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[Federal Register Volume 76, Number 243 (Monday, December 19, 2011)]
[Rules and Regulations]
[Pages 78483-78499]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31730]

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1007 and 1008

[Docket No. CFPB-2011-0023]
RIN 3170-AA06

S.A.F.E. Mortgage Licensing Act (Regulations G & H)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

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SUMMARY: Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act) transferred rulemaking authority for a 
number of consumer financial protection laws from seven Federal 
agencies to the Bureau of Consumer Financial Protection (Bureau) as of 
July 21, 2011. The Bureau is in the process of republishing the 
regulations implementing those laws with technical and conforming 
changes to reflect the transfer of authority and certain other changes 
made by the Dodd-Frank Act. In light of the transfer to the Bureau of 
the rulemaking authority of the Board of Governors of the Federal 
Reserve System, the Comptroller of the Currency, the National Credit 
Union Administration, the Federal Deposit Insurance Corporation, and 
the Department of Housing and Urban Development for the Secure and Fair 
Enforcement for Mortgage Licensing Act (S.A.F.E. Act), the Bureau is 
publishing for public comment an interim final rule establishing a new 
Regulation G (S.A.F.E. Mortgage Licensing Act--Federal Registration of 
Residential Mortgage Loan Originators) and a new

[[Page 78484]]

Regulation H (S.A.F.E. Mortgage Licensing Act--State Compliance and 
Bureau Registration System). This interim final rule also covers 
employees of institutions regulated by the Farm Credit Administration. 
This interim final rule does not impose any new substantive obligations 
on persons subject to the existing S.A.F.E. Act regulations.

DATES: This interim final rule is effective on December 30, 2011. 
Comments must be received on or before February 17, 2012.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2011-
0023 or RIN 3170-AA06, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Bureau of Consumer Financial Protection, 1500 Pennsylvania Avenue NW., 
(Attn: 1801 L Street), Washington, DC 20220.
     Hand Delivery/Courier in Lieu of Mail: Monica Jackson, 
Office of the Executive Secretary, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20006.
    All submissions must include the agency name and docket number or 
Regulatory Information Number (RIN) for this rulemaking. In general, 
all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public 
inspection and copying at 1700 G Street NW., Washington, DC 20006, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Mitchell E. Hochberg or Joseph Devlin, 
Office of Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

    The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 
(S.A.F.E. Act) provides for the licensing and/or registration of 
mortgage loan originators. The S.A.F.E. Act requires employees of 
depository institutions, employees of subsidiaries that are owned and 
controlled by a depository institution and regulated by a Federal 
banking agency, or employees of institutions regulated by the Farm 
Credit Administration who act as residential mortgage loan originators 
to register with the Nationwide Mortgage Licensing System and Registry, 
obtain a unique identifier, and maintain this registration. The 
S.A.F.E. Act further requires states to adopt minimum standards for 
licensing residential mortgage loan originators.
    Historically, the Federal registration requirements of the S.A.F.E. 
Act have been implemented through a coordinated rulemaking of the 
Federal banking agencies and the Farm Credit Administration with 
authority over Federal registration requirements under the S.A.F.E. Act 
(collectively, the Federal registry agencies).\1\ Further, prior to 
July 21, 2011, the S.A.F.E. Act charged the Department of Housing and 
Urban Development (HUD) with evaluation of states' compliance with the 
S.A.F.E. Act and with establishing and maintaining a licensing and 
registration system for a state or territory that does not have a 
system in place for licensing loan originators that meets the 
requirements of the S.A.F.E. Act.
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    \1\ 75 FR 44656 (July 28, 2010). The rules were promulgated by 
the Office of the Comptroller of the Currency (12 CFR part 34); the 
Federal Reserve System (12 CFR parts 208 and 211); the Federal 
Deposit Insurance Corporation (12 CFR part 365); the Office of 
Thrift Supervision (12 CFR part 563); the Farm Credit Administration 
(12 CFR part 610); and the National Credit Union Administration (12 
CFR parts 741 and 761).
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    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) \2\ amended a number of consumer financial protection 
laws, including the S.A.F.E. Act. In addition to minor amendments, the 
Dodd-Frank Act transferred rulemaking authority for the S.A.F.E. Act 
from the Board of Governors of the Federal Reserve System, the 
Comptroller of the Currency, the National Credit Union Administration, 
the Federal Deposit Insurance Corporation, and the Department of 
Housing and Urban Development to the Bureau of Consumer Financial 
Protection (Bureau), effective July 21, 2011.\3\ See sections 1061 and 
1100 of the Dodd-Frank Act. The Dodd-Frank Act also granted the Bureau 
rulemaking authority pursuant to the S.A.F.E. Act with respect to 
employees of institutions regulated by the Farm Credit Administration. 
See section 1100 of the Dodd-Frank Act. Pursuant to the Dodd-Frank Act 
and the S.A.F.E. Act, as amended, the Bureau is publishing for public 
comment an interim final rule establishing a new Regulation G, S.A.F.E. 
Mortgage Licensing Act--Federal Registration of Residential Mortgage 
Loan Originators, 12 CFR part 1007, implementing the Federal 
registration requirements of the S.A.F.E. Act and a new Regulation H, 
S.A.F.E. Mortgage Licensing Act--State Compliance and Bureau 
Registration System, 12 CFR Part 1008, implementing the requirements 
with respect to states' compliance with the S.A.F.E. Act and the 
maintenance of a licensing and registration system for a state or 
territory that does not have a system in place for licensing loan 
originators that meets the requirements of the S.A.F.E. Act.
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    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
    \3\ Dodd-Frank section 1029 generally excludes from this 
transfer of authority, subject to certain exceptions, any rulemaking 
authority over a motor vehicle dealer that is predominantly engaged 
in the sale and servicing of motor vehicles, the leasing and 
servicing of motor vehicles, or both.
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II. Summary of the Interim Final Rule

A. General

    The interim final rule substantially duplicates the Federal 
registry agencies' largely identical coordinated rules as the Bureau's 
new Regulation G, 12 CFR part 1007, making only certain non-
substantive, technical, formatting, and stylistic changes. The interim 
final rule also substantially duplicates HUD's rule as the Bureau's new 
Regulation H, 12 CFR part 1008. To minimize any potential confusion, 
the Bureau is preserving the past numbering systems of the Federal 
registry agencies and HUD, other than the new part numbers and, with 
respect to Regulation G, the enumeration of the individual definitions 
in section 1007.102. While this interim final rule generally 
incorporates and consolidates the largely identical rules of the 
Federal registry agencies and HUD, the rule has been edited as 
necessary to reflect nomenclature and other technical amendments 
required by the Dodd-Frank Act. Notably, this interim final rule does 
not impose any new substantive obligations on regulated entities. 
Regulated entities and their employees that were registered with the 
Nationwide Mortgage Licensing System and Registry and had obtained 
unique identifiers pursuant to the regulations of the Federal registry 
agencies as of the effective date of this Regulation G will be 
considered by the Bureau to have registered pursuant to the new 
Regulation G.

B. Specific Changes

    The new Regulation G consolidates the regulations of the Office of 
the Comptroller of the Currency (12 CFR part 34); the Federal Reserve 
System (12

[[Page 78485]]

CFR parts 208 and 211); the Federal Deposit Insurance Corporation (12 
CFR part 365); the Office of Thrift Supervision (12 CFR part 563); the 
Farm Credit Administration (12 CFR part 610); and the National Credit 
Union Administration (12 CFR parts 741 and 761) pursuant to the 
conforming changes in section 1100 of the Dodd-Frank Act. Further, the 
new Regulation H has been changed to effect technical, non-substantive 
changes to HUD's existing regulatory text of 24 CFR part 3400.
    For both Regulations G and H, references to the respective banking 
agencies and HUD have been replaced with references to the Bureau in 
the new regulations. Conforming edits have been made to internal cross-
references. Conforming edits have also been made to reflect the scope 
of the Bureau's authority pursuant to the requirements of the S.A.F.E. 
Act, as amended by the Dodd-Frank Act. For example, references to the 
Federal registry agencies and HUD and their respective administrative 
structures have been replaced with references to the Bureau and its 
administrative structure. Conforming edits have been made to internal 
cross-references and addresses. Historical references that are no 
longer applicable, and references to effective dates that have passed, 
have been removed.

III. Legal Authority

A. Rulemaking Authority

    The Bureau is issuing this interim final rule pursuant to its 
authority under the S.A.F.E. Act and the Dodd-Frank Act.\4\ Effective 
July 21, 2011, section 1061 of the Dodd-Frank Act transferred to the 
Bureau the ``consumer financial protection functions'' previously 
vested in certain other Federal agencies. The term ``consumer financial 
protection function'' is defined to include ``all authority to 
prescribe rules or issue orders or guidelines pursuant to any Federal 
consumer financial law, including performing appropriate functions to 
promulgate and review such rules, orders, and guidelines.'' \5\ The 
S.A.F.E. Act is a ``Federal consumer financial law.'' \6\ Additionally, 
section 1061 transferred to the Bureau all of the HUD Secretary's 
consumer protection functions relating to the S.A.F.E. Act, which 
includes rulemaking authority. The Dodd-Frank Act also granted the 
Bureau rulemaking authority pursuant to the S.A.F.E. Act with respect 
to employees of institutions regulated by the Farm Credit 
Administration.\7\ Accordingly, effective July 21, 2011, the Bureau has 
rulemaking authority for the S.A.F.E. Act.\8\
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    \4\ In addition, the Bureau also relies on section 1402 of the 
Dodd-Frank Act, which amends the Truth in Lending Act (TILA) to 
provide the Bureau with specific rulemaking authority over mortgage 
originator qualifications, among other things. The Bureau also has 
authority to make adjustments and exceptions with respect to 
consumer credit transactions pursuant to TILA rulemaking authority. 
See 15 U.S.C. 1604(a), 1639b.
    \5\ Public Law 111-203, section 1061(a)(1). Effective on the 
designated transfer date, July 21, 2011, the Bureau was also granted 
``all powers and duties'' vested in certain other Federal agencies, 
relating to the consumer financial protection functions, on the day 
before the designated transfer date. Until this and other interim 
final rules take effect with respect to the functions transferred 
pursuant to section 1061, existing regulations for which rulemaking 
authority transferred to the Bureau continue to govern persons 
covered by this rule. See 76 FR 43569 (July 21, 2011).
    \6\ Public Law 111-203, section 1002(14) (defining ``Federal 
consumer financial law'' to include the ``enumerated consumer 
laws''); id. Section 1002(12) (defining ``enumerated consumer laws'' 
to include the S.A.F.E. Act).
    \7\ Public Law 111-203, section 1100.
    \8\ Section 1066 of the Dodd-Frank Act grants the Secretary of 
the Treasury interim authority to perform certain functions of the 
Bureau. Pursuant to that authority, Treasury is publishing this 
interim final rule on behalf of the Bureau.
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    The S.A.F.E. Act, as amended, authorizes the Bureau to ``develop 
and maintain a system for registering employees of a depository 
institution, employees of a subsidiary that is owned and controlled by 
a depository institution and regulated by a Federal banking agency, or 
employees of an institution regulated by the Farm Credit 
Administration, as registered loan originators with the Nationwide 
Mortgage Licensing System and Registry.'' \9\ The S.A.F.E. Act also 
authorizes the Bureau to make such de minimis exceptions to the 
registration requirements as may be appropriate.\10\ Further, under the 
S.A.F.E. Act, if the Bureau determines that a state's loan origination 
licensing system does not meet the minimum requirements of the S.A.F.E. 
Act, the Bureau is charged with establishing and implementing a system 
for all loan originators in that state. Additionally, if at any time 
the Bureau determines that the nationwide mortgage licensing system and 
registry is failing to meet the S.A.F.E. Act's requirements, the Bureau 
is charged with establishing and maintaining a licensing and registry 
database for loan originators.\11\ Regulations G and H are issued in 
accordance with these authorities.
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    \9\ Public Law 111-203, section 1100(5)(A).
    \10\ 12 U.S.C. 5106(c).
    \11\ 12 U.S.C. 5107-5108.
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B. Authority To Issue an Interim Final Rule Without Prior Notice and 
Comment

