Are You Licensed to Lend?

Don’t let the forecasts fool you. The refinance boom may be over, but the Mortgage Bankers Association predicts that 2022 will be one of the biggest years in history, with total originations expected to hit $2.526 trillion.

Residential lending not only provides the opportunity for community banks to create another profitable line of business, but it also helps cement banks’ long-term success while making a positive impact on their communities. When done efficiently, mortgage origination can be a game-changer for small- and mid-sized community banks; however, for first-timers or even old hands who are ready to get back in the business, it can be difficult to know where to begin.  

Getting your loan officers registered is one of the most important steps in this process, as they cannot offer mortgages legally without registration. While every institution must obtain a Nationwide Multistate Licensing System (NMLS) ID before they are permitted register their respective loan officers, this process varies by institution type.  

The NMLS Federal Registry is the system of record federally chartered or insured institutions and their mortgage loan originators (MLOs) must use to meet registration requirements. A depository institution must register with the NMLS Federal Registry if it employs individuals required to be federally registered as MLO and is federally chartered or insured by one of the following agencies:  

  • Farm Credit Administration;
  • Federal Deposit Insurance Corporation;
  • Board of Governors of the Federal Reserve System;
  • National Credit Union Administration; or
  • Office of the Comptroller of the Currency, Treasury.

The NMLS State Registry is the system of record for nonbank, financial services licensing and registration in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Guam. These institutions must be licensed or registered, as applicable, in all states in which they plan to operate, and requirements vary by state.

Individual MLO NMLS registration also varies by institution type. For federally chartered and insured institutions, NMLS allows batch upload of MLO information in bulk to create their accounts on the system. Once these institutions have gathered the MLOs’ basic information and completed the batch upload, the MLOs can access their own accounts. Basic fingerprint and credit reporting may be required.

For MLOs at non-bank institutions, the first step in completing their NMLS registration is to check the state licensing requirements on the NMLS Resource Center page. Like non-depository companies, MLOs need to be licensed in every state in which they plan to operate, which requires being registered in the NMLS.  Basic education, testing, fingerprinting and credit reporting requirements must be met prior to applying for any licenses in the NMLS for these individuals and their respective employers must also be licensed at the entity level.

After registering and obtaining an NMLS ID, depository institutions should follow up with their legal and regulatory counsel to confirm if there are any additional regulatory requirements. (State charted banks and other depository institutions may also be required to become licensed or registered in a handful of states at the entity level.)

However, the process doesn’t end at NMLS registration. To learn more about licensing and registration and how to offer mortgages both compliantly and cost-effectively, download our free eBook: The Complete Guide to Entering the Residential Mortgage Business.

July 21, 2022
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