RD225 - Report on the Operations of the State Regulatory Registry LLC - September 28, 2012


Executive Summary:
Introduction

In accordance with the Code of Virginia, the Bureau of Financial Institutions (Bureau) offers the following report of its review of the State Regulatory Registry LLC (SRR) and the Nationwide Mortgage Licensing System (NMLS). (*1)

Background

NMLS was initiated by state mortgage regulators in 2004 in response to the increased volume and variety of residential mortgage loan originators. SRR was formed in 2006 and is a nonprofit corporation based in Washington, D.C. (*2) SRR is a wholly owned subsidiary of the Conference of State Bank Supervisors (CSBS) (*3), and it owns and operates NMLS. SRR is directed by a Board of Managers consisting of seven state regulators. NMLS was developed by the Financial Industry Regulatory Authority (FINRA). (*4)

NMLS is a Web-based application which enables mortgage lenders, mortgage brokers, and mortgage loan originators (MLOs) to apply for, amend, update, and renew state licenses online with participating regulatory agencies using a single set of uniform applications. NMLS also offers the public an on-line public access/inquiry which discloses licensing information and regulatory enforcement history of mortgage firms and MLOs.

NMLS launched with seven states on January 2, 2008, and the Bureau went live on NMLS (with MLOs only) on August 3, 2009. Title V of the Housing and Economic Recovery Act of 2008, entitled The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), mandated that all MLOs be either federally registered or state-licensed through NMLS. (*5) From August 3, 2009 through June 18, 2012, the Bureau had received 11,309 MLO license applications. As of June 18, 2012, there were 6,827 MLOs approved and licensed in Virginia through NMLS, of which 6,277 licenses were active. Existing Virginia mortgage lender and broker licensees began transitioning onto NMLS on January 3, 2011. As of June 18, 2012, Virginia license transitions totaling 947 had been approved and were active. (*6)

All state mortgage regulatory agencies utilized NMLS to manage MLO licenses for the first time in 2011. In addition, under federal mandate the NMLS Federal Registry became fully operational in 2011 and by year-end contained active registrations for 11,081 federal institutions with 375,654 registered MLOs. SAFE Act requirements were also met last year by adding functionality for the submission of mortgage “Call Reports” by state-licensed companies, as well as adding regulatory and enforcement actions of state regulators in the NMLS. (*7) As these major SAFE Act mandates were met, SRR was able to focus on improving NMLS functionality for regulator and industry users, as well as begin expanding the NMLS to voluntarily allow states to manage non-mortgage financial service licensees in NMLS.
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(*1) The 2011 SRR Annual Report is dated May 1, 2012 and was publically released May 15, 2012. The 2011 audited financial statements for SRR and CSBS were publically released August 15, 2012 and September 7, 2012, respectively.
(*2) SRR has been ruled by the Internal Revenue Service to be a single member domestic limited liability company and is therefore disregarded as a separate entity for tax purposes.
(*3) CSBS is the nationwide, non-profit organization for state bank regulators, representing state regulators of the 50 states, the District of Columbia, and U.S. Territories which supervise state-chartered financial institutions. The majority of state banking departments also oversee mortgage providers and other financial service providers.
(*4) FINRA is the largest independent regulator for all securities firms conducting business in the United States.
(*5) Title V of The Housing and Economic Recovery Act of 2008 (H.E.R.A.), “the SAFE Act”, became effective July 30, 2009 and mandated that state-licensed MLOs meet certain minimum requirements for licensure. States were required to enact laws that brought MLOs into compliance with the SAFE Act no later than December 31, 2010 or lose state oversight of MLOs to the federal government.
(*6) This data is from the NMLS Statistical Report June 18, 2012.
(*7) The Mortgage Call Report collects quarterly mortgage activity and either quarterly or annual financial data from all state-licensed companies.