    The Administrative Procedure Act (APA) \12\ generally requires 
public notice and an opportunity to comment before promulgation of 
regulations.\13\ The APA provides exceptions to notice-and-comment 
procedures, however, where an agency for good cause finds that such 
procedures are impracticable, unnecessary, or contrary to the public 
interest or when a rulemaking relates to agency organization, 
procedure, and practice.\14\ The Bureau finds that there is good cause 
to conclude that providing notice and opportunity for comment would be 
unnecessary and contrary to the public interest under these 
circumstances. In addition, substantially all the changes made by this 
interim final rule, which were necessitated by the Dodd-Frank Act's 
transfer of S.A.F.E. Act authority to the Bureau, relate to agency 
organization, procedure, and practice and are thus exempt from the 
APA's notice-and-comment requirements.
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    \12\ 5 U.S.C. 551 et seq.
    \13\ 5 U.S.C. 553(b), (c).
    \14\ 5 U.S.C. 553(b)(B).
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    The Bureau's good cause findings are based on the following 
considerations. As an initial matter, the Federal registry agencies and 
HUD's existing regulations were a result of notice-and-comment 
rulemaking to the extent required. Moreover, the interim final rule 
published today does not impose any new, substantive obligations on 
regulated entities. Rather, the interim final rule makes only non-
substantive, technical changes to the existing text of the regulations, 
such as renumbering, changing internal cross-references, replacing 
appropriate nomenclature to reflect the transfer of authority to the 
bureau, and updating to reflect the expiration of certain deadlines. 
Given the technical nature of these changes, and the fact that the 
interim final rule does not impose any additional substantive 
requirements on covered entities, an opportunity for prior public 
comment is unnecessary. In addition, recodifying the Federal registry 
agencies' and HUD's regulations to reflect the transfer of authority to 
the Bureau will help facilitate compliance with the S.A.F.E. Act and 
its implementing regulations, and the new regulations will help reduce 
uncertainty regarding the applicable regulatory framework. Using 
notice-and-comment procedures would delay this process and thus be 
contrary to the public interest.
    The APA generally requires that rules be published not less than 30 
days

[[Page 78486]]

before their effective dates. See 5 U.S.C. 553(d). As with the notice 
and comment requirement, however, the APA allows an exception when 
``otherwise provided by the agency for good cause found and published 
with the rule.'' 5 U.S.C. 553(d)(3). The Bureau finds that there is 
good cause for providing less than 30 days notice here. A delayed 
effective date would harm consumers and regulated entities by 
needlessly perpetuating discrepancies between the amended statutory 
text and the implementing regulation, thereby hindering compliance and 
prolonging uncertainty regarding the applicable regulatory 
framework.\15\
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    \15\ This interim final rule is one of 14 companion rulemakings 
that together restate and recodify the implementing regulations 
under 14 existing consumer financial laws (part III.C, below, lists 
the 14 laws involved). In the interest of proper coordination of 
this overall regulatory framework, which includes numerous cross-
references among some of the regulations, the Bureau is establishing 
the same effective date of December 30, 2011 for those rules 
published on or before that date and making those published 
thereafter (if any) effective immediately.
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    In addition, delaying the effective date of the interim final rule 
for 30 days would provide no practical benefit to regulated entities in 
this context and in fact could operate to their detriment. As discussed 
above, the interim final rule published today does not impose any new, 
substantive obligations on regulated entities. Instead, the rule makes 
only non-substantive, technical changes to the existing text of the 
regulation. Thus, regulated entities that are already in compliance 
with the existing rules will not need to modify business practices as a 
result of this rule.

C. Section 1022(b)(2) of the Dodd-Frank Act

    In developing the interim final rule, the Bureau has conducted an 
analysis of potential benefits, costs, and impacts.\16\ The Bureau 
believes that the interim final rule will benefit consumers and covered 
persons by updating and recodifying in Regulations G and H the Federal 
registry agencies' and HUD's S.A.F.E. Act regulations to reflect the 
transfer of authority to the Bureau and certain other changes mandated 
by the Dodd-Frank Act. This will help facilitate compliance with the 
S.A.F.E. Act and its implementing regulations and help reduce any 
uncertainty regarding the applicable regulatory framework. The interim 
final rule will not impose any new substantive obligations on consumers 
or covered persons and is not expected to have any impact on consumers' 
access to consumer financial products and services.
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    \16\ Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the 
consideration of the potential benefits and costs of regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas. Section 
1022(b)(2)(B) requires that the Bureau ``consult with the 
appropriate prudential regulators or other Federal agencies prior to 
proposing a rule and during the comment process regarding 
consistency with prudential, market, or systemic objectives 
administered by such agencies.'' The manner and extent to which 
these provisions apply to interim final rules and to costs, 
benefits, and impacts that are compelled by statutory changes rather 
than discretionary Bureau action is unclear. Nevertheless, to inform 
this rulemaking more fully, the Bureau performed the described 
analyses and consultations.
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    Although not required by the interim final rule, covered entities 
may incur some costs in updating compliance manuals and related 
materials to reflect the new numbering and other technical changes 
reflected in the new Regulations G and H. The Bureau has worked to 
reduce any such burden by preserving the existing numbering to the 
extent possible and believes that such costs will likely be minimal. 
These changes could be handled in the short term by providing a short, 
standalone summary alerting users to the changes and in the long term 
could be combined with other updates at the covered entities' 
convenience. The Bureau intends to continue investigating the possible 
costs to affected entities of updating manuals and related materials to 
reflect these changes and solicits comments on this and other issues 
discussed in this section.
    The interim final rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets 
described in section 1026(a) of the Dodd-Frank Act. Also, the interim 
final rule will have no unique impact on rural consumers.
    In undertaking the process of updating and recodifying in 
Regulations G and H the Federal registry agencies' and HUD's S.A.F.E. 
Act regulations, as well as regulations implementing thirteen other 
existing consumer financial laws,\17\ the Bureau consulted the Federal 
Deposit Insurance Corporation, the Office of the Comptroller of the 
Currency, the National Credit Union Administration, the Board of 
Governors of the Federal Reserve System, the Federal Trade Commission, 
and the Department of Housing and Urban Development, including with 
respect to consistency with any prudential, market, or systemic 
objectives that may be administered by such agencies.\18\ The Bureau 
also consulted the Farm Credit Administration regarding the 
recodification of Regulation G and consulted with the Office of 
Management and Budget for technical assistance. The Bureau expects to 
have further consultations with the appropriate Federal agencies during 
the comment period.
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    \17\ The fourteen laws implemented by this and its companion 
rulemakings are: the Consumer Leasing Act, the Electronic Fund 
Transfer Act (except with respect to section 920 of that Act), the 
Equal Credit Opportunity Act, the Fair Credit Reporting Act (except 
with respect to sections 615(e) and 628 of that act), the Fair Debt 
Collection Practices Act, Subsections (b) through (f) of section 43 
of the Federal Deposit Insurance Act, sections 502 through 509 of 
the Gramm-Leach-Bliley Act (except for section 505 as it applies to 
section 501(b)), the Home Mortgage Disclosure Act, the Real Estate 
Settlement Procedures Act, the S.A.F.E. Mortgage Licensing Act, the 
Truth in Lending Act, the Truth in Savings Act, section 626 of the 
Omnibus Appropriations Act, 2009, and the Interstate Land Sales Full 
Disclosure Act.
    \18\ In light of the technical but voluminous nature of this 
recodification project, the Bureau focused the consultation process 
on a representative sample of the recodified regulations, while 
making information on the other regulations available. The Bureau 
expects to conduct differently its future consultations regarding 
substantive rulemakings.
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IV. Request for Comment

    Although notice and comment rulemaking procedures are not required, 
the Bureau invites comments on this notice. Commenters are specifically 
encouraged to identify any technical issues raised by the rule. The 
Bureau is also seeking comment in response to a notice published at 76 
FR 75825 (Dec. 5, 2011) concerning its efforts to identify priorities 
for streamlining regulations that it has inherited from other Federal 
agencies to address provisions that are outdated, unduly burdensome, or 
unnecessary.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\19\ The RFA generally requires an 
agency to conduct an initial regulatory flexibility analysis (IRFA) and 
a final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities.\20\ The Bureau also is subject to 
certain additional procedures under the RFA

[[Page 78487]]

involving the convening of a panel to consult with small business 
representatives prior to proposing a rule for which an IRFA is 
required.\21\
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    \19\ 5 U.S.C. 601 et seq.
    \20\ 5 U.S.C. 603, 604.
    \21\ 5 U.S.C. 609.
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    The IRFA and FRFA requirements described above apply only where a 
notice of proposed rulemaking is required,\22\ and the panel 
requirement applies only when a rulemaking requires an IRFA.\23\ As 
discussed above in part III, a notice of proposed rulemaking is not 
required for this rulemaking.
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    \22\ 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B).
    \23\ 5 U.S.C. 609(b).
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    In addition, as discussed above, this interim final rule has only a 
minor impact on entities subject to Regulations G and H. The rule 
imposes no new, substantive obligations on covered entities. 
Accordingly, the undersigned certifies that this interim final rule 
will not have a significant economic impact on a substantial number of 
small entities.

VI. Paperwork Reduction Act

    The Bureau may not conduct or sponsor, and a respondent is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
Regulation G contains information collection requirements under the 
Paperwork Reduction Act (PRA), which have been previously approved by 
OMB, and the ongoing PRA burden for which is unchanged by this rule. 
There are no new information collection requirements in this interim 
final rule. The Bureau's OMB control number for this information 
collection is 3170-0005.

List of Subjects in 12 CFR Parts 1007 and 1008

    Accounting, Administrative practice and procedure, Advertising, 
Agriculture, Bank deposit insurance, Banks, Banking, Confidential 
business information, Conflict of interests, Consumer protection, 
Credit unions, Crime, Currency, Exports, Foreign banking, Grant 
programs--housing and community development, Holding companies, 
Insurance, Investments, Loan programs--housing and community 
development, Licensing, Mortgages, National banks, Penalties, 
Registration, Reporting and recordkeeping requirements, Rural areas, 
Savings associations, Securities, Surety bonds.

Authority and Issuance

    For the reasons set forth above, the Bureau of Consumer Financial 
Protection adds Parts 1007 and 1008 to Chapter X in Title 12 of the 
Code of Federal Regulations to read as follows:

PART 1007--S.A.F.E. MORTGAGE LICENSING ACT--FEDERAL REGISTRATION OF 
RESIDENTIAL MORTGAGE LOAN ORIGINATORS (REGULATION G)

Sec.
1007.101 Authority, purpose, and scope of this part.
1007.102 Definitions applicable to this part.
1007.103 Registration of mortgage loan originators.
1007.104 Policies and procedures.
1007.105 Use of Unique Identifier.
Appendix A to Part 1007--Examples of Mortgage Loan Originator 
Activities

    Authority: 12 U.S.C. 5101-5116; 15 U.S.C. 1604(a), 1639b; Pub. 
L. 111-203, 124 Stat. 1376.

Sec.  1007.101  Authority, purpose, and scope.

