The mortgage industry is abuzz by the House of Representatives passing of H.R. 2121.
With rule changes that are greatly anticipated to reduce the friction currently experienced by Mortgage Loan Originators transitioning from federally insured institutions to non-bank lenders, as well as individuals moving or expanding their mortgage licensing to other states.
What does it mean to Loan Officers?
The new rules grant “transitional authority,” described as a period of up to 120 days of authority to originate loans as though the applicant already possessed a license in the state that their “complete application” was submitted. The allotted grace period is intended to allow time for the completion of required state specific SAFE Act training, testing and license processing, without impeding Loan Originator’s ability to generate income while their licensing approval is in process.
According to the FAQs publication titled “Temporary Authority to Operate for Mortgage Loan Originators,” published, April 4th, 2019, by the Nationwide Multi-State Licensing System & Registry, a “complete license application” is defined as a completed MU4, supporting docs for all yes answers, criminal background check, credit check authorization and any state specific requirements.
As you would expect, individuals granted this transitional licensing, and the loans they originate during this transition period are subject to the rules and regulations that apply within the state the application was submitted.
As stated in a published quote on Housewire.com – Sponsor of the bill, Rep. Steve Stivers, R-OH, “a loan officer who moves from a federally-insured institution to a nonbank lender must sit on their hands for weeks, even months, while they meet the SAFE Act’s licensing and testing requirements.”
It should come as no surprise that, since the bill was written specifically to rectify the noted negative side effects, its passing is being hailed by industry thought leaders, such as, the Mortgage Bankers Association (MBA) and the Community Home Lenders Association (CHLA) as a step in the right direction.
An unexpected benefit emerges…
And while the new rule’s primary focus is on fixing the plight of transitioning Mortgage Loan Originators, a shared benefit has emerged for non-bank lenders hoping to recruit highly sought experienced MLOs from within the institutional lending talent pool.
With an ability to originate loans during transition, those who may have been unwilling to consider non-bank employment may now seriously consider the option.
Simply put, these new rules allow MLOs to hit the ground running in new states… and by running we mean originating.
The published NMLS FAQ sheet provides a great deal of insight into specific lender obligations and conditions associated with the qualifying and granting of authority. We urge you to review this information to fully understand the scope of this change.
View or download the NMLS FAQ Sheet.
Interested in new state licensing? Click here to learn how MLG can help.