NMLS UPDATE NACARA Annual Conference Madison Wisconsin Tuesday

NMLS UPDATE NACARA Annual Conference Madison, Wisconsin Tuesday, October 11, 2016

NMLS UPDATE KC Schaler Supervising Examiner, Idaho Dept. of Finance Co-Chair, NMLS 2. 0 Steering Committee Mary Pfaff Senior Director, SRR Policy and Communications CSBS

NMLS – Original Purpose and Goals • Information Sharing for States • Uniform Application Data • Multiple Regulator Review • NMLS ID – Unique Entity Tracking • Consistent Validation • Started with mortgage industry then expanded to other supervised financial services in 2012

Basic to Complex • Basic Goals and Functionality • Singular Industry • Provide Better Information for Consumers • Uniforms for applications • Accomplishments and More Complex Functionality • Facilitated better information sharing for states • Succeeded in providing Better Information for Consumers • Reduced Regulatory Burden for Industry and Regulators by Streamlining Multiple Processes • 2015 SAFE Act Amendments: CBC expansion and change from “mortgage regulators” to “financial services regulators”

Count of State Entities and Licenses in NMLS 2013 State licensed 2014 2015 2013 -2015 % Change Entities Licenses Companies 18, 39, 19, 44, 20, 47, 20% 993 903 882 020 440 688 Branches 23, 43, 25, 49, 26, 56, 31% 467 066 583 904 655 402 MLOs 130, 331, 131, 359, 135, 408, 23% 311 351 725 992 016 542

Consumer Finance, Debt, MSB on NMLS 1, 800 1, 597 1, 500 1, 200 930 886 900 679 633 600 342 336 329 300 559 390 282 61 0 Consumer Payday loan lending - storefront Consumer Sales Consumer Title lending Payday Third party First party loan finance loan lending - debt servicing company brokering online collection activities - motor vehicles Consumer Finance Debt Check cashing Selling money orders Electronic money transmitting Money Services

Debt Collection Licenses in NMLS

Number of States with Debt Collection Activity 500 464 450 Number of companies 400 350 300 263 250 200 156 150 111 100 91 90 84 3 4 5 -20 Number of states with debt collection activity 21 -50 50 0 1 2 50+

Debt Licensees in NMLS • Total Debt-related Licenses: 18 • Debt Collection: • Debt Management: • Debt Adjuster • Debt Settlement • Debt Negotiator 6 5 4 2 1 Arizona adding collection agencies on 1/1/2017 Oregon adding collection agencies on 4/1/2017

NMLS New Features and Entity Growth • • # of Unique Entities ~12 k Company ~10 k Branch ~51 k Individual • • Uniform Filing Regulator Worklist Payment Processing Streamlined Renewal Basic Reports 2008 • • Financial Statement Upload MLO Education MLO Testing 2009 ** Entity = Company/Institution, Branch, or Individual. • • Consumer Access MLO Criminal Background Check Processing MLO Credit Reports Processing 2010 • • • Credit Reports for Control Persons Federal Registry Mortgage Call Report State Regulatory Actions 2011 • • • Expanded use of NMLS for other Financial Services Company Document Upload Disclosure Explanations Renewal Workflow Revamp 2012 • • Agency Fee Invoicing Uniform Authorized Agent Reporting (MSB) UST Implementati on Advance Change Notice 2013 • • Expedited Payment Processing Industry Dashboard Mortgage Call Report Analytics 2014 ~30 k Company ~27 k Branch ~543 k Individual • • • Removal of State and Federal Wall Process and Security Enhancement s MCR Examiners Report Renewal Analytics 2015 * • • CBC for Control Persons Federal Agency Regulatory Actions Upload Individual Document Upload Electronic Surety Bonds 2016

NMLS State Participation • 62 state agencies manage 600 license authorities through NMLS • 9 state agencies planning on managing 24 additional license authorities in the next year • State manage 2, 373 checklists (license transition, license application, amendments, and license surrender requirements) housed on the NMLS Resource Center

NMLS expansion Companies in NMLS by Industry by Year 3, 000 Consumer Finance 2, 500 Money Services Business 2, 000 Debt Related 1, 500 1, 000 500 0 2011 2012 2013 2014 2015

MLOs on the rise MLOs MLO Licenses 160, 000 450, 000 140, 000 400, 000 350, 000 120, 000 300, 000 100, 000 250, 000 80, 000 200, 000 60, 000 150, 000 40, 000 100, 000 20, 000 50, 000 - 0 2011 2012 2013 2014 2015

Steady Federal Registrations Federally Registered MLOs 450, 000 400, 000 350, 000 300, 000 250, 000 200, 000 150, 000 100, 000 50, 000 0 2012 2013 2014 2015