    (a) Authority. This part, known as Regulation G, is issued by the 
Bureau of Consumer Financial Protection pursuant to the Secure and Fair 
Enforcement for Mortgage Licensing Act of 2008, title V of the Housing 
and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122 
Stat. 2654, 12 U.S.C. 5101 et seq.), 12 U.S.C. 5512, 5581, 15 U.S.C. 
1604(a), 1639b.
    (b) Purpose. This part implements the S.A.F.E. Act's Federal 
registration requirement for mortgage loan originators. The S.A.F.E. 
Act provides that the objectives of this registration include 
aggregating and improving the flow of information to and between 
regulators; providing increased accountability and tracking of mortgage 
loan originators; enhancing consumer protections; supporting anti-fraud 
measures; and providing consumers with easily accessible information at 
no charge regarding the employment history of, and publicly adjudicated 
disciplinary and enforcement actions against, mortgage loan 
originators.
    (c) Scope--(1) In general. This part applies to:
    (i) National banks, Federal branches and agencies of foreign banks, 
their operating subsidiaries (collectively referred to in this part as 
national banks), and their employees who act as mortgage loan 
originators;
    (ii) Member banks of the Federal Reserve System; their respective 
subsidiaries that are not functionally regulated within the meaning of 
section 5(c)(5) of the Bank Holding Company Act, as amended (12 U.S.C. 
1844(c)(5)); branches and agencies of foreign banks; commercial lending 
companies owned or controlled by foreign banks (collectively referred 
to in this part as member banks); and their employees who act as 
mortgage loan originators;
    (iii) Insured state nonmember banks (including state-licensed 
insured branches of foreign banks), their subsidiaries (except brokers, 
dealers, persons providing insurance, investment companies, and 
investment advisers) (collectively referred to in this part as insured 
state nonmember banks), and employees of such banks or subsidiaries who 
act as mortgage loan originators;
    (iv) Savings associations, their operating subsidiaries 
(collectively referred to in this part as savings associations), and 
their employees who act as mortgage loan originators;
    (v) Farm Credit System lending institutions that actually originate 
residential mortgage loans pursuant to sections 1.9(3), 1.11 or 2.4(a) 
and (b) of the Farm Credit Act of 1971 (collectively referred to in 
this part as Farm Credit System institutions), and their employees who 
act as mortgage loan originators; and
    (vi) Any federally insured credit union and its employees, 
including volunteers, who act as mortgage loan originators. This part 
also applies to non-federally insured credit unions and their 
employees, including volunteers, who act as mortgage loan originators, 
subject to the conditions in paragraph (c)(3) of this section.
    (2) De minimis exception. (i) This part and the requirements of 12 
U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any 
employee of a national bank, member bank, insured state nonmember bank, 
savings association, Farm Credit System institution, or credit union 
who has never been registered or licensed through the Registry as a 
mortgage loan originator if during the past 12 months the employee 
acted as a mortgage loan originator for 5 or fewer residential mortgage 
loans.
    (ii) Prior to engaging in mortgage loan origination activity that 
exceeds the exception limit in paragraph (c)(2)(i) of this section, an 
employee must register with the Registry pursuant to this part.
    (iii) Evasion. National banks, member banks, insured state 
nonmember banks, savings associations, Farm Credit System institutions, 
and credit unions are prohibited from engaging in any act or practice 
to evade the limits of the de minimis exception set forth in paragraph 
(c)(2)(i) of this section.
    (3) For non-federally insured credit unions. A non-federally 
insured credit union in a state identified on the

[[Page 78488]]

National Credit Union Administration's Web site (NCUA.gov) as one where 
the appropriate state supervisory authority has executed a Memorandum 
of Understanding (MOU) with the National Credit Union Administration 
may register under this rule provided that any Nationwide Mortgage 
Licensing System and Registry listing of the non-federally insured 
credit union and its employees contains a clear and conspicuous 
statement that the non-federally insured credit union is not insured by 
the National Credit Union Share Insurance Fund, and the state 
supervisory authority where the non-federally insured credit union is 
located maintains an agreement with the National Credit Union 
Administration for this registration process and oversight. If the 
state supervisory authority where the non-federally insured credit 
union is located fails to maintain such an agreement, the non-federally 
insured credit union and its employees in that state may not register 
or maintain registration under the Federal system. They instead must 
use the appropriate state licensing and registration system, or if the 
state does not have such a system, the licensing and registration 
system established by the Bureau for mortgage loan originators and 
their employees.

Sec.  1007.102  Definitions.

    For purposes of this part, the following definitions apply:
    Administrative or clerical tasks means the receipt, collection, and 
distribution of information common for the processing or underwriting 
of a loan in the residential mortgage industry and communication with a 
consumer to obtain information necessary for the processing or 
underwriting of a residential mortgage loan.
    Annual renewal period means November 1 through December 31 of each 
year.
    Bureau means the Bureau of Consumer Financial Protection.
    Covered financial institution means any national bank, member bank, 
insured state nonmember bank, savings association, Farm Credit System 
institution, or federally insured credit union as any such term is 
defined in Sec.  1007.101(c)(1). Covered financial institution also 
includes a non-federally insured credit union that registers subject to 
the conditions of Sec.  1007.101(c)(3).
    Mortgage loan originator means
    (1) An individual who:
    (i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain.
    (2)(i) The term mortgage loan originator does not include:
    (A) An individual who performs purely administrative or clerical 
tasks on behalf of an individual who is described as a mortgage loan 
originator in this section;
    (B) An individual who only performs real estate brokerage 
activities (as defined in 12 U.S.C. 5102(4)(D)) and is licensed or 
registered as a real estate broker in accordance with applicable state 
law, unless the individual is compensated by a lender, a mortgage 
broker, or other mortgage loan originator or by any agent of such 
lender, mortgage broker, or other mortgage loan originator, and meets 
the definition of mortgage loan originator in this section; or
    (C) An individual or entity solely involved in extensions of credit 
related to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D).
    (ii) Examples of activities that would, and would not, result in an 
employee meeting the definition of mortgage loan originator are 
provided in Appendix A to this part.
    Nationwide Mortgage Licensing System and Registry or Registry means 
the system developed and maintained by the Conference of State Bank 
Supervisors and the American Association of Residential Mortgage 
Regulators for the state licensing and registration of state-licensed 
mortgage loan originators and the registration of mortgage loan 
originators pursuant to 12 U.S.C. 5107.
    Registered mortgage loan originator or registrant means any 
individual who:
    (1) Meets the definition of mortgage loan originator and is an 
employee of a covered financial institution; and
    (2) Is registered pursuant to this part with, and maintains a 
unique identifier through, the Registry.
    Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(v) of the Truth in Lending Act, 15 U.S.C. 
1602(v)) or residential real estate upon which is constructed or 
intended to be constructed a dwelling, and includes refinancings, 
reverse mortgages, home equity lines of credit and other first and 
additional lien loans that meet the qualifications listed in this 
definition. This definition does not amend or supersede 12 CFR 
613.3030(c) with respect to Farm Credit System institutions.
    Unique identifier means a number or other identifier that:
    (1) Permanently identifies a registered mortgage loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry and the Bureau to facilitate:
    (i) Electronic tracking of mortgage loan originators; and
    (ii) Uniform identification of, and public access to, the 
employment history of and the publicly adjudicated disciplinary and 
enforcement actions against mortgage loan originators; and
    (3) Must not be used for purposes other than those set forth under 
the S.A.F.E. Act.

Sec.  1007.103  Registration of mortgage loan originators.

    (a) Registration requirement--(1) Employee registration. Each 
employee of a covered financial institution who acts as a mortgage loan 
originator must register with the Registry, obtain a unique identifier, 
and maintain this registration in accordance with the requirements of 
this part. Any such employee who is not in compliance with the 
registration and unique identifier requirements set forth in this part 
is in violation of the S.A.F.E. Act and this part.
    (2) Covered financial institution requirement--(i) In general. A 
covered financial institution that employs one or more individuals who 
act as a residential mortgage loan originator must require each such 
employee to register with the Registry, maintain this registration, and 
obtain a unique identifier in accordance with the requirements of this 
part.
    (ii) Prohibition. A covered financial institution must not permit 
an employee who is subject to the registration requirements of this 
part to act as a mortgage loan originator for the covered financial 
institution unless such employee is registered with the Registry 
pursuant to this part.
    (3) [Reserved]
    (4) Employees previously registered or licensed through the 
Registry--(i) In general. If an employee of a covered financial 
institution was registered or licensed through, and obtained a unique 
identifier from, the Registry and has maintained this registration or 
license before the employee becomes subject to this part at the current 
covered financial institution, then the registration requirements of 
the S.A.F.E. Act and this part are deemed to be met, provided that:
    (A) The employment information in paragraphs (d)(1)(i)(C) and 
(d)(1)(ii) of this section is updated and the

[[Page 78489]]

requirements of paragraph (d)(2) of this section are met;
    (B) New fingerprints of the employee are submitted to the Registry 
for a background check, as required by paragraph (d)(1)(ix) of this 
section, unless the employee has fingerprints on file with the Registry 
that are less than 3 years old;
    (C) The covered financial institution information required in 
paragraphs (e)(1)(i) (to the extent the covered financial institution 
has not previously met these requirements) and (e)(2)(i) of this 
section is submitted to the Registry; and
    (D) The registration is maintained pursuant to paragraphs (b) and 
(e)(1)(ii) of this section, as of the date that the employee becomes 
subject to this part.
    (ii) Rule for certain acquisitions, mergers, or reorganizations. 
When registered or licensed mortgage loan originators become covered 
financial institution employees as a result of an acquisition, 
consolidation, merger, or reorganization, only the requirements of 
paragraphs (a)(4)(i)(A), (C), and (D) of this section must be met, and 
these requirements must be met within 60 days from the effective date 
of the acquisition, merger, or reorganization.
    (b) Maintaining registration. (1) A mortgage loan originator who is 
registered with the Registry pursuant to paragraph (a) of this section 
must:
    (i) Except as provided in paragraph (b)(3) of this section, renew 
the registration during the annual renewal period, confirming the 
responses set forth in paragraphs (d)(1)(i) through (viii) of this 
section remain accurate and complete, and updating this information, as 
appropriate; and
    (ii) Update the registration within 30 days of any of the following 
events:
    (A) A change in the name of the registrant;
    (B) The registrant ceases to be an employee of the covered 
financial institution; or
    (C) The information required under paragraphs (d)(1)(iii) through 
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
    (2) A registered mortgage loan originator must maintain his or her 
registration, unless the individual is no longer engaged in the 
activity of a mortgage loan originator.
    (3) The annual registration renewal requirement set forth in 
paragraph (b)(1) of this section does not apply to a registered 
mortgage loan originator who has completed his or her registration with 
the Registry pursuant to paragraph (a)(1) of this section less than 6 
months prior to the end of the annual renewal period.
    (c) Effective dates--(1) Registration. A registration pursuant to 
paragraph (a)(1) of this section is effective on the date the Registry 
transmits notification to the registrant that the registrant is 
registered.
    (2) Renewals or updates. A renewal or update pursuant to paragraph 
(b) of this section is effective on the date the Registry transmits 
notification to the registrant that the registration has been renewed 
or updated.
    (d) Required employee information--(1) In general. For purposes of 
the registration required by this section, a covered financial 
institution must require each employee who is a mortgage loan 
originator to submit to the Registry, or must submit on behalf of the 
employee, the following categories of information, to the extent this 
information is collected by the Registry:
    (i) Identifying information, including the employee's:
    (A) Name and any other names used;
    (B) Home address and contact information;
    (C) Principal business location address and business contact 
information;
    (D) Social security number;
    (E) Gender; and
    (F) Date and place of birth;
    (ii) Financial services-related employment history for the 10 years 
prior to the date of registration or renewal, including the date the 
employee became an employee of the covered financial institution;
    (iii) Convictions of any criminal offense involving dishonesty, 
breach of trust, or money laundering against the employee or 
organizations controlled by the employee, or agreements to enter into a 
pretrial diversion or similar program in connection with the 
prosecution for such offense(s);
    (iv) Civil judicial actions against the employee in connection with 
financial services-related activities, dismissals with settlements, or 
judicial findings that the employee violated financial services-related 
statutes or regulations, except for actions dismissed without a 
settlement agreement;
    (v) Actions or orders by a state or Federal regulatory agency or 
foreign financial regulatory authority that:
    (A) Found the employee to have made a false statement or omission 
or been dishonest, unfair or unethical; to have been involved in a 
violation of a financial services-related regulation or statute; or to 
have been a cause of a financial services-related business having its 
authorization to do business denied, suspended, revoked, or restricted;
    (B) Are entered against the employee in connection with a financial 
services-related activity;
    (C) Denied, suspended, or revoked the employee's registration or 
license to engage in a financial services-related activity; disciplined 
the employee or otherwise by order prevented the employee from 
associating with a financial services-related business or restricted 
the employee's activities; or
    (D) Barred the employee from association with an entity or its 
officers regulated by the agency or authority or from engaging in a 
financial services-related business;
    (vi) Final orders issued by a state or Federal regulatory agency or 
foreign financial regulatory authority based on violations of any law 
or regulation that prohibits fraudulent, manipulative, or deceptive 
conduct;
    (vii) Revocation or suspension of the employee's authorization to 
act as an attorney, accountant, or state or Federal contractor;
    (viii) Customer-initiated financial services-related arbitration or 
civil action against the employee that required action, including 
settlements, or which resulted in a judgment; and
    (ix) Fingerprints of the employee, in digital form if practicable, 
and any appropriate identifying information for submission to the 
Federal Bureau of Investigation and any governmental agency or entity 
authorized to receive such information in connection with a state and 
national criminal history background check; however, fingerprints 
provided to the Registry that are less than 3 years old may be used to 
satisfy this requirement.
    (2) Employee authorizations and attestation. An employee 
registering as a mortgage loan originator or renewing or updating his 
or her registration under this part, and not the employing covered 
financial institution or other employees of the covered financial 
institution, must:
    (i) Authorize the Registry and the employing institution to obtain 
information related to sanctions or findings in any administrative, 
civil, or criminal action, to which the employee is a party, made by 
any governmental jurisdiction;
    (ii) Attest to the correctness of all information required by 
paragraph (d) of this section, whether submitted by the employee or on 
behalf of the employee by the employing covered financial institution; 
and
    (iii) Authorize the Registry to make available to the public 
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii) 
through (viii) of this section.

