PERSONS REQUIRED TO BE LICENSED
LICENSING REQUIREMENTS FOR RESIDENTIAL MORTGAGE LENDERS AND RESIDENTIAL MORTGAGE BROKERS, AS BUSINESS LICENSEES:
No person may act as a residential mortgage lender or broker without first obtaining a license. The department will issue licenses that specify whether a business licensee is licensed as a residential mortgage lender or broker. Please note that a person licensed as a residential mortgage lender may act as a broker, if proper disclosure is made. Additionally, no person may be issued or hold a license as a residential mortgage lender or residential mortgage broker unless one (1) officer, director, partner, owner or principal is a qualified individual licensee of that same type sought or held. The commissioner may, by regulation, require a licensed residential mortgage lender or broker to employ additional qualified individual licensees to properly supervise the business licensee in its branch offices. If a qualified individual licensee allows his license to lapse or for some other reason is no longer affiliated with the business licensee, the business licensee must notify the commissioner within ten (10) days, and must also appoint another qualified individual licensee within ninety (90) days or a longer period as permitted by the commissioner.
Finally, no person licensed as an insurance producer with title insurance authority may be licensed as a business licensee or engage in the business of mortgage loan origination. While on the subject of residential mortgage lenders and residential mortgage brokers, it is important to note that neither are required to maintain an office an New Jersey as long as they are qualified to do business in New Jersey and have a registered agent for service of process. However, if a business licensee changes the address of its principal office or a branch office serving New Jersey consumers, it must file a notice of address change.
FOR RESIDENTIAL MORTGAGE LENDERS AND RESIDENTIAL MORTGAGE BROKERS, AS QUALIFIED INDIVIDUAL LICENSEES:
No individual may act as a qualified individual licensee for a residential mortgage lender or residential mortgage broker without first obtaining a license under the RMLA. A qualified individual licensee licensed as a residential mortgage lender or broker may act as a mortgage loan originator. However, no person licensed as an insurance producer with title insurance authority may be licensed as a qualified individual licensee or engage in the business of mortgage loan origination. It should be noted that this license is required for a natural person who must be an officer, director, partner, owner or principal of a business entity licensed or to be licensed as a Residential Mortgage Broker and is required as a condition of the business entity’s qualification for licensure. The individual must at a minimum meet all of the licensing criteria for a mortgage
loan originator. Residential mortgage loans include both first and second mortgage loans on New Jersey property. A licensed Qualified Individual may act as a mortgage loan originator without additional licensure.
FOR MORTGAGE LOAN ORIGINATORS:
No individual may act as a mortgage loan originator without first obtaining a license or transitional license. Furthermore, no individual may be issued or hold a license or transitional license as a mortgage loan originator unless employed as an originator by one, and not more than one, business licensee, and is subject to the direct supervision and control of that licensee, employed by an exempt company, or who is under a written agreement with and sponsored in the Nationwide Mortgage Licensing System by one, and not more than one, person exempt from licensing requirements and registered with the department, and is subject to the direct supervision and control of that exempt person. There is one exception to the above rule. No individual may act as a loan processor or underwriter who is an independent contractor, or employed by an independent contractor without first obtaining a mortgage loan originator license under this act, with the exception of exempt companies, which we will discuss in the next section. Finally, no person licensed as an insurance producer with title insurance authority may be licensed as a mortgage loan originator or engage in the business of mortgage loan origination.
A NOTE ON TRANSITIONAL LICENSES
The 2018 amendments to the RMLA established a statutory framework for the issuance of “transitional MLO licenses.” These transitional licenses will allow many MLO’s – those who have been working for a bank or a bank subsidiary (Bank MLO’s) and those who have been working for a Mortgage Company not licensed in New Jersey (Out-of-State MLO’s) – to begin working for and earning commissions from a New Jersey-licensed Mortgage Company without having to first apply for and obtain a New Jersey MLO license. The 2018 amendments permit Bank MLO’s to obtain transitional licenses if they were validly registered in the Nationwide Multistate Licensing System & Registry with a depository institution or a depository institution subsidiary (and thus exempt from state licensing requirements under the SAFE Act for at least the one-year period immediately preceding submission of their application for a New Jersey MLO license, and become employed by a New Jersey-licensed Mortgage Company, as well as submit an application for a New Jersey MLO license. The amendments also permit Out-of-State MLO’s to obtain transitional licenses if they are validly licensed as an MLO in at least one state, are or become employed by a New Jersey licensed Mortgage Company, and submit an application for a New Jersey MLO license. Bank MLOs and Out-of-State MLO’s who obtain a transitional license will be immediately authorized to take New Jersey loan applications for their New Jersey-licensed Mortgage Company employer, while awaiting approval of their pending New Jersey MLO license application. If, however, they are unable to obtain such approval after 120 days, their transitional license will expire, and they will have to cease acting as an MLO for their New Jersey-licensed Mortgage Company employer until their application is approved.
