Last week, in a blog entitled "Coronavirus Hits Home," we informed you that we had contacted the Conference of State Bank Supervisors ("CSBS") and regulators in a number of states to see what CSBS or the state regulators were telling mortgage lender or broker licensees as to whether their licensed MLO employees who had been quarantined in their homes because of the coronavirus ("COVID-19") could continue to originate mortgage loans from their homes without the home being licensed as a branch office. Since that blog, CSBS has posted certain state-by-state COVID-19 guidance on the NMLS Resource Center, which among other things covers relevant business continuity plans for licensed mortgage loan officers. We urge you to check the NMLS Resource Center and the State Agency websites for the guidance provided.
Since we sent our request to state regulators as to relief from branch licensing for licensed MLOs who are quarantined in their homes, but want to continue to originate mortgage loans, a number of state regulators have responded directly and positively to our email request. As some of the guidance posted on the NMLS website may not cover the branch licensing issue we posed to CSBS and certain other state regulators, we thought it would be helpful to post some of the specific guidance we have received from state regulators that addressed the branch licensing concern raised by our clients.
Alabama – Last week the supervisor of the Bureau of Loans with the Alabama Banking Department (the "Department") sent a memorandum that, among other things, reminded licensees that their business continuity planning should be reviewed and updated at this time. In addition, he advised that, if it was necessary and appropriate, the licensee may wish to take precautions to further avoid the risk of exposure by relocating offices or by having employees work from home. Licensees would be expected to immediately inform the Department of any such cases and the Department would work with those licensees during this time. Licensees were reminded that compliance with all applicable laws and regulations, including those regarding data security requirements, need to maintained during such time. Licensees that are not able to relocate or allow employees to work from home are encouraged to take steps to mitigate the impact on business and customers. Licensees must notify the Department of any circumstances that require closure, relocation, or remote work programs, and any efforts taken to work with consumer The Supervisor of the Alabama Bureau of Loans also served as the Conference of State Bank Supervisors NMLS Ombudsman for the last six years, and encouraged CSBS and other regulators to address this issue for company and MLO licensees. As indicated above, CSBS has moved forward in getting information out to licensees and the general public.
Alaska – Alaska regulators had not had any inquiries on this issue prior to our initial contact, but appreciated our inquiry, and recognized the concern. Although the Alaska regulators did not have an official policy on this issue, they provided some very helpful, creative and well-reasoned guidance as to how to view this issue. Noting that the regulations under the Alaska Secure and Fair Enforcement for Mortgage Licensing Act (the "Alaska SAFE Act") provide that an MLO's home would need to be licensed as a branch if the MLO conducts the majority of his or her origination activities from that location, the regulators indicated that because an MLO's license is for a calendar year, being quarantined for 14-30 days would not be considered the majority of their time over the course of a year under the Alaska Safe Act They added that the company sponsoring the MLO should ensure it provides guidance to the licensed MLO on how the MLO will be supervised to ensure compliance with the Gramm-Leach-Bliley Act (GLBA). See Alaska's guidance here.
Arizona – In response to our email inquiry, the Licensing Supervisor for the Arizona Department of Financial Institutions indicated last week that the Department is preparing written guidance that will be issued. In the interim she indicated that, "as far as the LO's go, they can work from home, as long as they are attached to a licensed branch." The Licensing Supervisor added certain additional guidance, which we understand to mean that a loan originator cannot hold out to the public that the person's home office is licensed as a branch. Once written guidance is issued, we will post an update.
California – In response to our inquiry, the Deputy Commissioner for Mortgage Lending for the Department of Business Oversight ("DBO") referenced section 1950.122.6 of the regulations to section 50141 of the California Residential Mortgage Lending Act "CRMLA") and provided that these sections "allow licensees the flexibility to mitigate the spread of Covid-19 (Coronavirus)." He added that "Mortgage Lending will allow licensees that choose to temporarily allow MLO(s) to telework from remote unapproved residences." He further added that CRMLA licensees should "ensure the [DBOs] policies and procedures for mortgage originations, servicing, teleworking, electronic data security, and physical data security are adhered to." Finally, he noted that at the present time the DBO has not issued a formal/official statement, but that Commissioner Alvarez and others in the DBO will continue assessing needs across the DBO's licensees. As we learn more from the DBO, and from the Bureau of Real estate regarding the Real Estate Law, we will provide an update.
Connecticut – Officials with the Connecticut Department of Banking were considering the matter when we first contacted them last week, and they indicated that a memorandum would be forthcoming. This week the Department issued a memorandum that it will take a "no action position with respect to those licensed MLO who temporarily work from home due to COVID-19. The Department's memorandum can be accessed here.
Delaware – Regulators with the Office of the State Bank Commissioner indicated businesses should review the COVID-19 guidance on the state's Public Health website. Thus far, however, the regulators have not issued any separate guidance addressing the MLO's ability to work from a home location because the Delaware Banking Code and regulations do not restrict financial institution employees from working at home. The regulator stated that there is an expectation that financial institutions will make reasonable efforts to remain accessible to their customers. As the Delaware Banking Code and the regulations do not restrict employees from working at home, we expect that state regulators will see working from home as a reasonable decision. We will post an update if one is issued.