[[Page 78490]]

    (3) Submission of information. A covered financial institution may 
identify one or more employees of the covered financial institution who 
may submit the information required by paragraph (d)(1) of this section 
to the Registry on behalf of the covered financial institution's 
employees provided that this individual, and any employee delegated 
such authority, does not act as a mortgage loan originator, consistent 
with paragraph (e)(1)(i)(F) of this section. In addition, a covered 
financial institution may submit to the Registry some or all of the 
information required by paragraphs (d)(1) and (e)(2) of this section 
for multiple employees in bulk through batch processing in a format to 
be specified by the Registry, to the extent such batch processing is 
made available by the Registry.
    (e) Required covered financial institution information. A covered 
financial institution must submit the following categories of 
information to the Registry:
    (1) Covered financial institution record. (i) In connection with 
the registration of one or more mortgage loan originators:
    (A) Name, main office address, and business contact information;
    (B) Internal Revenue Service Employer Tax Identification Number 
(EIN);
    (C) Research Statistics Supervision and Discount (RSSD) number, as 
issued by the Board of Governors of the Federal Reserve System;
    (D) Identification of its primary Federal regulator;
    (E) Name(s) and contact information of the individual(s) with 
authority to act as the covered financial institution's primary point 
of contact for the Registry;
    (F) Name(s) and contact information of the individual(s) with 
authority to enter the information required by paragraphs (d)(1) and 
(e) of this section to the Registry and who may delegate this authority 
to other individuals. For the purpose of providing information required 
by paragraph (e) of this section, this individual and their delegates 
must not act as mortgage loan originators unless the covered financial 
institution has 10 or fewer full time or equivalent employees and is 
not a subsidiary; and
    (G) If a subsidiary of a national bank, member bank, savings 
association, or insured state nonmember bank, indication that it is a 
subsidiary and the RSSD number of the parent institution; if an 
operating subsidiary of an agricultural credit association, indication 
that it is a subsidiary, and the RSSD number of the parent agricultural 
credit association.
    (ii) Attestation. The individual(s) identified in paragraphs 
(e)(1)(i)(E) and (F) of this section must comply with Registry 
protocols to verify their identity and must attest that they have the 
authority to enter data on behalf of the covered financial institution, 
that the information provided to the Registry pursuant to this 
paragraph (e) is correct, and that the covered financial institution 
will keep the information required by this paragraph (e) current and 
will file accurate supplementary information on a timely basis.
    (iii) A covered financial institution must update the information 
required by this paragraph (e) of this section within 30 days of the 
date that this information becomes inaccurate.
    (iv) A covered financial institution must renew the information 
required by paragraph (e) of this section on an annual basis.
    (2) Employee information. In connection with the registration of 
each employee who acts as a mortgage loan originator:
    (i) After the information required by paragraph (d) of this section 
has been submitted to the Registry, confirmation that it employs the 
registrant; and
    (ii) Within 30 days of the date the registrant ceases to be an 
employee of the covered financial institution, notification that it no 
longer employs the registrant and the date the registrant ceased being 
an employee.

Sec.  1007.104  Policies and procedures.

    A covered financial institution that employs one or more mortgage 
loan originators must adopt and follow written policies and procedures 
designed to assure compliance with this part. These policies and 
procedures must be appropriate to the nature, size, complexity, and 
scope of the mortgage lending activities of the covered financial 
institution, and apply only to those employees acting within the scope 
of their employment at the covered financial institution. At a minimum, 
these policies and procedures must:
    (a) Establish a process for identifying which employees of the 
covered financial institution are required to be registered mortgage 
loan originators;
    (b) Require that all employees of the covered financial institution 
who are mortgage loan originators be informed of the registration 
requirements of the S.A.F.E. Act and this part and be instructed on how 
to comply with such requirements and procedures;
    (c) Establish procedures to comply with the unique identifier 
requirements in Sec.  1007.105;
    (d) Establish reasonable procedures for confirming the adequacy and 
accuracy of employee registrations, including updates and renewals, by 
comparisons with its own records;
    (e) Establish reasonable procedures and tracking systems for 
monitoring compliance with registration and renewal requirements and 
procedures;
    (f) Provide for independent testing for compliance with this part 
to be conducted at least annually by covered financial institution 
personnel or by an outside party;
    (g) Provide for appropriate action in the case of any employee who 
fails to comply with the registration requirements of the S.A.F.E. Act, 
this part, or the covered financial institution's related policies and 
procedures, including prohibiting such employees from acting as 
mortgage loan originators or other appropriate disciplinary actions;
    (h) Establish a process for reviewing employee criminal history 
background reports received pursuant to this part, taking appropriate 
action consistent with applicable Federal law, including section 19 of 
the Federal Deposit Insurance Act (12 U.S.C. 1829), section 206 of the 
Federal Credit Union Act (12 U.S.C. 1786(i)), and section 5.65(d) of 
the Farm Credit Act of 1971, as amended (12 U.S.C. 2277a-14(d)), and 
implementing regulations with respect to these reports, and maintaining 
records of these reports and actions taken with respect to applicable 
employees; and
    (i) Establish procedures designed to ensure that any third party 
with which the covered financial institution has arrangements related 
to mortgage loan origination has policies and procedures to comply with 
the S.A.F.E. Act, including appropriate licensing and/or registration 
of individuals acting as mortgage loan originators.

Sec.  1007.105  Use of unique identifier.

    (a) The covered financial institution shall make the unique 
identifier(s) of its registered mortgage loan originator(s) available 
to consumers in a manner and method practicable to the institution.
    (b) A registered mortgage loan originator shall provide his or her 
unique identifier to a consumer:
    (1) Upon request;
    (2) Before acting as a mortgage loan originator; and
    (3) Through the originator's initial written communication with a 
consumer, if any, whether on paper or electronically.

[[Page 78491]]

Appendix A to Part 1007--Examples of Mortgage Loan Originator 
Activities

    This appendix provides examples to aid in the understanding of 
activities that would cause an employee of a covered financial 
institution to fall within or outside the definition of mortgage 
loan originator. The examples in this Appendix are not all-
inclusive. They illustrate only the issue described and do not 
illustrate any other issues that may arise under this part. For 
purposes of the examples below, the term ``loan'' refers to a 
residential mortgage loan.
    (a) Taking a loan application. The following examples illustrate 
when an employee takes, or does not take, a loan application.
    (1) Taking an application includes: receiving information 
provided in connection with a request for a loan to be used to 
determine whether the consumer qualifies for a loan, even if the 
employee:
    (i) Has received the consumer's information indirectly in order 
to make an offer or negotiate a loan;
    (ii) Is not responsible for verifying information;
    (iii) Is inputting information into an online application or 
other automated system on behalf of the consumer; or
    (iv) Is not engaged in approval of the loan, including 
determining whether the consumer qualifies for the loan.
    (2) Taking an application does not include any of the following 
activities performed solely or in combination:
    (i) Contacting a consumer to verify the information in the loan 
application by obtaining documentation, such as tax returns or 
payroll receipts;
    (ii) Receiving a loan application through the mail and 
forwarding it, without review, to loan approval personnel;
    (iii) Assisting a consumer who is filling out an application by 
clarifying what type of information is necessary for the application 
or otherwise explaining the qualifications or criteria necessary to 
obtain a loan product;
    (iv) Describing the steps that a consumer would need to take to 
provide information to be used to determine whether the consumer 
qualifies for a loan or otherwise explaining the loan application 
process;
    (v) In response to an inquiry regarding a prequalified offer 
that a consumer has received from a covered financial institution, 
collecting only basic identifying information about the consumer and 
forwarding the consumer to a mortgage loan originator; or
    (vi) Receiving information in connection with a modification to 
the terms of an existing loan to a borrower as part of the covered 
financial institution's loss mitigation efforts when the borrower is 
reasonably likely to default.
    (b) Offering or negotiating terms of a loan. The following 
examples are designed to illustrate when an employee offers or 
negotiates terms of a loan, and conversely, what does not constitute 
offering or negotiating terms of a loan.
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting a loan offer to a consumer for acceptance, either 
verbally or in writing, including, but not limited to, providing a 
disclosure of the loan terms after application under the Truth in 
Lending Act, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process; or
    (D) Only the rate approved by the covered financial 
institution's loan approval mechanism function for a specific loan 
product is communicated without authority to negotiate the rate.
    (ii) Responding to a consumer's request for a lower rate or 
lower points on a pending loan application by presenting to the 
consumer a revised loan offer, either verbally or in writing, that 
includes a lower interest rate or lower points than the original 
offer.
    (2) Offering or negotiating terms of a loan does not include 
solely or in combination:
    (i) Providing general explanations or descriptions in response 
to consumer queries regarding qualification for a specific loan 
product, such as explaining loan terminology (e.g., debt-to-income 
ratio); lending policies (e.g., the loan-to-value ratio policy of 
the covered financial institution); or product-related services;
    (ii) In response to a consumer's request, informing a consumer 
of the loan rates that are publicly available, such as on the 
covered financial institution's Web site, for specific types of loan 
products without communicating to the consumer whether 
qualifications are met for that loan product;
    (iii) Collecting information about a consumer in order to 
provide the consumer with information on loan products for which the 
consumer generally may qualify, without presenting a specific loan 
offer to the consumer for acceptance, either verbally or in writing;
    (iv) Arranging the loan closing or other aspects of the loan 
process, including communicating with a consumer about those 
arrangements, provided that communication with the consumer only 
verifies loan terms already offered or negotiated;
    (v) Providing a consumer with information unrelated to loan 
terms, such as the best days of the month for scheduling loan 
closings at the covered financial institution;
    (vi) Making an underwriting decision about whether the consumer 
qualifies for a loan;
    (vii) Explaining or describing the steps or process that a 
consumer would need to take in order to obtain a loan offer, 
including qualifications or criteria that would need to be met 
without providing guidance specific to that consumer's 
circumstances; or
    (viii) Communicating on behalf of a mortgage loan originator 
that a written offer, including disclosures provided pursuant to the 
Truth in Lending Act, has been sent to a consumer without providing 
any details of that offer.
    (c) Offering or negotiating a loan for compensation or gain. The 
following examples illustrate when an employee does or does not 
offer or negotiate terms of a loan ``for compensation or gain.''
    (1) Offering or negotiating terms of a loan for compensation or 
gain includes engaging in any of the activities in paragraph (b)(1) 
of this appendix in the course of carrying out employment duties, 
even if the employee does not receive a referral fee or commission 
or other special compensation for the loan.
    (2) Offering or negotiating terms of a loan for compensation or 
gain does not include engaging in a seller-financed transaction for 
the employee's personal property that does not involve the covered 
financial institution.

PART 1008--S.A.F.E. MORTGAGE LICENSING ACT--STATE COMPLIANCE AND 
BUREAU REGISTRATION SYSTEM (REGULATION H)

Sec.
1008.1 Purpose.
1008.3 Confidentiality of information.
Subpart A--General
1008.20 Scope of this subpart.
1008.23 Definitions.
Subpart B--Determination of State Compliance With the S.A.F.E. Act
1008.101 Scope of this subpart.
1008.103 Individuals required to be licensed by states.
1008.105 Minimum loan originator license requirements.
1008.107 Minimum annual license renewal requirements.
1008.109 Effective date of state requirements imposed on 
individuals.
1008.111 Other minimum requirements for state licensing systems.
1008.113 Performance standards.
1008.115 Determination of noncompliance.
Subpart C--Bureau's Loan Originator Licensing System and Bureau's 
Nationwide Mortgage Licensing and Registry System
1008.201 Scope of this subpart.
1008.203 Bureau's establishment of loan originator licensing system.
1008.205 Bureau's establishment of nationwide mortgage licensing 
system and registry.
Subpart D--Minimum Requirements for Administration of the NMLSR
1008.301 Scope of this subpart.
1008.303 Financial reporting.
1008.305 Data security.
1008.307 Fees.
1008.309 Absence of liability for good-faith administration.
Subpart E--Enforcement of Bureau Licensing System
1008.401 Bureau's authority to examine loan originator records.
1008.403 [Reserved].
1008.405 [Reserved].
Appendix A to Part 1008--Examples of Mortgage Loan Originator 
Activities
Appendix B to Part 1008--Engaging in the Business of a Loan 
Originator: Commercial Context and Habitualness
Appendix C to Part 1008--Independent Contractors and Loan Processor 
and Underwriter Activities That Require a State Mortgage Loan 
Originator License
Appendix D to Part 1008--Attorneys: Circumstances that Require a 
State Mortgage Loan Originator License

[[Page 78492]]

    Authority: 12 U.S.C. 5101-5116; Pub. L. 111-203, 124 Stat. 1376.