Fewer companies, more territory Companies Company Licenses 20, 000 45, 000 18, 000 40, 000 16, 000 35, 000 14, 000 30, 000 12, 000 25, 000 10, 000 20, 000 8, 000 15, 000 6, 000 4, 000 10, 000 2, 000 5, 000 0 0 2011 2012 2013 2014 2015

MSB Licenses in NMLS • 35 state agencies manage MSB licenses on NMLS • 1, 895 companies in NMLS holding 4, 310 MSB licenses MSB Activities Include Money transmission Check cashing Issue/sell travelers checks Issue/sell money order Bill paying Transporting currency Issue/sell prepaid access/stored value

Consumer Finance Licenses in NMLS • 20 “Consumer Finance” business activity definitions in NMLS • 25 agencies manage a consumer finance license on NMLS • 12 state agencies license payday lenders in NMLS

NMLS Current Functionality Work Item Analytics • Reports to Monitor Workflows and Analyze Performance • Renewal Analytics • License Requests • Amendments • Sponsorship Requests

Work Item Analytics Usage in Q 3: 38 users 650 sessions

NMLS Current Functionality Quarterly Manager’s Packet • Licensing activity • Agency performance metrics • Trends • Benchmarks • Licensee demographics • Fiscal-year-based activity measures

NMLS September 12 th Release • Electronic Surety Bond Tracking • Creating new bond issuance and maintenance procedures • Replacing paper-based processing • Surety companies and producers create an account in NMLS, are validated through NAIC • 16 companies and 27 producers in NMLS • 10 states adopting in September; next wave in Q 1 2017 • CBC for Control Persons, Owners, Qualified Individuals • Amendment to SAFE Act –December 2015 • NMLS can act as channeling agent for non-MLO individuals • Review of all state laws for specific authority • 28 agencies using functionality • Individual Document Upload

NMLS September Release Money Services Businesses Call Report • Creates a comprehensive and uniform report • 36 states require reporting on MSB business activities • 34 states license MSBs thru NMLS (4 more scheduled) • Input and support of MMET (performed 68 joint exams in 2015) • Report includes state and national specific MSB activity • Go live in Q 1 2017; first report due May 15 th • 9 agencies planning to adopt immediately

NMLS Enhancements 2016 and Beyond • Data Analytics & User Reporting • NMLS Consumer Access • Consumer Complaint Processing • Exam Management Tool Suite (EMTS)

Policy Initiatives • NMLS Information • Since 2008, NMLS data expanded in scope & quality • New Analytical tools & data available to states • MCR Analytics software • Renewal Dashboard • Public Comment • Uniform Forms • Mortgage Call Report • NMLS Consumer Access

CFPB Request for Information • In late July, CFPB released a RFI: • “Non-Bank Financial Registration System for CFBP” • Gathering information on existing systems • Next step for CFPB: Proposed Rule on Registration of Non-Bank Entities under CFPB supervisory purview • CFPB Posting of Regulatory Actions in NMLS

MODERNIZATION: NMLS 2. 0

Purpose • NMLS 2. 0 is a major initiative that will involve multiple stakeholders. Proper communications to the various stakeholder groups will help CSBS create transparency and understanding of the actions required to complete the modernization initiative, and help facilitate engagement across external audiences. The plan will ensure that progress of the NMLS Policy Committee, NMLS 2. 0 Steering Committee, and state regulator working groups is communicated to a broader audience.

Why Modernization? Current NMLS: • Application architecture is difficult to change • Database structure is inefficient and complex to manage and store data • Not as intuitive as it could be for the range of stakeholder users • Does not meet all current business needs • Is not well suited to serve as a solid foundation for new functionality and capabilities going forward

NMLS 2. 0 Guiding Principles Real Time System Uniform Form Dynamic Capability One Record Supervisory Balance Data Validity NMLS 2. 0 is a real time system that will show the past, current and future state of an entity's record in the System NMLS 2. 0 will be comprised of a uniform application/licensing form containing common terms and definitions NMLS 2. 0 will explore methods that will allow state regulatory agencies participating in the System to select which areas of the Uniform Form are presented to their licensees Each distinct legal entity, branch, and natural person will have a single, unique record in the NMLS. The entities’ One Record in NMLS can be used to apply for, maintain, or surrender licenses in multiple states. NMLS 2. 0 will strike appropriate balance between satisfying each state’s regulatory requirements in as automated a manner as possible and unifying state agencies around common best practices NMLS 2. 0 will ensure that data entered into the System is vetted, maintained, validated and manageable

