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Mortgage Lending: Appendix A to Part 1007—Examples of Mortgage Loan Originator Activities

This appendix provides examples to aid in the understanding of activities that would cause an employee of a covered financial institution to fall within or outside the definition of mortgage loan originator. The examples in this Appendix are not all-inclusive. They illustrate only the issue described and do not illustrate any other issues that may arise under this part. For purposes of the examples below, the term “loan” refers to a residential mortgage loan.

Mortgage Lending: § 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.).

Mortgage Lending: § 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.

Mortgage Lending: § 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.

Mortgage Lending: § 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.

Mortgage Lending: § 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.

Mortgage Lending: § 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:

Mortgage Lending: § 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:

Mortgage Lending: § 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;

Mortgage Lending: § 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;

Mortgage Lending: § 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.

Mortgage Lending: 12 U.S.C. § 1821. Insurance Funds

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(d) Powers and duties of Corporation as conservator or receiver

(1) Rulemaking authority of Corporation

The Corporation may prescribe such regulations as the Corporation determines to be appropriate regarding the conduct of conservatorships or receiverships.

(2) General powers

(A) Successor to institution

Mortgage Lending: 12 U.S.C. § 1823 Corporation monies

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(e) Agreements against interests of Corporation

(1) In general

No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 1821 of this title, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the Corporation unless such agreement—

Mortgage Lending: 13.9.2.2 Two Separate TILA Provisions Limit Arbitration

In covered mortgage loans, TILA prohibits any terms that require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction (hereinafter referred to as the “(e)(1) provision”).499 The parties can agree to arbitration or a similar procedure at any time after a dispute or claim under the transaction arises.500

Mortgage Lending: 13.9.2.4 Effective Date and Retroactive Application

There is no question that the TILA limitation on arbitration agreements in mortgage loans applies to any arbitration agreement entered into after June 1, 2013. This subsection considers the enforceability of arbitration agreements entered into before that date. Two issues are examined. First, whether the TILA requirement was effective as of June 1, 2013, or July 22, 2010. Second, whichever date is used, does the provision prevent the current enforcement of arbitration agreements entered into before the effective date?

Mortgage Lending: 13.9.3.1 Introduction

Federal law clearly prohibits mandatory arbitration requirements for virtually all disputes involving mortgage loans extended after June 1, 2013, and courts might also apply the section (e)(3) provision retroactively to older mortgage loans.519 But, even for cases not covered by the federal ban on arbitration in mortgage loans, homeowners still have a number of other challenges to the arbitration requirement.

Mortgage Lending: 13.9.3.3 Proof of an Applicable Arbitration Agreement and Party’s Standing to Enforce That Agreement

When a party seeks to force the consumer into arbitration, that party must produce the actual arbitration agreement to prove there is such a requirement. An arbitration requirement is grounded upon an agreement between parties that delineated disputes must be resolved by an arbitration procedure specified in the agreement. The Federal Arbitration Act (FAA) requires that arbitration agreements be enforced.526 But the federal policy is not that disputes must be arbitrated.