Nationwide Mortgage Licensing System (NMLS) - Overview

What is the NMLS?

Not everyone in the mortgage industry is completely familiar with the Nationwide Mortgage Licensing System (NMLS). However, by July of 2010 - the deadline for state implementation of the federal S.A.F.E Act - everyone in the mortgage industry will be. As of the last revision of this article, 55 state agencies have signed a letter of intent to join the NMLS. The member states have been joining the NMLS in increments, starting with 7 states in January 2008, with the last states joining the system in 2010.

First of all, it is important to know what the NMLS is not. Contrary to popular misconception, the NMLS is not a nationwide mortgage license. The NMLS is, however, a centralized, national repository for all fundamental information related to mortgage companies, their principals, and their loan officers. The system was developed with the help of the same organization that centralized this same type of information for the securities industry.

Purpose of the NMLS

The purpose of the NMLS is to maintain a centralized mortgage industry database that can be accessed by mortgage regulatory agencies around the country. In order to accomplish this task, every state which has agreed to join the NMLS has foregone state-specific application forms in favor of a uniform, national set of application forms. These national application forms, entitled MU1, MU2, MU3 and MU4, involve information related to the mortgage companies, their principals, branch offices and loan originators, respectively. The original paper forms that bore these names have since been replaced by online application forms.

New mortgage companies will file original license applications using the online NMLS registration process, and all existing, licensed mortgage companies will eventually need to transition to the online registration process to upload their information. The transition process for existing licensees will typically be handled during the license renewal process.

Benefits of the NMLS

There are several benefits of the NMLS. First of all, all state mortgage regulators have access to one uniform set of data for any given mortgage company and the individuals associated with it. Now, there is no way for a “bad apple” in the industry to skip town and attempt to get licensed in a new state without being detected. Second, it streamlines the mortgage licensing process for mortgage companies throughout the country.

Research state law BEFORE going to the NMLS

In addition to the standardized “MU” forms required for registration in the NMLS, each state will also have its own specific set of requirements (e.g. fingerprint cards, bonding, financial statement formats, net worth, mortgage industry experience, pre-licensing education, pre-licensing testing, in-state offices, loan officer licensing, continuing education, dual employment restrictions, compensation format requirements, etc.). These additional requirements will all have to be satisfied in order to be licensed in any particular state.

The NMLS only provides company users with a list of state-specific documents that must be submitted as part of the mortgage licensure process in any given state. The NMLS does not provide any information relating to state licensing laws. Given this, ALL mortgage companies MUST read and understand state mortgage licensing statutes and administrative rules PRIOR to starting the mortgage licensing process in any state. Not doing so will either lead to very expensive mistakes or substantial delays in licensing.

State regulators still make the licensing decision

A second popular misconception is that the NMLS is a regulatory body. It is not. It is only a central repository of licensing information. All licensing decisions will still be made by each individual state mortgage regulatory agency, as has always been the case.

Vestevich & Associates, P.C. Law Firm - NMLS Licensing Assistance

William P. Vestevich, Esq. and Theodora Kotsakis, Esq. have acted as industry advisors to the National Conference of State Bank Examiners in the development and implementation of the Nationwide Mortgage Licensing System.

The law firm of Vestevich & Associates, P.C and its attorneys assist new mortgage companies with their initial licensing on the NMLS, as well as existing companies with their transition to, and continuing licensing requirements with, the NMLS.  Rev. 07-28-09

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