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 Year.

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 inquiries

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.