Temporary Authority to Act as a Mortgage Loan Originator
On May 24, 2018, The Economic Growth, Regulatory Relief and Consumer Protection Act (S.2155) was signed into law. This law, which takes effect November 24, 2019, added a new section known as “Employment Transition of Loan Originators” (12 USC § 5117) to the federal SAFE Act. The newly added Section 5117 of the SAFE Act, grants qualified federally registered mortgage loan originators seeking state licensure, and qualified state licensed mortgage loan originators seeking licensure in another state, temporary authority to act as a mortgage loan originator (“MLO”) and originate loans while completing certain state-specific requirements for licensure (“Temporary Authority”).
The Application Process
There is no application for Temporary Authority and there is no Temporary Authority License. Individuals seeking to originate loans under Temporary Authority must submit an application through the Nationwide Multistate Licensing System (“NMLS”) for licensing as a New York MLO as provided for by Article 12-E of the New York Banking Law (“Article 12-E”). All applications submitted for a New York MLO license, on or after November 24, 2019, will be reviewed for Temporary Authority eligibility.
Eligibility for Temporary Authority
In order for the New York State Department of Financial Services (“Department”) to determine whether an applicant is eligible for Temporary Authority in New York State, applicants must:
- Submit an application through the NMLS for licensing as a New York MLO;
- Be a W-2 employee of, and sponsored by, a mortgage banker or broker licensed or registered by the Department, and working from a location that is licensed or registered by the Department;
- Upload to the NMLS explanations and supporting documentation for any “Yes” answer to a disclosure question;
- Have, within the last 30 days, authorized a credit report through the NMLS;
- Authorize a Criminal Background Check through the NMLS and complete the required New York State specific criminal background check;
- Submit the New York jurisdiction specific Mortgage Loan Originator Affirmation form; and
- Have held either: (a) an MLO license from a state other than New York, continuously during the 30-day period immediately preceding the date on which the application was submitted; or (b) a federal registration through the NMLS, continuously during the one (1) year period immediately preceding the date of application.
Disqualification for Temporary Authority
Applicants who do not qualify for Temporary Authority are prohibited from acting as an MLO in New York unless subsequently licensed as an MLO by the Department. The Department will not grant Temporary Authority to act as an MLO to an applicant who:
- Had an application for an MLO authorization, license or license equivalent denied in any jurisdiction;
- Had an MLO authorization, license or license equivalent revoked or suspended in any jurisdiction;
- Was the subject of, or served with, a cease and desist order in any jurisdiction;
- Failed to submit fingerprint cards and supporting documents to facilitate the New York State specific criminal background check;
- Had been convicted of, or pled guilty or nolo contendere to a felony in a domestic, foreign or military court:
- During the seven-year period preceding the date of the application for licensing; or
- At anytime preceding the date of application, if the felony involved an act of fraud, dishonesty, or breach of trust or money laundering;
- Failed to submit a New York jurisdiction specific Mortgage Loan Originator Affirmation form;
- Has not uploaded explanations and supporting documents for any “Yes” answer to a disclosure question;
- Is not a W-2 employee of and sponsored by a mortgage banker or broker licensed or registered by the Department;
- Does not work from a location licensed or registered by the Department; or
- Has not timely authorized a credit report.
Termination of Temporary Authority
Unless the application has been denied by the Department, termination of an applicant’s Temporary Authority does not discontinue processing of the application for licensing. However, once Temporary Authority is terminated, the applicant is prohibited from acting as an MLO in New York unless subsequently licensed as, an MLO by the Department. If an applicant is granted Temporary Authority, such authority is terminated when:
- The applicant withdraws the application for an MLO license;
- The applicant is no longer a W-2 employee or employed, and sponsored by, a mortgage banker or broker licensed or registered by the Department;
- The Department issues a notice of intent to deny or denies the application;
- The Superintendent grants the applicant an MLO license;
- The applicant subsequently had an application for authority, licensure or licensure equivalent as an MLO denied in any jurisdiction;
- The applicant is convicted of a felony subsequent to submitting the application;
- The applicant’s MLO authorization, license or license equivalent is revoked or suspended in any jurisdiction;
- The applicant no longer works at a location licensed or registered by the Department;
- The applicant subsequently became the subject of or was served with a cease and desist order in any jurisdiction; or
- The application is deemed incomplete 120 days after the date on which it was submitted.
Employment and Sponsorship Requirements Under Temporary Authority
In order for an applicant to be eligible for Temporary Authority the applicant must be employed as a W-2 employee and sponsored by an originating entity. Therefore, originating entities must ensure that the NMLS “Worker Classification” is set to W-2 employee.
Also, originating entities are reminded of their responsibility to conduct due diligence on applicants sponsored by the company [ 3 NYCRR 420.18(a)(2)]. Additionally, the Department expects originating entities to ensure that all sponsored MLOs, including those operating under Temporary Authority, are properly supervised.
Surety Bond Requirements
Article 12-E requires individuals engaging in MLO activities to maintain a surety bond. Section 5117(d)(2) of the SAFE Act allows the Department to apply this requirement to MLOs operating under Temporary Authority.& Each originating entity employing an MLO that operates under Temporary Authority will be required to maintain an originating entity surety bond that complies with the requirements of 3 NYCRR 420.15. You can review the Mortgage Loan Originator Surety Bond Instructions on how to determine the required bond coverage.
For additional questions regarding Temporary Authority or MLO Licensing please contact the New York State Department of Financial Services licensing staff via email at [email protected].