MLO License Application Timelines by Year Number of days to approve application Licenses Year Processed Average days Median days 0 -7 8 -14 15 -29 30 -59 60 -89 90 + 2011 52, 579 31. 3 19 8. 0% 12. 4% 14. 3% 9. 7% 3. 2% 3. 3% 2012 72, 704 29. 3 17 15. 9% 23. 2% 24. 0% 15. 1% 4. 4% 4. 8% 2013 111, 121 29. 7 18 14. 2% 23. 7% 24. 3% 17. 5% 4. 8% 4. 9% 2014 101, 240 27. 3 16 15. 6% 26. 0% 25. 9% 16. 0% 4. 5% 4. 0% 2015 121, 922 25. 2 15 19. 3% 25. 7% 24. 5% 16. 1% 3. 9% 3. 4%

NMLS 2. 0 Steering Committee Mick Campbell Supervisor of Mortgage Licensing Missouri Division of Finance Jefferson City, MO Valerie Carbone Counsel Massachusetts Division of Banks Boston, MA Felicia Faison-Holmes Director, Non-Depository Financial Institutions Georgia Department of Banking and Finance Atlanta, GA Bob Mednikov Assistant Deputy Commissioner Virginia Bureau of Financial Institutions Richmond, VA Chris Romano Non-Depository Bureau Chief Montana Division of Banking & Financial Institutions Helena, MT

NMLS 2. 0 Breakdown by Function • Elements of the System have been categorized into 5 groups • Determined by complexity, available resources • Working Groups will be active in waves • e. g. Group 1: • • • Application Submission and Maintenance Entity Affiliation Authority Management Accounting & Invoicing Advance Change Notice

EXAMINATION MANAGEMENT TOOL SUITE

3 Exam Management Tool Suite Mission Statement: To develop a full-service examination management suite of tools for state agency use for single, multistate, and state/federal non-depository examinations while adopting and aligning with, to the fullest extent practicable, the examination tool being developed by CFPB. Record retention, file transmission and other functionality will also be available to state agencies for depository examinations.

Exam Management Tool Suite • In an initial 2014 survey, 64% of state agencies did not utilize an exam management application • In response to a 2015 survey, 41 agencies were interested in using EMTS. Those agencies conducted 19, 370 exams in 2015 and had 577 examiners • States have been working in tandem with CFPB to ensure seamless exchange of information during exams.

State Agency Survey: Given the proposed functional features to be offered please identify three to five features that will add the most value to your agency’s examination process.

EXAMINATION MANAGEMENT TOOL SUITE SYSTEM FUNCTIONAL COMPONENTS CORE EXAMINATION MANAGEMENT FUNCTIONS Select Examinee Scope Examination Schedule Examination Information Requests Conduct Examination Manage Exit Meetings Report of Examination Post-Exam Activities Survey Examinees Recover Exam Costs Archive & Retrieve Exams Examinee Portal SUPPORTING FUNCTIONS &SYSTEMS System Integration Security/Access Control Workflow Management Document Management Alerting & Notification NMLS Reporting & Analysis Performance Evaluation Administration Functions Inter-Agency Coordination Track Examiner Training General System Requirements Communication Management Accounting Functions Data Presentation Version 1. 1 02/12/2015

2. 0 STAKEHOLDER ENGAGEMENT

Audience/Stakeholders § State Regulators § Commissioners and Deputies § Federal Regulators § Consumer Financial Protection Bureau § NMLS Policy Committee § Large Institutions Working Group § Industry Development Working Group § Federal Industry Users § State Industry Users § Specific Industry Users (Mortgage, Money Services Business, Debt, etc. ) § CSBS Staff

Types of Communications There are various ways to effectively communicate with our audiences. The list below are some of the ways in which we can reach out target audiences. § Email § NMLS Resource Center (News Item, NMLS Connection) § NMLS 2. 0 Specific Webpage – Regulator Only § NMLS 2. 0 Specific Webpage – Industry § Conference Calls § Webinars § Conference Speaking Engagements § Press Releases § Twitter

Types of Engagement Ways to get both regulators and industry involved during the modernization initiative. § Webinars § Polling/Surveys § Call Center § Conference Sessions on NMLS 2. 0 § Demos § Submitting Feedback through 2. 0 Webpages § Conferences

NMLS 2. 0 • Goal is to automate where possible while balancing regulator’s responsibilities • Builds upon collective decisions by regulators to date • Will not revisit every policy decision • Will challenge SRR staff and regulators to revision processes revision • Builds upon experience and input from all state regulators and industry users • Opportunity not to just improve the system, but to rethink the system rethink

Stakeholder Input Communication tools • Website (dedicated pages on NMLS Resource Center) • Surveys • News and Alerts • Webinars • Conferences • Dedicated email box

NMLS Resources • Call Center • Training Guides on Resource Center • Ombudsman • Consumer Access • Annual Report • Quarterly Report