Since the 2008 beginning of the Nationwide Multistate Licensing System (f/k/a the Nationwide Mortgage Licensing System) (the "NMLS"), the most unnecessary information licensees or license applicants must provide to establish or maintain an MU1 Account Record is the identification of each affiliate and subsidiary that provides financial services or settlement services. The applicant or licensee only needs to disclose the name and address, relationship to the applicant or licensee, and business line of each affiliate or subsidiary. Although that information is largely innocuous, it presents issues for applicants and licensees, particularly with respect to providing this information for their affiliates, because: (i) the NMLS provides no clear guidance as to which entities are affiliates, (ii) the information on affiliates is not readily known or available to entities under common ownership with scores of companies operating nationwide or on a multinational basis, (iii) the information must be kept up-to-date, and (iv) the licensee must make an attestation each time it makes a change in its MU1 Account Record that any information previously submitted remains accurate and complete. For many applicants and licensees, it is frustrating to identify, assemble, confirm the accuracy of, track, and report on affiliates when the information seems to serve no purpose to state regulators in deciding whether to approve or deny a license request or renewal.
As mentioned above, concerns and confusion have arisen in being required to identify affiliates for NMLS purposes if the identified entities are not regarded as affiliates under the most common and widely-accepted definition of affiliate. Some licensees may consider a 25%-or-more common ownership test, rather than a 10% test, to be the appropriate measure for purposes of disclosing affiliates, as this is the measure used under federal banking law and the banking laws of many states. As the information that the NMLS requests of the affiliates of applicants and licensees is not material to issuing or renewing a license, the NMLS should discontinue requiring the disclosure.
We have long questioned the purpose for requiring this information on commonly-owned affiliates when presenting comments to the Conference of State Bank Supervisors ("CSBS") and the Policy Committee of state regulators that administer the NMLS. With the 2017 NMLS User Conference set to take place in Austin, Texas in mid-February, and with CSBS and state regulators beginning to consider the development of a new NMLS 2.0, we thought it would be appropriate and informative to again raise our concerns during the Ombudsman session at the Conference and with those tasked with creating NMLS 2.0. Attached is the letter we presented to the NMLS. We welcome any thoughts or comments you may have and can convey them to CSBS and state regulators, on a company-anonymous basis, if you would have us do so.
Originally published February 9, 2017
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