Florida – Regulators with the Florida Office of Consumer Finance (the "Office") indicated that they are assessing the situation and preparing appropriate guidance. Regulators expect that the Office would be communicating more directly with licensees within the next several days. Meanwhile, a senior regulator advised that Florida's branch licensing requirements may be triggered by use of home addresses on business cards, stationery, or advertising or the use of the licensee's name on advertising, promotional materials, or signage that suggests that mortgage loans are being originated or negotiated at a specific location. Licensees should ensure that while working at home they do not take action which might trigger these requirements and companies should provide guidance to the licensed MLO on how the MLO will be supervised. The senior regulator further stated the Office would consider factors such as whether the MLO met clients at his or her home or whether the company still had control of the management of the MLO's activities. Part of this guidance seems self-evident, but if a loan originator is quarantined in his or her home, the person should not be meeting with any clients.
Idaho – The Supervising Examiner for the Consumer Finance Bureau of the Idaho Department of Finance (the "Department") prepared an email to notify the Department's licensees of the Department's Temporary Guidance on this issue. The Guidance also was posted to the NMLS website and was sent to AARMR, NACCA and NACARA. Plus the Department dedicated a webpage to Coronavirus Resources on its website. As of last Friday, the Idaho Financial Institutions Bureau and the Securities Bureau (regulating Money Services Businesses) were also working on their guidance notifications. Pursuant to the guidance issued by the Department, the Department will not take an enforcement action against a licensee or registrant for unlicensed activity at a residence through June 30, 2020, unless this Guidance is otherwise modified or withdrawn, as long as licensable activities conducted from the employee's residence meet certain security measures and business practices, as set out in the Guidance that was issued by the Department.
Kentucky – Kentucky regulators were direct and to the point. In response to our inquiry, the Manager of Licensing indicated that "the employees will be allowed to work from home on a temporary basis due to health concerns. Once the threat passes, current policies will be [re]implemented."
Maryland – Maryland regulators appear to be out front on this issue, as they had long considered when a licensed MLO can originate mortgage loans from certain unlicensed locations. The regulations to the Maryland Mortgage lender Law, COMAR, provides direction as to the locations from which a licensed mortgage loan originator can work. Specifically, section 09.03.09.07 of COMAR provides that: "A. A mortgage loan originator may not conduct mortgage lending business at any location different from the address that appears on the license or licenses of the mortgage loan originator's employer: B. Notwithstanding § A of this regulation, a mortgage loan originator may take a loan application or offer or negotiate terms of a mortgage loan at a location other than the address that appears on the license or licenses of the mortgage loan originator's employer if neither the mortgage loan originator nor the mortgage loan originator's employer: (1) Owns or leases the location for the purpose of conducting mortgage lending business; (2) Indicates or suggests by use of signage that the mortgage loan originator or the mortgage loan originator's employer utilizes the location for taking mortgage loan applications or offering or negotiating terms of mortgage loans; (3) Advertises that the mortgage loan originator or the mortgage loan originator's employer takes mortgage loan applications or offers or negotiates terms of mortgage loans at the location; (4) Maintains work space, telephone service, or internet service at the location in the name of the mortgage loan originator or the mortgage loan originator's employer for the purpose of conducting mortgage lending business; (5) Receives mail relating to the mortgage lending business at the location; or (6) Stores books or records relating to the mortgage lending business at the location." Given this regulation, through the issuance of a March 13, 2020 Bulletin. Maryland regulators have confirmed that under certain conditions a licensed MLO quarantined in his or her home can originate mortgage loans from his or her home without the home being licensed as a branch office.
New York – The Deputy Superintendent of the New York Department of Financial Services (the "NYDFS") quickly recognized the seriousness of the COVID-19 pandemic, and its effect on licensees and borrowers, and she was one of the first regulators to respond to our inquiry of last week. She indicated that the NYDFS was working on addressing how the issue we raised, and other issues, should be handled, which she believes likely will include some degree of oversight. One concern she raised centered on how individuals who had contracted the virus would handle paper filings, document, and packages if the company and the licensed MLO could not transmit information electronically. This week the NYDFS issued certain Industry Letters providing guidance to New York State Regulated Institutions Relating to Potential Financial Risk Arising from the Outbreak of the Novel Coronavirus.
Pennsylvania – The Pennsylvania Department of Banking and Securities/Non-Depository (the "Department") is permitting licensees to work from alternate locations. The Department's website states that "[t]he Department of Banking and Securities will not take exception to licensees and registrants working from alternate site locations, whether licensed or not, only while the Commonwealth of Pennsylvania is under a Proclamation of Disaster Emergency."
We trust this communication and others to come will help you navigate the state branch office licensing requirements during the COVID-19 pandemic. As we learn more, we will pass this on to our clients, other lenders who contact us and want to be kept abreast of the actions of the state regulators, state regulators who want to know what their regulator colleagues in other states are doing, and in the interest of good citizenship to our financial services colleagues in other firms.
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