Banking Interpretations

NYSBL 590; 599

March 17, 2008


Re: Requirement for registration as a mortgage broker

Dear Ms. [---]:

Your letter to the Superintendent of Banks regarding whether your client, a broker-dealer registered both in New York and with the Securities and Exchange Commission, is required to obtain a mortgage broker registration in order to conduct certain business activities in New York State, has been referred to me for response.

According to your letter, you expect your client to enter into a relationship with an affiliated mortgage lender ("Lender") to provide educational and information services to existing and prospective customers of the Lender, on the Lender's behalf; if the customers are seeking residential mortgage loans. In the examples you provide, your client might provide "general information" to the customers about which mortgage products are available, a description of those products, and copies of Lender's printed literature. You write that your client may also provide such information on its website, or by mail or telephone. Furthermore, your client might introduce customers to the Lender and direct customers to consult with the Lender for more detailed information.

According to your letter, your client will not collect information from customers for the purpose of making credit decisions, nor will it distribute or accept mortgage applications, or discuss loan terms or credit eligibility. You write that your client will not enter into any mortgage product agreement between the Lender and the customers, nor discuss or negotiate loan conditions, including interest rates and terms of such loans. Additionally, your client does not intend to collect any origination fee in connection with a mortgage product.

We agree with your position that your client need not obtain a broker registration from the New York State Banking Department (the "Department"), since, based on your description, it does not appear that your client intends to engage in mortgage brokerage activities. The Department has opined in the past that persons and entities that do not obtain information from customers sufficient to make a credit decision do not require a mortgage broker registration. In other words, unless your client is, in effect, taking from its customers an "application" for a mortgage loan, as that term is defined in Regulation B of the Federal Reserve Board, registration is not required. From your letter it appears that your client does not propose to take such applications. Moreover, as your client would not be making loans, no licensing under Article 12-D of the Banking Law is required either.

As for the application of Article 12-E of the Banking Law, I note that employees of your client would not be engaged in mortgage loan originating, as that term is defined in Section 599-b(2) of the Banking Law. Consequently, they would not be required to be authorized as mortgage loan originators under that article.

I trust this is responsive to your inquiry.

Very truly yours,

Elizabeth Nochlin
Assistant Counsel