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Nationwide Multistate Licensing System (NMLS) – Overview

What Is the NMLS?

Not everyone in the mortgage industry is completely familiar with the Nationwide Multistate Licensing System (NMLS). However, the entire mortgage industry is affected by the NMLS – mortgage companies (mortgage brokers, mortgage bankers, mortgage servicers, mortgage loan purchasers), mortgage loan originators (MLOs), mortgage company “control persons”, etc.

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 electronic data 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, online, finance industry licensing database that can be accessed by regulatory agencies throughout the country. In order to accomplish this task, every state licensing regulator 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 and finance 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 The original paper forms that bore these names have since been replaced by online application forms.

In the NMLS, companies and individuals each receive unique identifying numbers, which allow state regulators to track them over time. The NMLS allows state regulators to access one unique set of data for any licensed company, its principals, and affiliated companies.

Mortgage and finance companies file initial license applications using the online NMLS registration process, and existing, licensed mortgage and finance companies must file all subsequent applications, changes to applications, and license renewals through the NMLS system.

Benefits of the NMLS

There are several benefits of the NMLS. First of all, all state mortgage and finance company regulators have access to one uniform set of data for any given licensed 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 and finance company licensing process for 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 licensing 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 initial licensing process in any given state. The NMLS does not provide any information relating to state licensing laws. Given this, ALL mortgage and finance companies MUST read and understand state licensing statutes and administrative rules PRIOR to starting the 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 electronic licensing information. All licensing decisions are made by each individual state licensing 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 each acted as industry advisors to the National Conference of State Bank Examiners in the development and implementation of the Nationwide Multistate Licensing System.

The law firm of Vestevich & Associates, P.C and its attorneys assist both new and existing mortgage and finance companies with their NMLS state licensing matters. Call us today to discuss your company’s mortgage and finance company licensing needs!

The Finance Industry’s Licensing Authority Since 1996