Sec.  1008.1  Purpose.

    (a) Authority. This part, known as Regulation H, is issued by the 
Bureau of Consumer Financial Protection to implement the Secure and 
Fair Enforcement for Mortgage Licensing Act of 2008, title V of the 
Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-
289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.).
    (b) Purpose. The purpose of this part is to enhance consumer 
protection and reduce fraud by directing states to adopt minimum 
uniform standards for the licensing and registration of residential 
mortgage loan originators and to participate in a nationwide mortgage 
licensing system and registry database of residential mortgage loan 
originators. Under the S.A.F.E. Act, if the Bureau determines that a 
state's loan origination licensing system does not meet the minimum 
requirements of the S.A.F.E. Act, the Bureau is charged with 
establishing and implementing a system for all loan originators in that 
state. Additionally, if at any time the Bureau determines that the 
nationwide mortgage licensing system and registry is failing to meet 
the S.A.F.E. Act's requirements, the Bureau is charged with 
establishing and maintaining a licensing and registry database for loan 
originators.
    (c) Organization. The regulation is divided into subparts and 
appendices as follows:
    (1) Subpart A establishes the definitions applicable to this part.
    (2) Subpart B provides the minimum standards that a state must meet 
in licensing loan originators, including standards for whom a state 
must require to be licensed, and sets forth the Bureau's procedure for 
determining a state's compliance with the minimum standards.
    (3) Subpart C provides the requirements that the Bureau will apply 
in any state that the Bureau determines has not established a licensing 
and registration system in compliance with the minimum standards of the 
S.A.F.E. Act.
    (4) Subpart D provides minimum requirements for the administration 
of the Nationwide Mortgage Licensing System and Registry.
    (5) Subpart E clarifies the Bureau's enforcement authority in 
states in which it operates a state licensing system.
    (6) Appendices A through D set forth examples to aid in the 
understanding and application of the regulations.

Sec.  1008.3  Confidentiality of information.

    (a) Except as otherwise provided in this part, any requirement 
under Federal or state law regarding the privacy or confidentiality of 
any information or material provided to the Nationwide Mortgage 
Licensing System and Registry or a system established by the Director 
under this part, and any privilege arising under Federal or state law 
(including the rules of any Federal or state court) with respect to 
such information or material, shall continue to apply to such 
information or material after the information or material has been 
disclosed to the system. Such information and material may be shared 
with all state and Federal regulatory officials with mortgage industry 
oversight authority without the loss of privilege or the loss of 
confidentiality protections provided by Federal and state laws.
    (b) Information or material that is subject to a privilege or 
confidentiality under paragraph (a) of this section shall not be 
subject to:
    (1) Disclosure under any Federal or state law governing the 
disclosure to the public of information held by an officer or an agency 
of the Federal Government or the respective state; or
    (2) Subpoena or discovery, or admission into evidence, in any 
private civil action or administrative process, unless with respect to 
any privilege held by the Nationwide Mortgage Licensing System and 
Registry or by the Director with respect to such information or 
material, the person to whom such information or material pertains, 
waives, in whole or in part, in the discretion of such person, that 
privilege.
    (c) Any state law, including any state open record law, relating to 
the disclosure of confidential supervisory information or any 
information or material described in paragraph (a) of this section that 
is inconsistent with paragraph (a), shall be superseded by the 
requirements of such provision to the extent that state law provides 
less confidentiality or a weaker privilege.
    (d) This section shall not apply with respect to the information or 
material relating to the employment history of, and any publicly 
adjudicated disciplinary and enforcement action against, any loan 
originator that is included in the Nationwide Mortgage Licensing System 
and Registry for access by the public.

Subpart A--General

Sec.  1008.20  Scope of this subpart.

    This subpart provides the definitions applicable to this part, and 
other general requirements applicable to this part.

Sec.  1008.23  Definitions.

    Terms that are defined in the S.A.F.E. Act and used in this part 
have the same meaning as in the S.A.F.E. Act, unless otherwise provided 
in this section.
    Administrative or clerical tasks means the receipt, collection, and 
distribution of information common for the processing or underwriting 
of a loan in the mortgage industry and communication with a consumer to 
obtain information necessary for the processing or underwriting of a 
residential mortgage loan.
    American Association of Residential Mortgage Regulators (AARMR) is 
the national association of executives and employees of the various 
states who are charged with the responsibility for administration and 
regulation of residential mortgage lending, servicing, and brokering, 
and dedicated to the goals described at www.aarmr.org.
    Application means a request, in any form, for an offer (or a 
response to a solicitation of an offer) of residential mortgage loan 
terms, and the information about the borrower or prospective borrower 
that is customary or necessary in a decision on whether to make such an 
offer.
    Bureau means the Bureau of Consumer Financial Protection.
    Clerical or support duties:
    (1) Include:
    (i) The receipt, collection, distribution, and analysis of 
information common for the processing or underwriting of a residential 
mortgage loan; and
    (ii) Communicating with a consumer to obtain the information 
necessary for the processing or underwriting of a loan, to the extent 
that such communication does not include offering or negotiating loan 
rates or terms, or counseling consumers about residential mortgage loan 
rates or terms; and
    (2) Does not include:
    (i) Taking a residential mortgage loan application; or
    (ii) Offering or negotiating terms of a residential mortgage loan.
    Conference of State Bank Supervisors (CSBS) is the national 
organization composed of state bank supervisors dedicated to 
maintaining the state banking system and state regulation of financial 
services in accordance with the CSBS statement of principles described 
at www.csbs.org.
    Director means the Director of the Bureau of Consumer Financial 
Protection.
    Employee means an individual:
    (1) Whose manner and means of performance of work are subject to 
the right of control of, or are controlled by, a person, and

[[Page 78493]]

    (2) Whose compensation for Federal income tax purposes is reported, 
or required to be reported, on a W-2 form issued by the controlling 
person.
    Farm Credit Administration means the independent Federal agency, 
authorized by the Farm Credit Act of 1971, that examines and regulates 
the Farm Credit System.
    For compensation or gain. See Sec.  1008.103(c)(2)(ii).
    Independent contractor means an individual who performs his or her 
duties other than at the direction of and subject to the supervision 
and instruction of an individual who is licensed and registered in 
accordance with Sec.  1008.103(a), or is not required to be licensed, 
in accordance with Sec.  1008.103(e)(5), (6), or (7).
    Loan originator. See Sec.  1008.103.
    Loan processor or underwriter, for purposes of this part, means an 
individual who, with respect to the origination of a residential 
mortgage loan, performs clerical or support duties at the direction of 
and subject to the supervision and instruction of:
    (1) A state-licensed loan originator; or
    (2) A registered loan originator.
    Nationwide Mortgage Licensing System and Registry or NMLSR means 
the mortgage licensing system developed and maintained by the 
Conference of State Bank Supervisors and the American Association of 
Residential Mortgage Regulators for the licensing and registration of 
loan originators and the registration of registered loan originators or 
any system established by the Director, as provided in subpart D of 
this part.
    Nontraditional mortgage product means any mortgage product other 
than a 30-year fixed-rate mortgage.
    Origination of a residential mortgage loan, for purposes of the 
definition of loan processor or underwriter, means all residential 
mortgage loan-related activities from the taking of a residential 
mortgage loan application through the completion of all required loan 
closing documents and funding of the residential mortgage loan.
    Real estate brokerage activities mean any activity that involves 
offering or providing real estate brokerage services to the public 
including--
    (1) Acting as a real estate agent or real estate broker for a 
buyer, seller, lessor, or lessee of real property;
    (2) Bringing together parties interested in the sale, purchase, 
lease, rental, or exchange of real property;
    (3) Negotiating, on behalf of any party, any portion of a contract 
relating to the sale, purchase, lease, rental, or exchange of real 
property (other than in connection with providing financing with 
respect to any such transaction);
    (4) Engaging in any activity for which a person engaged in the 
activity is required to be registered as a real estate agent or real 
estate broker under any applicable law; and
    (5) Offering to engage in any activity, or act in any capacity, 
described in paragraphs (1), (2), (3), or (4) of this definition.
    Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(w) of the Truth in Lending Act) or residential 
real estate upon which is constructed or intended to be constructed a 
dwelling (as so defined).
    State means any state of the United States, the District of 
Columbia, any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Virgin Islands, and the Commonwealth of the 
Northern Mariana Islands.
    Unique identifier means a number or other identifier that:
    (1) Permanently identifies a loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry and the Bureau to facilitate electronic 
tracking of loan originators and uniform identification of, and public 
access to, the employment history of and the publicly adjudicated 
disciplinary and enforcement actions against loan originators; and
    (3) Shall not be used for purposes other than those set forth under 
the S.A.F.E. Act.

Subpart B--Determination of State Compliance With the S.A.F.E. Act

Sec.  1008.101  Scope of this subpart.

    This subpart describes the minimum standards of the S.A.F.E. Act 
that apply to a state's licensing and registering of loan originators. 
This subpart also provides the procedures that the Bureau follows to 
determine that a state does not have in place a system for licensing 
and registering mortgage loan originators that complies with the 
minimum standards. Upon making such a determination, the Bureau will 
impose the requirements and exercise the enforcement authorities 
described in subparts C and E of this part.

Sec.  1008.103  Individuals required to be licensed by states.

    (a) Except as provided in paragraph (e) of this section, in order 
to operate a S.A.F.E.-compliant program, a state must prohibit an 
individual from engaging in the business of a loan originator with 
respect to any dwelling or residential real estate in the state, unless 
the individual first:
    (1) Registers as a loan originator through and obtains a unique 
identifier from the NMLSR, and
    (2) Obtains and maintains a valid loan originator license from the 
state.
    (b) An individual engages in the business of a loan originator if 
the individual, in a commercial context and habitually or repeatedly:
    (1)(i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain; or
    (2) Represents to the public, through advertising or other means of 
communicating or providing information (including the use of business 
cards, stationery, brochures, signs, rate lists, or other promotional 
items), that such individual can or will perform the activities 
described in paragraph (b)(1) of this section.
    (c)(1) An individual ``takes a residential mortgage loan 
application'' if the individual receives a residential mortgage loan 
application for the purpose of facilitating a decision whether to 
extend an offer of residential mortgage loan terms to a borrower or 
prospective borrower (or to accept the terms offered by a borrower or 
prospective borrower in response to a solicitation), whether the 
application is received directly or indirectly from the borrower or 
prospective borrower.
    (2) An individual ``offers or negotiates terms of a residential 
mortgage loan for compensation or gain'' if the individual:
    (i)(A) Presents for consideration by a borrower or prospective 
borrower particular residential mortgage loan terms;
    (B) Communicates directly or indirectly with a borrower, or 
prospective borrower for the purpose of reaching a mutual understanding 
about prospective residential mortgage loan terms; or
    (C) Recommends, refers, or steers a borrower or prospective 
borrower to a particular lender or set of residential mortgage loan 
terms, in accordance with a duty to or incentive from any person other 
than the borrower or prospective borrower; and
    (ii) Receives or expects to receive payment of money or anything of 
value in connection with the activities described in paragraph 
(c)(2)(i) of this section or as a result of any residential mortgage 
loan terms entered into as a result of such activities.

