Resistance to Proposed Licensing Exemption
ATLANTIC CITY, NJ—A proposal by the Pennsylvania Department of Banking and Securities to create an exemption for those who originate less than four mortgages a year from its licensing statutes met with resistance from attendees at the Northeast Conference of Mortgage Brokers here.
According to Timothy Siwy, deputy secretary for nondepository institutions, the proposal is part of a bill he dubbed “Operation Red Tape.” It came about because the Department of Housing and Urban Development’s final rule is inconsistent with the state’s current mortgage licensing act.
Therefore he put together a group and Siwy said the only direction he gave was “no stupid rules.” As long as something did not involve consumer protection, the committee should consider eliminating it.
However, the bill is stuck in committee in the Pennsylvania Legislature and does not currently have a number.
Therefore, Siwy said, the department needs a push from the industry to the Legislature to get the bill moving.
While there were things in the bill which got little attention from the audience, such as Pennsylvania replacing its state-specific test with the uniform state test offered with the Consumer Financial Protection Bureau national test, the licensing exemption got a lot of push back from the attendees.
In explaining the reasoning behind the exemption, Siwy said the mobile home/manufactured home dealers requested it in order to provide seller financing. Later in the presentation, Thomas Hunt, deputy assistant division director of the banking division of the New Jersey Department of Banking and Insurance, added that such an exemption was requested in his state by those dealers so they can move older inventory, which financing through broker sources could not be obtained.
When Siwy brought up the exemption, one audience member commented what is to stop insurance agents or real estate agents from using that exemption to originate mortgage loans.
E. Robert Levy, executive director of the mortgage banker and mortgage broker trade groups in New Jersey and counsel to their Pennsylvania counterparts, said the way he reads the wording of the bill if someone originates loans regularly, no matter what the number, they would have to be licensed.
Siwy reiterated the point about it being designed for seller financing of mobile homes, to which another audience member asked rhetorically why doesn’t the bill specify that?
Siwy then commented that the department is open to suggestions but it has to strike a balance on what is fair for the mobile home dealers.
The proposal will also remove the word “employee” from the statute. Siwy said some companies pay using 1099 forms (which is typical for independent contractors), while others have professional employer organizations to manage their workers.
Pennsylvania is concerned about supervision and control. Some organizations use these PEOs to offer better benefits for example.
Someone in the audience commented the Pennsylvania Department of Labor takes a different view of the 1099 versus W-2 issue. Siwy said his department is not looking to be inconsistent when it comes to labor or tax laws. Another person mentioned the Federal Housing Administration’s policy requiring loans it insures be produced by W-2 employees.
Siwy commented the proposal would not work for every originator, but if it works for your company, that is great.
Another part of the proposal will amend the law to state if someone is based in Pennsylvania but does makes all of his or her originations in another state, they will not be required to be licensed in Pennsylvania.
Hunt said New Jersey does not have a formal proposal on the table now, but it is looking to clean up some of the bric-a-brac in the state’s licensing law.
It is also looking at the mobile home dealer exemption, but wants to do so in a way that doesn’t open the door for uncontrolled use of that exemption.
On the 1099 issue, New Jersey is not going down the same path as Pennsylvania at this time. Hunt did note the state does have a rule regarding professional employer organizations.
In those cases, the loan officers are considered employees of the licensed originator for control and supervision purposes.