FOR EXEMPT COMPANIES
No person qualifies for registration as an exempt company unless the person is in the business of mortgage loan origination solely by virtue of its performance of loan processing or underwriting functions. The commissioner has the authority to adopt rules in accordance with the “Administrative Procedure Act,” specifying additional criteria on the basis of which a person in the business of mortgage loan origination solely by virtue of its performance of loan processing or underwriting functions may qualify for registration as an exempt company. An exempt company must register with the commissioner and with the Nationwide Mortgage Licensing System and Registry. An applicant for registration or for renewal of registration as an exempt company must:
• Submit a completed application to the commissioner;
• Pay to the commissioner at the time of application a nonrefundable application fee not to exceed $500 as established by the commissioner by regulation;
• Pay to the Nationwide Mortgage Licensing System and Registry any fees required by that system and registry, or any fees which, by arrangement of the commissioner, are payable to the Nationwide Mortgage Licensing System and Registry on behalf of the commissioner; and
• Obtain a blanket bond in an amount and form prescribed by the commissioner, but not less than $25,000. The bond must be obtained from a surety company authorized by law to do business in New Jersey. The exempt company must procure the bond to cover its mortgage loan origination related activities. The bond will run to the state of New Jersey for the benefit of any person injured by the wrongful act, default, fraud or
misrepresentation of any person covered by the bond. A registered exempt company must also:
• Respond in a timely manner to any request of the commissioner for the production of and access to books, records, accounts, documents or other information relative to its operations;
• Submit to the Nationwide Mortgage Licensing System and Registry a mortgage call report of conditions, in the form and manner, and with such information, at any time as may be required by the nationwide system and registry, and any other report to, or through, the nationwide system and registry pursuant to an arrangement for reporting and sharing information;
• Provide written notice to the commissioner within 10 days of the occurrence of any event that would cause the exempt company to no longer qualify for registration as such under the terms of this subsection d. and so notify in writing all licensed mortgage loan originators employed or retained by the exempt company; and
• Employ at least one individual who is licensed as a mortgage loan originator who does not engage in the origination of mortgage loans and who has been assigned supervision and instruction duties with respect to individuals employed as loan processors or loan underwriters.
The following persons are exempt from the licensure requirements of the New Jersey Residential Mortgage Lending Act:
• Depository institutions. Note: subsidiaries and service corporations of these institutions are not exempt. Furthermore, a depository institution may register with the department for the purpose of sponsoring individuals, licensed as mortgage loan originators, provided that such registered entity obtains and maintains bond coverage for mortgage loan originators.
• A registered mortgage loan originator that is registered under the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008. Note: Registration is Required by the SAFE Act:
The prevailing idea under this exception is that even though loan originators who work for depository institutions are exempt from individual licensing, these mortgage loan originators must still register with the NMLS and acquire and use a NMLS unique identifier. If a “registered” mortgage loan originator (MLO) discontinues employment with an exempt entity and wants to engage in the business of making mortgage loans in New Jersey with a non-depository institution such as a mortgage broker or lender, then that previously only registered MLO must now become licensed as a Mortgage Loan Originator (MLO).
• A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client, as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a residential mortgage lender, residential mortgage broker,
or mortgage loan originator. Note: It is common for attorneys to prepare mortgages during the normal course of practicing law. This happens many times when private financing from investors is involved, rather than going through a financial institution. Other times, an attorney will
prepare mortgage loans to secure an interest in a property as part of a contractual agreement. What the State of New Jersey is saying here, is that if an attorney is engaging in the mortgage loan business and is being compensated by any of the persons provided in the list above, they will be subject to the same licensing requirements as if they were, let’s say, a mortgage broker or originator.
• A person licensed as a NJ real estate broker or salesperson and not engaged in the business of a residential mortgage lender or residential mortgage broker: Note: A real estate broker or salesperson is not deemed to be engaged in the business of a Mortgage lender or mortgage broker if:
o The real estate broker receives two hundred and fifty dollars ($250) or less at the
closing of the mortgage loan for reimbursement of expenses incurred in providing
specific mortgage related services in connection with a particular real estate sale or
real estate brokerage service;
o The real estate broker itemizes in writing the specific services provided by the real estate broker or by the salesperson licensed with the broker and submits that itemized list to the mortgage lender prior to closing; and
o The real estate broker or salesperson receives a real estate commission in connection with the transaction.
• Any employer, other than a residential mortgage lender, who provides residential mortgage loans to his employees as a benefit of employment, which are at an interest rate which is not in excess of the usury rate in existence at the time the loan is made, as established in accordance with the law of New Jersey, and on which the borrower has not agreed to pay, directly or indirectly, any charge, cost, expense or any fee
whatsoever, other than interest.