[[Page 78494]]

    (d)(1) Except as provided in paragraph (e) of this section, a state 
must prohibit an individual who is an independent contractor from 
engaging in residential mortgage loan origination activities as a loan 
processor or underwriter with respect to any dwelling or residential 
real estate in the state, unless the individual first:
    (i) Registers as a loan originator through and obtains a unique 
identifier from the NMLSR, and
    (ii) Obtains and maintains a valid loan originator license from the 
state.
    (2) An individual ``engage[s] in residential mortgage loan 
origination activities as a loan processor or underwriter'' if, with 
respect to a residential mortgage loan application, the individual 
performs clerical or support duties.
    (e) A state is not required to impose the prohibitions required 
under paragraphs (a) and (d) of this section on the following 
individuals:
    (1) An individual who performs only real estate brokerage 
activities and is licensed or registered in accordance with applicable 
state law, unless the individual is compensated directly or indirectly 
by a lender, mortgage broker, or other loan originator or by an agent 
of such lender, mortgage broker, or other loan originator;
    (2) An individual who is involved only in extensions of credit 
relating to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D);
    (3) An individual who performs only clerical or support duties and:
    (i) Who does so at the direction of and subject to the supervision 
and instruction of an individual who:
    (A) Is licensed and registered in accordance with paragraph (a) of 
this section, or
    (B) Is not required to be licensed in accordance with paragraph 
(e)(5); or
    (ii) Who performs such duties solely with respect to transactions 
for which the individual who acts as a loan originator is not required 
to be licensed, in accordance with paragraph (e)(2), (6), or (7) of 
this section;
    (4) An individual who performs only purely administrative or 
clerical tasks on behalf of a loan originator;
    (5) An individual who is lawfully registered with, and maintains a 
unique identifier through, the Nationwide Mortgage Licensing System and 
Registry, and who is an employee of a covered financial institution, as 
that term is defined in 12 CFR Part 1007.
    (6)(i) An individual who is an employee of a Federal, state, or 
local government agency or housing finance agency and who acts as a 
loan originator only pursuant to his or her official duties as an 
employee of the Federal, state, or local government agency or housing 
finance agency.
    (ii) For purposes of this paragraph (e)(6), the term employee has 
the meaning provided in paragraph (1) of the definition of employee in 
Sec.  1008.23 and excludes the meaning provided in paragraph (2) of the 
definition.
    (iii) For purposes of this paragraph (e)(6), the term housing 
finance agency means any authority:
    (A) That is chartered by a state to help meet the affordable 
housing needs of the residents of the state;
    (B) That is supervised directly or indirectly by the state 
government;
    (C) That is subject to audit and review by the state in which it 
operates; and
    (D) Whose activities make it eligible to be a member of the 
National Council of State Housing Agencies.
    (7)(i) An employee of a bona fide nonprofit organization who acts 
as a loan originator only with respect to his or her work duties to the 
bona fide nonprofit organization, and who acts as a loan originator 
only with respect to residential mortgage loans with terms that are 
favorable to the borrower.
    (ii) For an organization to be considered a bona fide nonprofit 
organization under this paragraph, a state supervisory authority that 
opts not to require licensing of the employee must determine, under 
criteria and pursuant to processes established by the state, that the 
organization:
    (A) Has the status of a tax-exempt organization under section 
501(c)(3) of the Internal Revenue Code of 1986;
    (B) Promotes affordable housing or provides homeownership 
education, or similar services;
    (C) Conducts its activities in a manner that serves public or 
charitable purposes, rather than commercial purposes;
    (D) Receives funding and revenue and charges fees in a manner that 
does not incentivize it or its employees to act other than in the best 
interests of its clients;
    (E) Compensates its employees in a manner that does not incentivize 
employees to act other than in the best interests of its clients;
    (F) Provides or identifies for the borrower residential mortgage 
loans with terms favorable to the borrower and comparable to mortgage 
loans and housing assistance provided under government housing 
assistance programs; and
    (G) Meets other standards that the state determines are 
appropriate.
    (iii) A state must periodically examine the books and activities of 
an organization it determines is a bona fide nonprofit organization and 
revoke its status as a bona fide nonprofit organization if it does not 
continue to meet the criteria under paragraph (e)(7)(ii) of this 
section;
    (iv) For residential mortgage loans to have terms that are 
favorable to the borrower, a state must determine that the terms are 
consistent with loan origination in a public or charitable context, 
rather than a commercial context.
    (f) A state must require an individual licensed in accordance with 
paragraphs (a) or (d) of this section to renew the loan originator 
license no less often than annually.

Sec.  1008.105  Minimum loan originator license requirements.

    For an individual to be eligible for a loan originator license 
required under Sec.  1008.103(a) and (d), a state must require and 
find, at a minimum, that an individual:
    (a) Has never had a loan originator license revoked in any 
governmental jurisdiction, except that a formally vacated revocation 
shall not be deemed a revocation;
    (b)(1) Has never been convicted of, or pled guilty or nolo 
contendere to, a felony in a domestic, foreign, or military court:
    (i) During the 7-year period preceding the date of the application 
for licensing; or
    (ii) At any time preceding such date of application, if such felony 
involved an act of fraud, dishonesty, a breach of trust, or money 
laundering.
    (2) For purposes of this paragraph (b):
    (i) Expunged convictions and pardoned convictions do not, in 
themselves, affect the eligibility of the individual; and
    (ii) Whether a particular crime is classified as a felony is 
determined by the law of the jurisdiction in which an individual is 
convicted.
    (c) Has demonstrated financial responsibility, character, and 
general fitness, such as to command the confidence of the community and 
to warrant a determination that the loan originator will operate 
honestly, fairly, and efficiently, under reasonable standards 
established by the individual state.
    (d) Completed at least 20 hours of pre-licensing education that has 
been reviewed and approved by the Nationwide Mortgage Licensing System 
and Registry. The pre-licensing education completed by the individual 
must include at least:
    (1) 3 hours of Federal law and regulations;

[[Page 78495]]

    (2) 3 hours of ethics, which must include instruction on fraud, 
consumer protection, and fair lending issues; and
    (3) 2 hours of training on lending standards for the nontraditional 
mortgage product marketplace.
    (e)(1) Achieved a test score of not less than 75 percent correct 
answers on a written test developed by the NMLSR in accordance with 12 
U.S.C. 5105(d).
    (2) To satisfy the requirement under paragraph (e)(1) of this 
section, an individual may take a test three consecutive times, with 
each retest occurring at least 30 days after the preceding test. If an 
individual fails three consecutive tests, the individual must wait at 
least 6 months before taking the test again.
    (3) If a formerly state-licensed loan originator fails to maintain 
a valid license for 5 years or longer, not taking into account any time 
during which such individual is a registered loan originator, the 
individual must retake the test and achieve a test score of not less 
than 75 percent correct answers.
    (f) Be covered by either a net worth or surety bond requirement, or 
pays into a state fund, as required by the state loan originator 
supervisory authority.
    (g) Has submitted to the NMLSR fingerprints for submission to the 
Federal Bureau of Investigation and to any government agency for a 
state and national criminal history background check; and
    (h) Has submitted to the NMLSR personal history and experience, 
which must include authorization for the NMLSR to obtain:
    (1) Information related to any administrative, civil, or criminal 
findings by any governmental jurisdiction; and
    (2) An independent credit report.

Sec.  1008.107  Minimum annual license renewal requirements.

    (a) For an individual to be eligible to renew a loan originator 
license as required under Sec.  1008.103(f), a state must require the 
individual:
    (1) To continue to meet the minimum standards for license issuance 
provided in Sec.  1008.105; and
    (2) To satisfy annual continuing education requirements, which must 
include at least 8 hours of education approved by the NMLSR. The 8 
hours of annual continuing education must include at least:
    (i) 3 hours of Federal law and regulations;
    (ii) 2 hours of ethics (including instruction on fraud, consumer 
protection, and fair lending issues); and
    (iii) 2 hours of training related to lending standards for the 
nontraditional mortgage product marketplace.
    (b) A state must provide that a state-licensed loan originator may 
only receive credit for a continuing education course in the year in 
which the course is taken, and that a state-licensed loan originator 
may not apply credits for education courses taken in one year to meet 
the continuing education requirements of subsequent years. A state must 
provide that an individual may not meet the annual requirements for 
continuing education by taking an approved course more than one time in 
the same year or in successive years.
    (c) An individual who is an instructor of an approved continuing 
education course may receive credit for the individual's own annual 
continuing education requirement at the rate of 2 hours credit for 
every one hour taught.

Sec.  1008.109  Effective date of state requirements imposed on 
individuals.

    (a) Except as provided in paragraphs (b) and (c) of this section, a 
state must provide that the effective date for requirements it imposes 
in accordance with Sec. Sec.  1008.103, 1008.105, and 1008.107 is no 
later than August 29, 2011.
    (b) For an individual who was permitted to perform residential 
mortgage loan originations under state legislation or regulations 
enacted or promulgated prior to the state's enactment or promulgation 
of a licensing system that complies with this subpart, a state may 
delay the effective date for requirements it imposes in accordance with 
Sec. Sec.  1008.103, 1008.105, and 1008.107 to no later than August 29, 
2011. For purposes of this paragraph (b), an individual was permitted 
to perform residential mortgage loan originations only if prior state 
law required the individual to be licensed, authorized, registered, or 
otherwise granted a form of affirmative and revocable government 
permission for individuals as a condition of performing residential 
mortgage loan originations.
    (c) The Bureau may approve a later effective date only upon a 
state's demonstration that substantial numbers of loan originators (or 
of a class of loan originators) who require a state license face 
unusual hardship, through no fault of their own or of the state 
government, in complying with the standards required by the S.A.F.E. 
Act and in obtaining state licenses within one year.

Sec.  1008.111  Other minimum requirements for state licensing systems.

    (a) General. A state must maintain a loan originator licensing, 
supervisory, and oversight authority (supervisory authority) that 
provides effective supervision and enforcement, in accordance with the 
minimum standards provided in this section and in Sec.  1008.113.
    (b) Authorities. A supervisory authority must have the legal 
authority and mechanisms:
    (1) To examine any books, papers, records, or other data of any 
loan originator operating in the state;
    (2) To summon any loan originator operating in the state, or any 
person having possession, custody, or care of the reports and records 
relating to such a loan originator, to appear before the supervisory 
authority at a time and place named in the summons and to produce such 
books, papers, records, or other data, and to give testimony, under 
oath, as may be relevant or material to an investigation of such loan 
originator for compliance with the requirements of the S.A.F.E. Act;
    (3) To administer oaths and affirmations and examine and take and 
preserve testimony under oath as to any matter in respect to the 
affairs of any such loan originator;
    (4) To enter an order requiring any individual or person that is, 
was, or would be a cause of a violation of the S.A.F.E. Act as 
implemented by the state, due to an act or omission the person knew or 
should have known would contribute to such violation, to cease and 
desist from committing or causing such violation and any future 
violation of the same requirement;
    (5) To suspend, terminate, and refuse renewal of a loan originator 
license for violation of state or Federal law; and
    (6) To impose civil money penalties for individuals acting as loan 
originators, or representing themselves to the public as loan 
originators, in the state without a valid license or registration.
    (c) A supervisory authority must have established processes in 
place to verify that individuals subject to the requirement described 
in Sec.  1008.103(a)(1) and (d)(1) are registered with the NMLSR.
    (d) The supervisory authority must be required under state law to 
regularly report violations of such law, as well as enforcement actions 
and other relevant information, to the NMLSR.
    (e) The supervisory authority must have a process in place for 
challenging information contained in the NMLSR.
    (f) The supervisory authority must require a loan originator to 
ensure that all residential mortgage loans that close as a result of 
the loan originator engaging in activities described in Sec.  
1008.103(b)(1) are included in reports of condition submitted to the 
NMLSR. Such reports of condition shall be in such form, shall contain 
such

[[Page 78496]]

information, and shall be submitted with such frequency and by such 
dates as the NMLSR may reasonably require.

Sec.  1008.113  Performance standards.

    (a) For the Bureau to determine that a state is providing effective 
supervision and enforcement, a supervisory authority must meet the 
following performance standards:
    (1) The supervisory authority must participate in the NMLSR;
    (2) The supervisory authority must approve or deny loan originator 
license applications and must renew or refuse to renew existing loan 
originator licenses for violations of state or Federal law;
    (3) The supervisory authority must discipline loan originator 
licensees with appropriate enforcement actions, such as license 
suspensions or revocations, cease-and-desist orders, civil money 
penalties, and consumer refunds for violations of state or Federal law;
    (4) The supervisory authority must examine or investigate loan 
originator licensees in a systematic manner based on identified risk 
factors or on a periodic schedule.
    (b) A supervisory authority that is accredited under the Conference 
of State Bank Supervisors-American Association of Residential Mortgage 
Regulators Mortgage Accreditation Program will be presumed by the 
Bureau to be compliant with the requirements of this section.

Sec.  1008.115  Determination of noncompliance.

