Banking group aims for standardized mortgage licensing requirements

A banking regulatory group is taking steps toward "modernizing" the National Multistate Licensing System, moving toward greater mortgage-industry standardization.

The Conference of State Bank Supervisors issued a call for comment on the new Mortgage Business-Specific Requirements proposal, which would set similar regulations around reporting expected from home lending businesses, with the aim for greater operational efficiency across state lines. 

"Adopting a standardized approach for mortgage industry licensing will help increase uniformity within the state system," said Vickie Peck, CSBS executive vice president of products and solutions, in a press release.

"In turn, uniform standards will streamline the licensing process for mortgage companies seeking licensure in multiple states," added Peck. 

Topics addressed within the proposal include rules surrounding listed business contacts, location reporting and documentation requirements, among others. The window for comment submission remains open until May 15.

Guidance around how to provide state offices proof of policies in place is just one of the rules that vary across the country, according to the CSBS filing. "Agencies run the gamut from not asking about policies an applicant has in place to asking for a complete copy of the policy," the proposal stated. 

If adopted in its current form, the proposal would also carve out separate regulations regarding submission of financial statements from applicants who wish to be licensed, depending on the specific type of business operation. New startups with less than $500,000 in revenue would be exempt from providing audited financial statements, for instance. Similarly, underwriters, loan processors and companies seeking a license only to provide broker services, would face less stringent requirements regarding their submitted financial documentation.

The CSBS also seeks to standardize consumer complaint policies and would apply a rule requiring third-party background checks of "key individuals" who had lived abroad and now work for the license-seeking applicant in operations, finance, compliance, and information security.

In 2022, approximately 662,000 companies, individuals and depository institutions participated in the NMLS system. CSBS operates NMLS on behalf of state regulators.

The CSBS call for comment is the second request this week seeking public input on current licensing policies at mortgage enterprises. The Consumer Financial Protection Bureau is also undergoing a mandatory 10-year review of sections within the Truth in Lending Act that impact several aspects of loan originators' work and compensation. Those laws were put into place following passage of the Dodd-Frank Act.