Banks in Danger of Missing Mortgage Registry Deadline

Some federally-regulated depositories are in danger of missing a July 29 deadline to be registered in the National Mortgage License System and Registry, exposing themselves to possible sanctions from regulators.

A number of financial institutions have initiated their applications but have yet to complete them, says Deborah Bortner, director of consumer services at the state of Washington's Department of Financial Institutions and ombudsman of the NMLS.

Under the 2008 SAFE Mortgage Licensing Act, federally insured banks are required to submit the fingerprints of their mortgage loan originators to the Federal Bureau of Investigation for state and national criminal background checks. Mortgage loan originators working for federally regulated banks also must submit forms detailing their personal history and experience.

The information will be uploaded into the NMLS, which is being maintained by the Conference of State Bank Supervisors.

"There are a number of institutions that are not in the system yet and there is only a week left," Bortner said. "The law requires them to be on there so if you are not on there by July 29, federal and state regulators are going to have to make a decision about what sanctions they are going to impose for failure to meet the requirements of the SAFE Act."

Although many states have strict penalties for mortgage originators at non banks that fail to comply with strict licensing provisions under the S.A.F.E act, there are no proscribed penalties yet for federally regulated banks that fail to comply with the registration requirements. However, according to Timothy Doyle, vice-president of the Conference of State Bank Supervisors, there could be severe ramifications.

"It would be an issue with a regulator," he says, "But there is also a market reason to comply, because if a consumer goes to our public website and does not find the loan officer that is employed by your institution properly registered, then they may not want to do business with him or her."

Before the NMLS system was initiated it was difficult for regulators to track loans back to individual loan originators. "Mortgage loan originators typically move around the industry a lot from institution to institution," Doyle said. "So the criminal background check acts as a basic review."

Doyle said the process of registering isn't a major undertaking, but some banks might not even be aware of the looming deadline.

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