• The State of New Jersey or a municipality, or any agency or instrumentality thereof, which, in accordance with a housing element that has received substantive certification from the Council on Affordable Housing, or in fulfillment of a regional contribution agreement with a municipality that has received a certification, employs or proposes to employ municipally generated funds, funds obtained through any State or federal subsidy, or funds acquired by the municipality under a regional contribution agreement, to finance the provision of affordable housing by extending loans or advances, the repayment of which is secured by a lien, subordinate to any prior lien, upon the property that is to be rehabilitated.
• Any individual who offers or negotiates terms of a residential mortgage loan:
o with or on behalf of an immediate family member; or
o secured by a dwelling that serves as the individual’s residence.
• Any person who, during a calendar year takes three or fewer residential mortgage loan applications or offers or negotiates the terms of three or fewer residential mortgage loans or makes three or fewer residential mortgage loans related to manufactured housing structures which are:
o titled by the New Jersey Motor Vehicle Commission;
o located in a mobile home park; and
o are exempt from taxation as real property.
• A bona fide not for profit entity and any individuals directly employed by that entity, so long as the entity maintains its tax-exempt status.
LICENSEE QUALIFICATIONS AND APPLICATION PROCESS UNDERSTANDING THE NATIONWIDE MORTGAGE LICENSING SYSTEM
As mentioned, all mortgage licensees in New Jersey are required to register through the
Nationwide Mortgage Licensing System and Registry; referred to in this course as the (NMLS). The NMLS system is a secure, internet-based system, designed to manage mortgage licenses online. It gives state licensed mortgage lenders, brokers, and loan officers the ability to apply for, amend, update, and renew licenses. The registry is intended to bring greater efficiency and effectiveness to the supervision of mortgage licensees. The NMLS brings transparency and uniformity to the mortgage industry, without hindering the ability of states to approve, deny, suspend or revoke licenses. For example, if a loan officer is censured by a state that participates in the NMLS, agencies and regulators in other participating states would have access to that information and act thereupon accordingly to their particular state’s laws and guidelines.
The NMLS does not issue approvals or denials of mortgage licenses. The system is only designed to process the applications. It was created by the Conference of State Banking Supervisors (CSBS), which is the organization that represents State Banking Supervisors and the American Association of Residential Mortgage Regulators (AARMR), which is the organization that represents the state residential mortgage regulators. The Nationwide Mortgage Licensing System is owned and operated by State Regulatory Registry LLC. http://www.stateregulatoryregistry.org
The NMLS provides benefits for everyone involved in the licensing process, from the regulators to the licensees. The main benefit is that access to information is available, virtually all the time. With access to the secure site, a licensee is able to:
✓ View, update, and amend license records
✓ Check the status of the application
✓ Pay fees online
✓ View historical filing and license information
✓ Communicate online with regulators.
This enhanced access allows a licensee to update and amend license data for multiple states at one time, as well as apply to additional states easily. With regard to multiple state licenses, it is important to remember that the NMLS only processes the information, and each state using the
system can have their own unique requirements for licensure. In other words, being approved in one state via the NMLS does NOT mean an applicant would be automatically approved in all member states. The database issues unique identifiers for each company, its branches, owners and loan officials. These identifiers are similar to Social Security numbers and will follow that firm or person throughout the industry. By doing this, the NMLS prevents fraudulent loan originators from escaping punishment by moving to another company, businesses from changing their
names, or owners from setting up new companies to avoid disclosing past violations. One feature of the NMLS that makes it efficient is the creation of 4 standardized and uniform application forms.
These forms are to be used by:
✓ New licensees wishing to apply for a state license
✓ Existing licensees wishing to transition their current state license onto the NMLS
✓ Existing licensees wishing to surrender or withdraw their license
The four (4) standardized forms used by the NMLS and approved for use in New Jersey are as follows:
(1) MU1 Form, Uniform Mortgage Lender or Broker Application—This form is completed by companies and sole proprietorships that are currently licensed by, or applying for a new license with, a participating state.
(2) MU2 Form, Uniform Mortgage Biographical Statement & Consent—Each individual identified as a control person or a qualifying individual on a mortgage company’s MU1 form must complete this form, as well as branch managers that submit an MU3 form.
(3) MU3 Form, Uniform Mortgage Branch Office Form—Companies licensed in a state that requires registration or licensure of branch locations must complete a separate MU3 for each location. Each MU3 must identify a branch manager, and have an accompanying MU2 on that manager.
(4) MU4 Form, Uniform Individual Mortgage License/Registration & Consent—This form is used to obtain or amend a license as an individual (mortgage loan officer), permitting the licensee to accept, or offer to accept mortgage loan applications. The NMLS uses a single record type system, which means that an applicant can create a company record (MU1), and then attach each associated control person’s record (MU2), each
branch record (MU3), and each loan officer (MU4) record. Each record can be accessed and managed under the umbrella of the MU1, or company entry.
Associate Contributing Editor Capital Lending Network, Inc.