Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78483 

report the application as an application for a 

subordinate-lien loan. 

ii. Lenders may also consider their 

established procedures when determining 

lien status for applications that do not result 

in originations. For example, a consumer 

applies to a lender to refinance a $100,000 

first mortgage; the consumer also has a home 

equity line of credit for $20,000. If the 

lender’s practice in such a case is to ensure 

that it will have first-lien position—through 

a subordination agreement with the holder of 

the mortgage on the home equity line—then 

the lender should report the application as an 

application for a first-lien loan. 

Paragraph 4(c)(3). 

1. An institution that opts to report homeequity lines reports the disposition of all 

applications, not just originations. 

4(d) Excluded data. 

1. Mergers, purchases in bulk, and branch 

acquisitions. If a covered institution acquires 

loans in bulk from another institution (for 

example, from the receiver for a failed 

institution) but no merger or acquisition of 

the institution, or acquisition of a branch, is 

involved, the institution reports the loans as 

purchased loans. 

Section 1003.5(a)—Disclosure and Reporting 

5(a) Reporting to agency. 

1. Submission of data. Institutions submit 

data to the appropriate Federal agencies in an 

automated, machine-readable form. The 

format must conform to that of the HMDA/ 

LAR. An institution should contact the 

appropriate Federal agency for information 

regarding procedures and technical 

specifications for automated data submission; 

in some cases, agencies also make software 

available for automated data submission. The 

data are edited before submission, using the 

edits included in the agency-supplied 

software or equivalent edits in software 

available from vendors or developed inhouse. 

2. Submission in paper form. Institutions 

that report twenty-five or fewer entries on 

their HMDA/LAR may collect and report the 

data in paper form. An institution that 

submits its register in non-automated form 

sends two copies that are typed or computer 

printed and must use the format of the 

HMDA/LAR (but need not use the form 

itself). Each page must be numbered along 

with the total number of pages (for example, 

‘‘Page 1 of 3’’). 

3. Procedures for entering data. The 

required data are entered in the register for 

each loan origination, each application acted 

on, and each loan purchased during the 

calendar year. The institution should decide 

on the procedure it wants to follow—for 

example, whether to begin entering the 

required data, when an application is 

received, or to wait until final action is taken 

(such as when a loan goes to closing or an 

application is denied). 

4. Options for collection. An institution 

may collect data on separate registers at 

different branches, or on separate registers for 

different loan types (such as for home 

purchase or home improvement loans, or for 

loans on multifamily dwellings). Entries need 

not be grouped on the register by MSA or 

Metropolitan Division, or chronologically, or 

by census tract numbers, or in any other 

particular order. 

5. Change in appropriate Federal agency. 

If the appropriate Federal agency for a 

covered institution changes (as a 

consequence of a merger or a change in the 

institution’s charter, for example), the 

institution must report data to the new 

appropriate Federal agency beginning with 

the year of the change. 

6. Subsidiaries. An institution is a 

subsidiary of a bank or savings association 

(for purposes of reporting HMDA data to the 

same agency as the parent) if the bank or 

savings association holds or controls an 

ownership interest that is greater than 50 

percent of the institution. 

7. Transmittal sheet—additional data 

submissions. If an additional data submission 

becomes necessary (for example, because the 

institution discovers that data were omitted 

from the initial submission, or because 

revisions are called for), that submission 

must be accompanied by a transmittal sheet. 

8. Transmittal sheet—revisions or 

deletions. If a data submission involves 

revisions or deletions of previously 

submitted data, it must state the total of all 

line entries contained in that submission, 

including both those representing revisions 

or deletions of previously submitted entries, 

and those that are being resubmitted 

unchanged or are being submitted for the first 

time. Depository institutions must provide a 

list of the MSAs or Metropolitan Divisions in 

which they have home or branch offices. 

5(b) Public disclosure of statement. 

1. Business day. For purposes of § 1003.5, 

a business day is any calendar day other than 

a Saturday, Sunday, or legal public holiday. 

2. Format. An institution may make the 

disclosure statement available in paper form 

or, if the person requesting the data agrees, 

in electronic form. 

5(c) Public disclosure of modified loan/ 

application register. 

1. Format. An institution may make the 

modified register available in paper or 

electronic form. Although institutions are not 

required to make the modified register 

available in census tract order, they are 

strongly encouraged to do so in order to 

enhance its utility to users. 

5(e) Notice of availability. 

1. Poster—suggested text. An institution 

may use any text that meets the requirements 

of the regulation. Some of the Federal 

agencies that receive HMDA data provide 

HMDA posters that an institution can use to 

inform the public of the availability of its 

HMDA data, or the institution may create its 

own posters. If an institution prints its own, 

the following language is suggested but is not 

required: 

Home Mortgage Disclosure Act Notice 

The HMDA data about our residential 

mortgage lending are available for review. 

The data show geographic distribution of 

loans and applications; ethnicity, race, sex, 

and income of applicants and borrowers; and 

information about loan approvals and 

denials. Inquire at this office regarding the 

locations where HMDA data may be 

inspected. 

