Marylands SAFE Act Conforming Legislation and the Transition

Maryland’s SAFE Act Conforming Legislation and the Transition to NMLS This presentation contains currently-available information regarding the Commissioner's transition to the NMLS. It may be updated as necessary and should not be relied upon as legal advice. 1

Topics of Discussion • • 2 Nationwide Mortgage Licensing System SAFE Legislative Framework NMLS Demonstration Maryland Process - Transitioning to NMLS

Section 1 Nationwide Mortgage Licensing System 3

NMLS Description • Nationwide state-supervised licensing system • Similar to other industries - § Securities § Investment advisors • Custom for mortgage industry • Two primary goals: – Uniform mortgage application for every agency – Comprehensive licensing and supervisory repository 4

NMLS Description • • NMLS launched on 1/2/2008 with 7 states 26 state agencies as of March 2008 9 more scheduled in 2009 including MD NMLS currently tracking: – Over 12, 000 companies – Over 11, 000 branches – Over 55, 000 loan originators 5

CSBS/AARMR Nationwide Mortgage Licensing System States currently using NMLS States to join NMLS in 2009 States to join NMLS in 2010 Washington Montana Vermont North Dakota Minnesota Oregon New Hampshire Idaho Massachusetts Wisconsin South Dakota New York Michigan Wyoming Rhode Island Connecticut Iowa Pennsylvania Nebraska Nevada Utah (DFI & DRE) California (DFI, DOC & DRE) Indiana (DFI & SOS) Illinois Colorado Kansas Ohio West Virginia Missouri New Mexico Oklahoma North Carolina South Carolina Arkansas Mississippi Hawaii Texas (OCCC & SML) New Jersey Delaware Maryland District of Columbia Kentucky Tennessee Arizona Maine Alabama Georgia Louisiana Florida Alaska Puerto Rico 6

NMLS Objectives • Streamline the licensing process – Efficient and standardized process leveraging technology – Centralized record for multi-jurisdictional entities • Enhance supervision – Uniform loan originator and lender records – Seamless visibility / coordination among states • Increase consumer protection – Industry accountability – Reduced fraud – Access to license and sanction data 7

Significant Infrastructure Commitment • NMLS at launch: $4. 4 million • 2008: $4. 0 million • 2009 $6. 8 million – Testing – Education – Criminal Background Checks – Credit reports – Consumer access 8

System Overview www. stateregulatoryregistry. org/nmls 9

Single License File 10

Individual State Licensing • All regulators share the same electronic MU filing • Each regulator makes their own licensing decisions and controls their own license information. 11 X

Section 2 SAFE Legislative Framework 12

Federal SAFE Legislation • Housing & Economic Recovery Act of 2008 – Signed by President Bush on July 30, 2008 – Reforms GSE (Freddie and Fannie) regulation – Modernizes the Federal Housing Administration – Promotes private-sector loan workouts to prevent foreclosure – Licensure of all loan originators (Title V) 13

Federal SAFE Legislation • All mortgage loan originators must be – Meet minimum standards – Be licensed or registered Financial institutions Registration through bank regulatory agencies Non banks Licensing through states on NMLS • Extended to mortgage lenders outside federal law 14

Key SAFE Participants SAFE Mortgage Licensing Act STATE REGULATORY AGENCY 15 US DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT NATIONWIDE MORTGAGE LICENSING SYSTEM & REGISTRY MORTGAGE LOAN ORIGINATORS AND LENDERS

Federal Mandate for States • All states must have a system of licensing for loan originators by July 31, 2009 • System must meet SAFE definitions and minimum standards, that include: – – Licensing loan originators through NMLS Criminal and credit background check Education Testing Maryland Legislation – SB 269 Meets SAFE requirements* Includes several provisions to facilitate transition 16 * Clarifying guidance from HUD is being obtained regarding (1) individual servicer licensing; (2) testing for current licensees; and applicability to manufactured housing

Federal Mandates for NMLS • Establish protocols for issuing unique ID # • Process criminal background checks • Approve pre-licensure and continuing education courses • Develop national test for loan originators • Develop mortgage call report • Provide public access to licensing data • Process consumer complaints 17

Maryland SAFE Act Legislation Senate Bill 269 • On April 14, 2009, Governor O’Malley signed SB 269 into law bringing Maryland into compliance with SAFE • Legislation will become effective July 1, 2009 • From a structural perspective, SB 269 seeks to – Maintain underlying structure and elements of MD mortgage licensing laws to retain integrity of features that do not conflict with the Federal SAFE Act – Integrate key elements necessary to meet SAFE Act requirements – Minimize disruption to mortgage industry in the transitional period 18

