PA 07-156—HB 7116

Banks Committee

Insurance and Real Estate Committee

Government Administration and Elections Committee

Finance, Revenue and Bonding Committee

Judiciary Committee

AN ACT ALLOWING PARTICIPATION IN THE NATIONAL MORTGAGE LICENSING SYSTEM

SUMMARY: This act allows the banking commissioner to participate in the national mortgage licensing system. It (1) requires mortgage originators to be licensed rather than registered; (2) allows the system to process mortgage lender, broker, and originator licenses in Connecticut and receive and maintain related records; and (3) makes a number of conforming changes regarding confidentiality, criminal history record checks, and license fees. The act defines the national mortgage licensing system as the system that the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators will implement under a uniform mortgage licensing project. The system is expected to be fully operational by 2008.

The act requires the banking commissioner to submit to the Banks Committee three consecutive annual reports, including financial statements of the State Regulatory Registry, LLC, on the licensing system. Each financial statement must cover a 12-month period. Each report must be submitted within 10 days after the commissioner receives the financial statement.

EFFECTIVE DATE: September 30, 2008

DISCLOSURE OF CONFIDENTIAL RECORDS

The act exempts from the laws concerning the confidentiality of Department of Banking (DOB) records, the disclosure of (1) records maintained with the national mortgage licensing system to any supervisory, government, or law enforcement agency authorized to access those records and (2) a licensee's record to that licensee. Records disclosed to an agency are DOB property and cannot be further disclosed without the commissioner's consent.

The act prohibits anyone from obtaining information from the system that could not otherwise be obtained under state law. It specifies that information obtained from the system is inadmissible in, and cannot be used to initiate, a civil proceeding in Connecticut unless it would otherwise be admissible in the proceeding under state law.

By law, the following records must not be disclosed by the commissioner or any DOB employee, or be subject to public inspection or discovery:

1. examination and investigation reports and information contained therein or derived from them;

2. confidential supervisory or investigative information obtained from a state, federal, or foreign regulatory law enforcement agency; and

3. information obtained, collected, or prepared in connection with examinations, inspections, or investigations, and public complaints received by the DOB, if the records are protected from disclosure under federal or state law or would reasonably lead to the disclosure of certain investigative information, financial information, or information that would harm a person.

The law allows the commissioner to disclose these records for any appropriate supervisory, government, law enforcement, or other public purpose. It also prohibits individuals associated with Connecticut banks or credit unions from disclosing information contained in any examination report that is not a public record without the commissioner's consent.

CRIMINAL BACKGROUND CHECKS

The act allows the commissioner to conduct criminal history record checks before issuing specific licenses. The law allows the commissioner to issue first and second mortgage loan licenses. It requires that license and license renewal applications for these licenses be made on a form provided by the commissioner and specifies the things that must be included in the application, as well as any other information the commissioner may require on the applicant and the applicant's background, and the background of his or her principals and employees.

The act allows the commissioner to conduct a criminal history record check of each first and second mortgage lender, correspondent lender, and broker applicant; each member, partner, officer, or director of the applicant; the person with supervisory authority at the license location; and each originator license applicant. It allows the commissioner to require the applicant to submit fingerprints of these individuals as part of the application. The application must be filed with the national mortgage licensing system, which must process the fingerprints through the FBI.

FEES AND LICENSING PERIODS

The act eliminates the previous licensing and registration fees for first and second mortgage lenders, correspondent lenders and brokers, and originators. It requires the payment of fees to the national mortgage licensing system, rather than to the commissioner, and on an annual, rather than biennial, basis.

Under prior law, first and second mortgage lenders and correspondent lenders generally paid the commissioner an $800 license fee, brokers paid a fee of $400, and the originator registration fee was $100. The act eliminates these fees and requires the licensees to pay an unspecified amount in licensing and processing fees to the national mortgage licensing system for initial applications and renewals.

Previously, unless the licenses were renewed, they expired at the close of business on September 30 of the even-numbered year following issuance. The originators' registrations expired when the associated license expired. Under the act, all of the licenses, including the originator license, expire on December 31 of the year following issuance unless they are renewed. The act eliminates existing language on the timing of renewal applications and payment of fees with a dishonored check.

The act specifically provides that each secondary mortgage originator license remains in force and effect until it has been surrendered, revoked, suspended, or expires. This language already existed for first mortgage originator registrations. The act makes the conforming change to first mortgage originator licenses.

BACKGROUND

National Mortgage Licensing System

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators are developing a national Residential Mortgage Licensing System that will provide uniform licensing applications for residential mortgage lenders and mortgage brokers, as well as a central repository of information about licensing and publicly adjudicated enforcement actions. The National Association of Securities Dealers has been selected to design and operate the system.

The system's basic features will be a central licensing system and repository containing licensing information, enforcement actions, and background data for every participating state-licensed mortgage lender, broker, and branch and loan originator.

The system will be accessible over the Internet, allowing prospective and current licensees to apply for or renew licenses for one or more jurisdictions through a secure website. The system will also collect licensing fees at the time of application or renewal and disburse these to the respective state agencies. The system will only process license applications or renewals. Each state agency will retain its regulatory authority to approve, deny, suspend, or revoke a license.

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