According to a press release from the Conference of State Bank Supervisors
(CSBS) and the American Association of Residential Mortgage
Regulators (AAMR), the Nationwide Mortgage Licensing
System (NMLS) about which we have written
in the past finally became operational on the first business day of the New
NMLS is an Internet-based system modeled on the registry used to regulate securities
brokers and dealers. It will provide a basis for coordination among the states
for mortgage supervision and consumer protection and will prevent, for example,
mortgage originators or brokers with complaints or violations on their records
from moving to a different state and starting over.
According to CSBS Executive Vice President John Ryan, NMLS is the culmination
of a four-year effort by state regulators to provide a new and more solid foundation
for mortgage supervision and consumer protection. "NMLS provides the underpinnings
of a regulatory framework to address the weaknesses of our current fragmented
and complex system of mortgage origination and supervision."
Seven states are initial participants in the program; Idaho,
Iowa, Kentucky, Massachusetts, Nebraska, New York and Rhode Island, but 42 state
agencies in 40 states have stated their intent to use the system. CSBS expects
that eventually all 50 states will use the system and projects that more than
500,000 company and professional licensees will ultimately be registered through
the NMLS program.
On its first day of operations, NMLS reported that 10 percent of the 2,500 companies
that were pre-registered with NMLS logged into the system and entered information
into the standard mortgage application forms, resulting in a total of 289 filings
created in the system. Fifty-five filings were processed by NMLS and submitted
to an agency for approval. One filing was approved. The call center took 133
Bill Matthews, president of State Regulatory Registry LLC,
the CSBS subsidiary that operates NMLS, explained that, "Through the System,
mortgage companies will apply for and manage their licenses electronically.
In addition, NMLS is designed to reduce industry and department costs for processing
licenses and will streamline the licensing application and renewal process for
companies and professionals and thereby reduce industry costs." It also will
centralize redundant state agency operations through the use of more uniform
mortgage licensing requirements.
NMLS is only part of a multi-faceted plan being implemented by CSBS and AAMR
to improve regulation and bring about greater uniformity in mortgage supervision
among states. Other efforts include coordinated supervision, improved regulatory
practices and consistent standards for testing and training for mortgage originators.
To accomplish this, many states have changed or are in the process of changing
their laws and regulations.
The National Association of Mortgage Brokers has strongly opposed
implementation of NMLS on the basis that not all lenders are covered by it and
its underlying inter-state compacts. CSBS and AARMR have argued in turn that
Federal financial institutions are exempt from state regulation, a legal situation
that was upheld last April by the Supreme Court in Watters v. Wachovia.
Consumers will eventually have access to the system's public
licensing and enforcement information which will mean they can check on the
history and credentials of a mortgage loan officer or lender before they commit
to patronizing him. This component should be in place by next year.