Key Elements for Originators Terms - 1 term - December 31 st Expiration Definitions - Residential Real Estate - Mortgage Loan Criminal Background Check 19 - Shift from staggered, 2 year licensing in process - Retains “owner occupied” residential 1 -4 focus / NOT investment properties - Registered Loan Originator - LOs with depositories participate through federal agencies - Total prohibition for conviction involving fraud, dishonesty, breach of trust, money laundering - Prohibition for other felony conviction within 7 years - Total prohibition for prior revocation (inc. other state) - Current prohibition for felony conviction for fraud, theft of forgery only if WITHIN 10 years - Currently, Commissioner discretion for other felonies - Currently evaluation of revocations within discretion of Commissioner

Key Elements For Originators Education - 20 hours of pre-licensing education - 8 hours of continuing ed Testing - NMLS approved testing Financial Responsibility - Financial responsibility must be demonstrated and new credit report submitted with NMLS application 20 - Current law allows 3 years of experience OR 40 hours of prelicensing education - Currently 20 hours every 2 years - As available (likely 1/10) - Currently, no explicit qualification in law previously – “good moral character and general fitness” for originators - Denial may not be based solely on any one of credit score, bankruptcy, foreclosure, debt from divorce or medical expenses

Key Elements For Originators Surety Bond - SAFE creates requirement for originators - Can be met at employer (lender) level - Functionally parallel to current MD law Other - Non-active status for LO between employers (notice requirement) - Non-SAFE element - Frequent issue in current market 21

Transition Timeline NMLS – 1/1/09 - New / renewal license expiration shifts to 12/31/09 – 5/11/09 - NMLS Portal opens for MD licensees – 6/30/09 - Last day for using MD system alone for MO and ML licenses (applications received well prior) – 7/1/09 - New / renewal license applications approved through NMLS by MD - New / renewal licenses expire on 12/31/10 – 1/1/10 - NMLS Federal / MD test and fingerprinting open – 12/31/10 - License transition complete 22 Pre-Transition Licensing Solely through MD System 18 Month Transition Licensing through NMLS

Section 3 Transitioning to NMLS 23

Transition Timeline NMLS – 1/1/09 - New / renewal license expiration shifts to 12/31/09 – 5/11/09 - NMLS Portal opens for MD licensees – 6/30/09 - Last day for using MD system alone for MO and ML licenses (applications received well prior) – 7/1/09 - New / renewal license applications approved through NMLS by MD - New / renewal licenses expire on 12/31/10 – 1/1/10 - NMLS Federal / MD test and fingerprinting open – 12/31/10 - License transition complete 24 Pre-Transition Licensing Solely through MD System 18 Month Transition Licensing through NMLS

What Does This Mean for You? Current Mortgage Loan Origination Professionals in MD NOT an employee of bank or subsidiary? Current Licensees New Licensees (Expiration After 6/30/09 (Exempt at 6/30/09) (De Novo) 25

What Does This Mean for Originators? • Current originator licensees – NMLS entry at renewal – 18 month transition (you may transition early) – Education / bonding / background check requirements met by 12/31/10 – Testing subject to HUD guidance – Continuing education within past 5 years will meet NMLS pre-licensing requirement • New originator licensees - previously exempt mortgage originators – Interim license allows current activities – Interim license application must be received by 7/31/09 or full de-novo licensing – Key requirements (education, background check, bonding, testing) must be satisfied to lift restrictions and must be obtained by 7/31/10 • New originator licensees – de-novo – NMLS entry at initial licensing – Full compliance required at outset – Testing deferred until NMLS test is available 26

Current Originator Licensees • • Licenses with expiration dates on or after July 1, 2009 Transition AT EXPIRATION (you may transition early) New license will expire Dec. 31, 2010 (up to 18 months) Key requirements - Education 20 hrs of pre-licensing education may be satisfied with 20 hrs of continuing ed. within past 5 years Bonding Employee of licensed mortgage lender may satisfy with employer bond Fingerprinting FBI / state – NMLS not yet operational Implementation delayed to 1/1/10 Testing Federal / MD test not yet available Implementation delayed to 1/1/10 Not required until HUD provides guidance 27 LO holding a MD Mortgage Originator license on 7/1/09 must comply with these requirements for NMLS licensing by 12/31/10 Current Licensees

Current Originator Licensees 1) Initiate MU 4 on NMLS (after consultation with employer) 2) Complete MU 4 and related tasks on NMLS 3) Pay NMLS processing fee - $30 annually / $60 if prior to 12/31/09 4) Proceed to MD website for - (i) Association with lender done on MD website (all lenders not on NMLS until end of transition (12/31/10) (ii) Payment of MD license fee - $225 annually - pro-rated for duration by MD 28 Current Licensees

