLS number is inactive until at least one state license is obtained
• Provides a centralized, standardized licensing system for regulatory agencies and the mortgage industry
• All licensing applications, renewals, payments, and communications with state regulators through the NMLS website
• Lenders must make MLO's NMLS number available to consumers practically
• The unique identifier needs to be clearly displayed on all mortgage loan applications, solicitations, advertisements, business cards, and websites. Should be provided upon request, before any mortgage tasks, and with initial consumer communication
• Provides uniform license applications and reporting for state-licensed loan originators
• Ensures all states have licensing laws and requirements for residential MLOs according to national definitions and minimum standards
• Maintains MLO and company licenses within the NMLS
• Provides a licensing and supervisory database boosting accountability in the subprime mortgage marketplace; provides training and examination requirements
• Facilitates consumer complaint collection and disbursement to state regulators
• Improves information flow, reduces regulatory burden, increases accountability for originators through unique identifiers, and enhances consumer protections and anti-fraud measures
• NMLS Consumer Access database (https://www.nmlsconsumeraccess.org/) is searchable by name or NMLS number for public information on companies, branches, and individuals.
• Enables accountability for compliance and consumer best interests
• Requires specific info on loan documents, like company and MLO names and NMLS numbers
• The NMLS unique identifier on all marketing materials, applications, required disclosures, and business cards, including the company's identifier on marketing (if applicable)

CFPB Role

• Can examine MLOs/companies for compliance with SAFE Act and other federal regulations

• Can impose penalties for violations of federal consumer protection laws

• Penalties are deposited into a fund to compensate harmed consumers, used for consumer education and financial literacy programs, if direct compensation isn't feasible

• Penalties vary by regulation and violation type (intentional/not intentional, etc.)

• RESPA Penalties 2023 example:

  • Per violation: $111
  • Intentional violation: $223
  • Annual cap: $223,229

• SAFE Act Penalty 2023 example: $34,401

• TILA Penalties 2023 example

  • First violation: $13,627
  • Subsequent violations: $27,252

• UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) Penalties:

  • Tier 3 violation: $1,362,567 per day (if violation continues)

• Loan Originator Rule:

  • Restricts compensation based on loan terms other than the loan amount.
  • Clarifies the definition of a loan originator, certain exceptions, and duties that do/don't constitute loan origination
  • Allows certain compensation plans for benefits, bonuses, and other compensation based on mortgage-related profits
  • Prohibits dual compensation from both the consumer and the lender or other person
  • Extends recordkeeping for loan originator compensation to companies and lengthens retention time for records

• Enforces requirements for licensed or registered employees concerning character and fitness

• Enforces criminal background checks and training for all unlicensed employees involved in the origination process

• Requirements for loan originator identification info on loan documents

• Prohibits mandatory arbitration clauses to prevent limiting federal statutory rights for consumers

• Restrictions for certain credit insurance/premiums

• Requires depository institutions to have internal policies/procedures to monitor compliance involving loan originator employees

• Consumer complaints are important, and a company on the NMLS has a designated complaints contact