2. Additional language for institutions 

making the disclosure statement available on 

request. An institution that posts a notice 

informing the public of the address to which 

a request should be sent could include the 

following sentence, for example, in its 

general notice: ‘‘To receive a copy of these 

data send a written request to [address].’’ 

Section 1003.6—Enforcement 

6(b) Bona fide errors. 

1. Bona fide error—information from third 

parties. An institution that obtains the 

property-location information for 

applications and loans from third parties 

(such as appraisers or vendors of 

‘‘geocoding’’ services) is responsible for 

ensuring that the information reported on its 

HMDA/LAR is correct. 

Dated: October 24, 2011. 

Alastair M. Fitzpayne, 

Deputy Chief of Staff and Executive Secretary, 

Department of the Treasury. 

[FR Doc. 2011–31712 Filed 12–20–11; 8:45 am] 

BILLING CODE 4810–AM–P 

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. 

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 


srobinson on DSK4SPTVN1PROD with RULES
78484 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

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). 

2Public 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. 

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. 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank 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 DoddFrank 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. 

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 nonsubstantive, 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 DoddFrank 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 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78485 

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. 

5Public 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). 

6Public 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). 

7Public Law 111–203, section 1100. 

8Section 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. 

9Public Law 111–203, section 1100(5)(A). 

10 12 U.S.C. 5106(c). 

11 12 U.S.C. 5107–5108. 

12 5 U.S.C. 551 et seq. 13 5 U.S.C. 553(b), (c). 14 5 U.S.C. 553(b)(B). 

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 DoddFrank 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

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. 

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 noticeand-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. 

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 


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78486 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

15This 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. 

16Section 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. 

17The 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. 

19 5 U.S.C. 601 et seq. 

20 5 U.S.C. 603, 604. 

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

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. 

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. 

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 


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21 5 U.S.C. 609. 

22 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B). 

23 5 U.S.C. 609(b). 

involving the convening of a panel to 

consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.21

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. 

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. 

§ 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 


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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 nonfederally insured credit union and its 

employees contains a clear and 

conspicuous statement that the nonfederally insured credit union is not 

insured by the National Credit Union 

Share Insurance Fund, and the state 

supervisory authority where the nonfederally 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 nonfederally 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. 

§ 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 

§ 1007.101(c)(1). Covered financial 

institution also includes a non-federally 

insured credit union that registers 

subject to the conditions of 

§ 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. 

§ 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 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 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 servicesrelated 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 servicesrelated 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. 


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(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. 

§ 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 § 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. 

§ 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. 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 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 allinclusive. 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 productrelated 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 


srobinson on DSK4SPTVN1PROD with RULES
78492 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

Authority: 12 U.S.C. 5101–5116; Pub. L. 

111–203, 124 Stat. 1376. 

§ 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. 

§ 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 

§ 1008.20 Scope of this subpart. 

This subpart provides the definitions 

applicable to this part, and other general 

requirements applicable to this part. 

§ 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 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 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 

§ 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 § 1008.103(a), or is not required to 

be licensed, in accordance with 

§ 1008.103(e)(5), (6), or (7). 

Loan originator. See § 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 

§ 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. 

§ 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. 


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78494 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

(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 § 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. 

§ 1008.105 Minimum loan originator 

license requirements. 

For an individual to be eligible for a 

loan originator license required under 

§ 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 prelicensing 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; 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 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. 

§ 1008.107 Minimum annual license 

renewal requirements. 

(a) For an individual to be eligible to 

renew a loan originator license as 

required under § 1008.103(f), a state 

must require the individual: 

(1) To continue to meet the minimum 

standards for license issuance provided 

in § 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 statelicensed 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. 

§ 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 §§ 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 §§ 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. 

§ 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 § 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 

§ 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 

§ 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 


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information, and shall be submitted 

with such frequency and by such dates 

as the NMLSR may reasonably require. 

§ 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. 

§ 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 

§ 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 § 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. 

§ 1008.203 The Bureau’s establishment of 

loan originator licensing system. 

If the Bureau determines, in 

accordance with § 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. 

§ 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 

§ 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 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 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. 

§ 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. 

§ 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. 

§ 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. 

§ 1008.309 Absence of liability for goodfaith 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 

§ 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. 

§ 1008.403 [Reserved]. 

§ 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 § 1008.23 of this part. 

(a) Taking a Loan Application. Taking a 

residential mortgage loan application within 

the meaning of § 1008.103(c)(1) means 

receipt by an individual, for the purpose of 

facilitating a decision whether to extend an 


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78498 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

offer of loan terms to a borrower or 

prospective borrower, of an application as 

defined in § 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 § 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 thirdparty 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 § 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 allinclusive. 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 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78499 

‘‘loan’’ refers to a ‘‘residential mortgage loan’’ 

as defined in § 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 § 1008.103(e)(6) of this part are 

met. 

(5) If all applicable conditions in 

§ 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 § 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 

§ 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 

§ 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 

§ 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 § 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 

§ 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 

§ 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 § 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 § 1008.103 (or, as 

applicable, an individual who is excluded 

from the licensing and registration 

requirements under § 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 § 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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