What Happens When on MD Website – Current MLO 29

What Happens When on MD Website – Current MLO 30

What Happens When on MD Website – Current MLO 31

New Originator Licensees Previously Exempt • Interim Mortgage Loan Originator license if AS OF 6/30/09 – Employed by licensed mortgage lender that makes loans and doesn’t broker – Owns 25% or more interest in mortgage lender • Application for interim license MUST be received by July 31, 2009 • License will expire Dec. 31, 2010 (up to 18 months) BUT “Interim” status must be cleared by 7/31/10 (within 12 months) • Key requirements - Education 20 hrs of pre-licensing education Bonding Employee of licensed mortgage lender may satisfy with employer bond Fingerprinting FBI / state – NMLS not yet operational Implementation delayed to 1/1/10 Testing Federal / MD test not yet available Implementation delayed to 1/1/10 32 1 Year to Clear Under Interim Status, licensee under same restrictions as under previous exemption New Licensees Previously Exempt

New Originator Licensees Previously Exempt 1) Initiate MU 4 on NMLS (after consultation with employer) 2) Complete MU 4 and related tasks on NMLS (by 7/31/09 for interim) 3) Pay ALL NMLS and MD fees on NMLS - $30 annually / $60 if prior to 12/31/09 - MD - $225 annually / $550 if prior to 12/31/09 and $100 investigation fee 4) Proceed to MD website for association with lender only (all lenders not on NMLS until end of transition (12/31/10) 5) Identify prior exemption on Affidavit of Md MLO Activity 6) Clear background, bonding, education, testing by 7/31/10 33 New Licensees Previously Exempt

New Originator Licensees De Novo • Application any time after May 1, 2009 for approval after July 1, 2009 • License will expire Dec. 31, 2010 (up to 18 months) • Key requirements - Education 20 hrs of pre-licensing education Fingerprinting FBI and state fingerprint check thru MD NMLS portal not operational yet Bonding Employee of licensed mortgage lender may satisfy with employer bond Testing Federal / MD test not yet available Implementation as available 34 NO INTERIM STATUS All requirements are effective with testing subject to availability New Licensees De Novo

New Originator Licensees De Novo 1) Initiate MU 4 on NMLS (after consultation with employer) 2) Complete MU 4 and related tasks on NMLS 3) Pay ALL NMLS and MD fees on ON NMLS - $30 annually / $60 if prior to 12/31/09 - MD - $225 annually / $550 if prior to 12/31/09 and $100 investigation fee 4) Proceed to MD website for association with lender only (all lenders not on NMLS until end of transition (12/31/10) 35 New Licensees De Novo

What Does This Mean for Lenders? • Current lender licensees – NMLS entry at renewal – 18 month transition (you may transition early) – Original / main office MUST be on NMLS for branch to transition – so Original / main office may need to transition early if existing branch expires or new branch is to be licensed prior to expiration of original / main office license – Surety bond and net worth requirements as current • New lender licensees – NMLS entry at renewal – 18 month transition (you may transition early) – Original / main office MUST be on NMLS for new branch to be licensed through NMLS – original / main office may need to transition early for new branch to be licensed – Surety bond and net worth requirements as current 36

Current Lender Licensees 1) Initiate MU 1 on NMLS 2) Initiate MU 3 on NMLS – only after MU 1 licensing completed* 3) Pay NMLS processing fee only ON NMLS Site - NMLS – Main - $100 annually / $200 if prior to 12/31/09 - NMLS - Branch - $20 annually / $40 if prior to 12/31/09 4) Pay MD license fee on MD website - $1, 000 annually - prorated for duration *No branch office may be licensed through NMLS until the home/main office has transitioned. 37 New Licensees De Novo

New Lender Licensees 1) Initiate MU 1 on NMLS 2) Initiate MU 3 on NMLS – only after MU 1 licensing completed* 3) Pay ALL NMLS and MD fees on NMLS - NMLS – Main - $100 annually / $200 if prior to 12/31/09 - NMLS - Branch - $20 annually / $40 if prior to 12/31/09 - MD - $1, 000 annually / $2, 000 if prior to 12/31/09 No branch office may be licensed through NMLS until the home/main office has transitioned. 38 New Licensees De Novo

Interim Changes • Do NOT make changes to your license while completing the transition / renewal process • If you need to make a change, transition / renew through the NMLS immediately and prior to expiration date • The license expiration will be extended to December 31, 2010 expiration pursuant to the normal renewal process and a pro-rated fee will be charged • Upon approval, you can implement the change through the NMLS directly No interim changes may be processed through MD Use NMLS AFTER license has transition / renewed 39

More Information to Follow • Communication has been and will be ongoing – Electronic newsletter – Webinars • Emergency regulations in process to support implementation http: //www. dllr. state. md. us/finance/frnews/ 40

Advantages of NMLS üSingle record for each company / originator üMore efficient simpler multi-state licensing üGreater consistency in standards üBetter technology and support– üSuperior regulatory oversight - Unified, multi-state access - Enhanced originator tracking - More information – call reports etc. 41