    (a) Evidence of compliance. Any time a state enacts legislation 
that affects its compliance with the S.A.F.E. Act, it must notify the 
Bureau. Upon request from the Bureau, a state must provide evidence 
that it is in compliance with the requirements of the S.A.F.E. Act and 
this part, including citations to applicable state law and regulations; 
descriptions of processes followed by the state's supervisory 
authority; and data concerning examination, investigation, and 
enforcement actions.
    (b) Initial determination of noncompliance. If the Bureau makes an 
initial determination that a state is not in compliance with the 
S.A.F.E. Act, the Bureau will notify the state and will publish, in the 
Federal Register, a notice providing the Bureau's initial determination 
and presenting the opportunity for public comment for a period of no 
less than 30 days. This public comment period will allow the residents 
of the state and other interested members of the public to comment on 
the Bureau's initial determination.
    (c) Final determination of noncompliance. In making a final 
determination of noncompliance, the Bureau will review additional 
information that may be offered by a state and the comments submitted 
during the public comment period described in paragraph (b) of this 
section. If the Bureau makes a final determination that a state does 
not have in place by law or regulation a system that complies with the 
minimum requirements of the S.A.F.E. Act, as described in this part, 
the Bureau will publish that final determination in the Federal 
Register.
    (d) Good-faith effort to comply. If the Bureau makes the final 
determination described in paragraph (c) of this section, but the 
Bureau finds that the state is making a good-faith effort to meet the 
requirements of 12 U.S.C. 5104, 5105, 5107(d), and this subpart, the 
Bureau may grant the state a period of not more than 24 months to 
comply with these requirements. If an extension is granted to the state 
in accordance with this paragraph (d), then the Bureau will provide an 
additional initial and final determination process before it determines 
that the state is not in compliance and is subject to subparts C and E 
of this part.
    (e) Effective date of subparts C and E. The provisions of subparts 
C and E of this part will become effective with respect to a state for 
which a final determination of noncompliance has been made upon:
    (1) The effective date of the Bureau's final determination with 
respect to the state, pursuant to paragraph (c) of this section, unless 
an extension had been granted to the state in accordance with paragraph 
(d) of this section; or
    (2) If an extension had been granted to the state in accordance 
with paragraph (d) of this section, the effective date of the Bureau's 
subsequent final determination with respect to the state following the 
expiration of the period of time granted pursuant to paragraph (d) of 
this section.

Subpart C--The Bureau's Loan Originator Licensing System and 
Nationwide Mortgage Licensing and Registry System

Sec.  1008.201  Scope of this subpart.

    The S.A.F.E. Act provides the Bureau with ``backup authority'' to 
establish a loan originator licensing system for any state that is 
determined by the Bureau not to be in compliance with the minimum 
standards of the S.A.F.E. Act. The provisions of this subpart become 
applicable to individuals in a state as provided in Sec.  1008.115(e). 
The S.A.F.E. Act also authorizes the Bureau to establish and maintain a 
nationwide mortgage licensing system and registry if the Bureau 
determines that the NMLSR is failing to meet the purposes and 
requirements of the S.A.F.E. Act for a comprehensive licensing, 
supervisory, and tracking system for loan originators.

Sec.  1008.203  The Bureau's establishment of loan originator licensing 
system.

    If the Bureau determines, in accordance with Sec.  1008.115(e), 
that a state has not established a licensing and registration system in 
compliance with the minimum standards of the S.A.F.E. Act, the Bureau 
shall apply to individuals in that state the minimum standards of the 
S.A.F.E. Act, as specified in subpart B, which provides the minimum 
requirements that a state must meet to be in compliance with the 
S.A.F.E. Act, and as may be further specified in this part.

Sec.  1008.205  The Bureau's establishment of nationwide mortgage 
licensing system and registry.

    If the Bureau determines that the NMLSR established by CSBS and 
AARMR does not meet the minimum requirements of subpart D of this part, 
the Bureau will establish and maintain a nationwide mortgage licensing 
system and registry.

Subpart D--Minimum Requirements for Administration of the NMLSR

Sec.  1008.301  Scope of this subpart.

    This subpart establishes minimum requirements that apply to 
administration of the NMLSR by the Conference of State Bank Supervisors 
or by the Bureau. The NMLSR must accomplish the following objectives:
    (a) Provide uniform license applications and reporting requirements 
for state-licensed loan originators.
    (b) Provide a comprehensive licensing and supervisory database.
    (c) Aggregate and improve the flow of information to and between 
regulators.
    (d) Provide increased accountability and tracking of loan 
originators.
    (e) Streamline the licensing process and reduce the regulatory 
burden.
    (f) Enhance consumer protections and support anti-fraud measures.
    (g) Provide consumers with easily accessible information, offered 
at no charge, utilizing electronic media, including the Internet, 
regarding the employment history of, and publicly adjudicated 
disciplinary and enforcement actions against, loan originators.
    (h) Establish a means by which residential mortgage loan 
originators would, to the greatest extent possible, be

[[Page 78497]]

required to act in the best interests of the consumer.
    (i) Facilitate responsible behavior in the mortgage marketplace and 
provide comprehensive training and examination requirements related to 
mortgage lending.
    (j) Facilitate the collection and disbursement of consumer 
complaints on behalf of state and Federal mortgage regulators.

Sec.  1008.303  Financial reporting.

    To the extent that CSBS maintains the NMLSR, CSBS must annually 
provide to the Bureau, and the Bureau will annually collect and make 
available to the public, NMLSR financial statements, audited in 
accordance with Generally Accepted Accounting Principles (GAAP) 
promulgated by the Federal Accounting Standards Advisory Board, and 
other data. These financial statements and other data shall include, 
but not be limited to, the level and categories of funds received in 
relation to the NMLSR and how such funds are spent, including the 
aggregate total of funds paid for system development and improvements, 
the aggregate total of salaries and bonuses paid, the aggregate total 
of other administrative costs, and detail on other money spent, 
including money and interest paid to reimburse system investors or 
lenders, and a report of each state's activity with respect to the 
NMLSR, including the number of licensees, the state's financial 
commitment to the system, and the fees collected by the state through 
the NMLSR.

Sec.  1008.305  Data security.

    (a) To the extent that CSBS, AARMR, or their successors maintain 
the NMLSR, CSBS, AARMR, and their successors, as applicable, must 
complete a background check on their employees, contractors, or other 
persons who have access to loan originators' Social Security Numbers, 
fingerprints, or any credit reports collected by the system.
    (b) To the extent that CSBS, AARMR, or their successors maintain 
the NMLSR, CSBS, AARMR, and their successors as applicable, must keep 
and adhere to an appropriate information security and privacy policy. 
If the NMLSR forms a reasonable belief that a security breach has 
occurred, it shall notify affected parties, as soon as practicable, 
including the Bureau, any loan originator or registrant whose data may 
have been compromised, and the employer of the loan originator or 
registrant, if such employer is also licensed through the system.

Sec.  1008.307  Fees.

    CSBS, AARMR, or the Bureau, as applicable, may charge reasonable 
fees to cover the costs of maintaining and providing access to 
information from the Nationwide Mortgage Licensing System and Registry. 
Fees shall not be charged to consumers for access to such system and 
registry. If the Bureau determines to charge fees, the fees to be 
charged shall be issued by notice with the opportunity for comment 
prior to any fees being charged.

Sec.  1008.309  Absence of liability for good-faith administration.

    The Bureau or any organization serving as the administrator of the 
Nationwide Mortgage Licensing System and Registry or a system 
established by the Bureau under 12 U.S.C. 5108 and in accordance with 
subpart C, or any officer or employee of the Bureau or the Bureau's 
designee, shall not be subject to any civil action or proceeding for 
monetary damages by reason of the good-faith action or omission of any 
officer or employee of any such entity, while acting within the scope 
of office or employment, relating to the collection, furnishing, or 
dissemination of information concerning persons who are loan 
originators or are applying for licensing or registration as loan 
originators.

Subpart E--Enforcement of the Bureau's Licensing System

Sec.  1008.401  The Bureau's authority to examine loan originator 
records.

    (a) Summons authority. The Bureau may:
    (1) Examine any books, papers, records, or other data of any loan 
originator operating in any state which is subject to a licensing 
system established by the Bureau under subpart C of this part; and
    (2) Summon any loan originator referred to in paragraph (a)(1) of 
this section or any person having possession, custody, or care of the 
reports and records relating to such loan originator, to appear before 
the Bureau at a time and place named in the summons and to produce such 
books, papers, records, or other data, and to give testimony, under 
oath, as may be relevant or material to an investigation of such loan 
originator for compliance with the requirements of the S.A.F.E. Act.
    (b) Examination authority--(1) In general. If the Bureau 
establishes a licensing system under 12 U.S.C. 5107 and in accordance 
with subpart C of this part for any state, the Bureau shall appoint 
examiners for the purposes of ensuring the appropriate administration 
of the Bureau's licensing system.
    (2) Power to examine. Any examiner appointed under paragraph (b)(1) 
of this section shall have power, on behalf of the Bureau, to make any 
examination of any loan originator operating in any state which is 
subject to a licensing system established by the Bureau under 12 U.S.C. 
5107 and in accordance with subpart C of this part, whenever the Bureau 
determines that an examination of any loan originator is necessary to 
determine the compliance by the originator with minimum requirements of 
the S.A.F.E. Act.
    (3) Report of examination. Each Bureau examiner appointed under 
paragraph (b)(1) of this section shall make a full and detailed report 
to the Bureau of examination of any loan originator examined under this 
section.
    (4) Administration of oaths and affirmations; evidence. In 
connection with examinations of loan originators operating in any state 
which is subject to a licensing system established by the Bureau under 
12 U.S.C. 5107, and in accordance with subpart C of this part, or with 
other types of investigations to determine compliance with applicable 
law and regulations, the Bureau and the examiners appointed by the 
Bureau may administer oaths and affirmations and examine and take and 
preserve testimony under oath as to any matter in respect to the 
affairs of any such loan originator.
    (5) Assessments. The cost of conducting any examination of any loan 
originator operating in any state which is subject to a licensing 
system established by the Bureau under 12 U.S.C 5107 and in accordance 
with subpart C of this part shall be assessed by the Bureau against the 
loan originator to meet the Director's expenses in carrying out such 
examination.

Sec.  1008.403  [Reserved].

Sec.  1008.405  [Reserved].

Appendix A to Part 1008--Examples of Mortgage Loan Originator 
Activities

    This Appendix provides examples to aid in the understanding of 
activities that would cause an individual to fall within or outside 
the definition of a mortgage loan originator under Part 1008. The 
examples in this Appendix are not all-inclusive. They illustrate 
only the issue described and do not illustrate any other issues that 
may arise. For purposes of the examples below, the term ``loan'' 
refers to a residential mortgage loan as defined in Sec.  1008.23 of 
this part.
    (a) Taking a Loan Application. Taking a residential mortgage 
loan application within the meaning of Sec.  1008.103(c)(1) means 
receipt by an individual, for the purpose of facilitating a decision 
whether to extend an

[[Page 78498]]

offer of loan terms to a borrower or prospective borrower, of an 
application as defined in Sec.  1008.23 (a request in any form for 
an offer, or a response to a solicitation of an offer, of 
residential mortgage loan terms, and the information about the 
borrower or prospective borrower that is customary or necessary in a 
decision whether to make such an offer).
    (1) The following are examples to illustrate when an individual 
takes, or does not take, a loan application:
    (i) An individual ``takes a residential mortgage loan 
application'' even if the individual:
    (A) Has received the borrower or prospective borrower's request 
or information indirectly. Section 1008.103(c)(1) provides that an 
individual takes an application, whether he or she receives it 
``directly or indirectly'' from the borrower or prospective 
borrower. This means that an individual who offers or negotiates 
residential mortgage loan terms for compensation or gain cannot 
avoid licensing requirements simply by having another person 
physically receive the application from the prospective borrower and 
then pass the application to the individual;
    (B) Is not responsible for verifying information. The fact that 
an individual who takes application information from a borrower or 
prospective borrower is not responsible for verifying that 
information--for example, the individual is a mortgage broker who 
collects and sends that information to a lender--does not mean that 
the individual is not taking an application;
    (C) Only inputs the information into an online application or 
other automated system; or
    (D) Is not involved in approval of the loan, including 
determining whether the consumer qualifies for the loan. Similar to 
an individual who is not responsible for verification, an individual 
can still ``take a residential mortgage loan application'' even if 
he or she is not ultimately responsible for approving the loan. A 
mortgage broker, for example, can take a residential mortgage loan 
application even though it is passed on to a lender for a decision 
on whether the borrower qualifies for the loan and for the ultimate 
loan approval.
    (ii) An individual does not take a loan application merely 
because the individual performs any of the following actions:
    (A) Receives a loan application through the mail and forwards 
it, without review, to loan approval personnel. The Bureau 
interprets the term ``takes a residential mortgage loan 
application'' to exclude an individual whose only role with respect 
to the application is physically handling a completed application 
form or transmitting a completed form to a lender on behalf of a 
borrower or prospective borrower. This interpretation is consistent 
with the definition of ``loan originator'' in section 1503(3) of the 
S.A.F.E. Act.
    (B) Assists a borrower or prospective borrower who is filling 
out an application by explaining the contents of the application and 
where particular borrower information is to be provided on the 
application;
    (C) Generally describes for a borrower or prospective borrower 
the loan application process without a discussion of particular loan 
products; or
    (D) In response to an inquiry regarding a prequalified offer 
that a borrower or prospective borrower has received from a lender, 
collects only basic identifying information about the borrower or 
prospective borrower on behalf of that lender.
    (b) Offering or Negotiating Terms of a Loan. The following 
examples are designed to illustrate when an individual offers or 
negotiates terms of a loan within the meaning of Sec.  
1008.103(c)(2) and, conversely, what does not constitute offering or 
negotiating terms of a loan:
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting for consideration by a borrower or prospective 
borrower particular loan terms, whether verbally, in writing, or 
otherwise, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process;
    (D) The individual lacks authority to negotiate the interest 
rate or other loan terms; or
    (E) The individual lacks authority to bind the person that is 
the source of the prospective financing.
    (ii) Communicating directly or indirectly with a borrower or 
prospective borrower for the purpose of reaching a mutual 
understanding about prospective residential mortgage loan terms, 
including responding to a borrower or prospective borrower's request 
for a different rate or different fees on a pending loan application 
by presenting to the borrower or prospective borrower a revised loan 
offer, even if a mutual understanding is not subsequently achieved.
    (2) Offering or negotiating terms of a loan does not include any 
of the following activities:
    (i) Providing general explanations or descriptions in response 
to consumer queries, such as explaining loan terminology (e.g., 
debt-to-income ratio) or lending policies (e.g., the loan-to-value 
ratio policy of the lender), or describing product-related services;
    (ii) Arranging the loan closing or other aspects of the loan 
process, including by communicating with a borrower or prospective 
borrower about those arrangements, provided that any communication 
that includes a discussion about loan terms only verifies terms 
already agreed to by the borrower or prospective borrower;
    (iii) Providing a borrower or prospective borrower with 
information unrelated to loan terms, such as the best days of the 
month for scheduling loan closings at the bank;
    (iv) Making an underwriting decision about whether the borrower 
or prospective borrower qualifies for a loan;
    (v) Explaining or describing the steps that a borrower or 
prospective borrower would need to take in order to obtain a loan 
offer, including providing general guidance about qualifications or 
criteria that would need to be met that is not specific to that 
borrower or prospective borrower's circumstances;
    (vi) Communicating on behalf of a mortgage loan originator that 
a written offer has been sent to a borrower or prospective borrower 
without providing any details of that offer; or
    (vii) Offering or negotiating loan terms solely through a third-
party licensed loan originator, so long as the nonlicensed 
individual does not represent to the public that he or she can or 
will perform covered activities and does not communicate with the 
borrower or potential borrower. For example:
    (A) A seller who provides financing to a purchaser of a dwelling 
owned by that seller in which the offer and negotiation of loan 
terms with the borrower or prospective borrower is conducted 
exclusively by a third-party licensed loan originator;
    (B) An individual who works solely for a lender, when the 
individual offers loan terms exclusively to third-party licensed 
loan originators and not to borrowers or potential borrowers.
    (c) For Compensation or Gain. (1) An individual acts ``for 
compensation or gain'' within the meaning of Sec.  
1008.103(c)(2)(ii) if the individual receives or expects to receive 
in connection with the individual's activities anything of value, 
including, but not limited to, payment of a salary, bonus, or 
commission. The concept ``anything of value'' is interpreted broadly 
and is not limited only to payments that are contingent upon the 
closing of a loan.
    (2) An individual does not act ``for compensation or gain'' if 
the individual acts as a volunteer without receiving or expecting to 
receive anything of value in connection with the individual's 
activities.

Appendix B to Part 1008--Engaging in the Business of a Loan Originator: 
Commercial Context and Habitualness

    An individual who acts (or holds himself or herself out as 
acting) as a loan originator in a commercial context and with some 
degree of habitualness or repetition is considered to be ``engage[d] 
in the business of a loan originator[.]'' An individual who acts as 
a loan originator does so in a commercial context if the individual 
acts for the purpose of obtaining anything of value for himself or 
herself, or for an entity or individual for which the individual 
acts, rather than exclusively for public, charitable, or family 
purposes. The habitualness or repetition of the origination 
activities that is needed to ``engage in the business of a loan 
originator'' may be met either if the individual who acts as a loan 
originator does so with a degree of habitualness or repetition, or 
if the source of the prospective financing provides mortgage 
financing or performs other origination activities with a degree of 
habitualness or repetition. This Appendix provides examples to aid 
in the understanding of activities that would not constitute 
engaging in the business of a loan originator, such that an 
individual is not required to obtain and maintain a state mortgage 
loan originator license. The examples in this Appendix are not all-
inclusive. They illustrate only the issue described and do not 
illustrate any other issues that may arise under part 1008. For 
purposes of the examples below, the term

[[Page 78499]]

``loan'' refers to a ``residential mortgage loan'' as defined in 
Sec.  1008.23 of this part.
    (a) Not Engaged in the Business of a Mortgage Loan Originator. 
The following examples illustrate when an individual generally does 
not ``engage in the business of a loan originator'':
    (1) An individual who acts as a loan originator in providing 
financing for the sale of that individual's own residence, provided 
that the individual does not act as a loan originator or provide 
financing for such sales so frequently and under such circumstances 
that it constitutes a habitual and commercial activity.
    (2) An individual who acts as a loan originator in providing 
financing for the sale of a property owned by that individual, 
provided that such individual does not engage in such activity with 
habitualness.
    (3) A parent who acts as a loan originator in providing loan 
financing to his or her child.
    (4) An employee of a government entity who acts as a loan 
originator only pursuant to his or her official duties as an 
employee of that government entity, if all applicable conditions in 
Sec.  1008.103(e)(6) of this part are met.
    (5) If all applicable conditions in Sec.  1008.103(e)(7) of this 
part are met, an employee of a nonprofit organization that has been 
determined to be a bona fide nonprofit organization by the state 
supervisory authority, when the employee acts as a loan originator 
pursuant to his or her duties as an employee of that organization.
    (6) An individual who does not act as a loan originator 
habitually or repeatedly, provided that the source of prospective 
financing does not provide mortgage financing or perform other loan 
origination activities habitually or repeatedly.

Appendix C to Part 1008--Independent Contractors and Loan Processor and 
Underwriter Activities That Require a State Mortgage Loan Originator 
License

    The examples below are designed to aid in the understanding of 
loan processing or underwriting activities for which an individual 
is required to obtain a S.A.F.E. Act-compliant mortgage loan 
originator license. The examples in this Appendix are not all-
inclusive. They illustrate only the issue described and do not 
illustrate any other issues that may arise under part 1008. For 
purposes of the examples below, the term ``loan'' refers to a 
residential mortgage loan as defined in Sec.  1008.23 of this part.
    (a) An individual who is a loan processor or underwriter who 
must obtain and maintain a state loan originator license includes:
    (1) Any individual who engages in the business of a loan 
originator, as defined in Sec.  1008.103 of this part;
    (2) Any individual who performs clerical or support duties and 
who is an independent contractor, as those terms are defined in 
Sec.  1008.23;
    (3) Any individual who collects, receives, distributes, or 
analyzes information in connection with the making of a credit 
decision and who is an independent contractor, as that term is 
defined in Sec.  1008.23; and
    (4) Any individual who communicates with a consumer to obtain 
information necessary for making a credit decision and who is an 
independent contractor, as that term is defined in Sec.  1008.23.
    (b) A state is not required to impose S.A.F.E. Act licensing 
requirements on any individual loan processor or underwriter who, 
for example:
    (1) Performs only clerical or support duties (i.e., the loan 
processor's or underwriter's activities do not include, e.g., 
offering or negotiating loan rates or terms, or counseling borrowers 
or prospective borrowers about loan rates or terms), and who 
performs those clerical or support duties at the direction of and 
subject to the supervision and instruction of an individual who 
either: Is licensed and registered in accordance with Sec.  
1008.103(a) (state licensing of loan originators); or is not 
required to be licensed because he or she is excluded from the 
licensing requirement pursuant to Sec.  1008.103(e)(2) (time-share 
exclusion), (e)(5)(federally registered loan originator), (e)(6) 
(government employees exclusion), or (e)(7) (nonprofit exclusion).
    (2) Performs only clerical or support duties as an employee of a 
mortgage lender or mortgage brokerage firm, and who performs those 
duties at the direction of and subject to the supervision and 
instruction of an individual who is employed by the same employer 
and who is licensed in accordance with Sec.  1008.103(a) (state 
licensing of loan originators).
    (3) Is an employee of a loan processing or underwriting company 
that provides loan processing or underwriting services to one or 
more mortgage lenders or mortgage brokerage firms under a contract 
between the loan processing or underwriting company and the mortgage 
lenders or mortgage brokerage firms, provided the employee performs 
only clerical or support duties and performs those duties only at 
the direction of and subject to the supervision and instruction of a 
licensed loan originator employee of the same loan processing and 
underwriting company.
    (4) Is an individual who does not otherwise perform the 
activities of a loan originator and is not involved in the receipt, 
collection, distribution, or analysis of information common for the 
processing or underwriting of a residential mortgage loan, nor is in 
communication with the consumer to obtain such information.
    (c) In order to conclude that an individual who performs 
clerical or support duties is doing so at the direction of and 
subject to the supervision and instruction of a loan originator who 
is licensed or registered in accordance with Sec.  1008.103 (or, as 
applicable, an individual who is excluded from the licensing and 
registration requirements under Sec.  1008.103(e)(2), (e)(6), or 
(e)(7)), there must be an actual nexus between the licensed or 
registered loan originator's (or excluded individual's) direction, 
supervision, and instruction and the loan processor or underwriter's 
activities. This actual nexus must be more than a nominal 
relationship on an organizational chart. For example, there is an 
actual nexus when:
    (1) The supervisory licensed or registered loan originator 
assigns, authorizes, and monitors the loan processor or underwriter 
employee's performance of clerical and support duties.
    (2) The supervisory licensed or registered loan originator 
exercises traditional supervisory responsibilities, including, but 
not limited to, the training, mentoring, and evaluation of the loan 
processor or underwriter employee.

Appendix D to Part 1008--Attorneys: Circumstances That Require a State 
Mortgage Loan Originator License

    This Appendix D clarifies the circumstances in which the 
S.A.F.E. Act requires a licensed attorney who engages in loan 
origination activities to obtain a state loan originator license and 
registration. This special category recognizes limited, heavily 
regulated activities that meet strict criteria that are different 
from the criteria for specific exemptions from the S.A.F.E. Act 
requirements and the exclusions set forth in the regulations and 
illustrated in other appendices of part 1008.
    (a) S.A.F.E. Act-compliant licensing required. An individual who 
is a licensed attorney is required to be licensed if the individual 
is engaged in the business of a loan originator as defined in Sec.  
1008.103 and such loan origination activities are not all of the 
following:
    (1) Considered by the state's court of last resort (or other 
state governing body responsible for regulating the practice of law) 
to be part of the authorized practice of law within the state;
    (2) Carried out within an attorney-client relationship; and
    (3) Accomplished by the attorney in compliance with all 
applicable laws, rules, ethics, and standards.
    (b) S.A.F.E. Act-compliant licensing not required. A licensed 
attorney performing activities that come within the definition of a 
loan originator is not required to be licensed, provided that such 
activities are:
    (1) Considered by the state's court of last resort (or other 
state governing body responsible for regulating the practice of law) 
to be part of the authorized practice of law within the state;
    (2) Carried out within an attorney-client relationship; and
    (3) Accomplished by the attorney in compliance with all 
applicable laws, rules, ethics, and standards.

    Dated: October 24, 2011.
Alastair M. Fitzpayne,
Deputy Chief of Staff and Executive Secretary, Department of the 
Treasury.
[FR Doc. 2011-31730 Filed 12-16-11; 8:45 am]
BILLING CODE 4810-AM-P
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