In our April 2023 and May 2023 editions of Licensing Link, we noted that, effective August 1, 2023, North Dakota will establish a new licensing requirement to engage in "residential mortgage lending," which includes arranging or providing residential mortgage loans as a form of financing, or advertising or soliciting in print, by letter, in person, or otherwise, the right to find lenders or provide residential mortgage loans for a person. (See North Dakota Senate Bill 2090). Also effective August 1, 2023, North Dakota will require companies servicing residential mortgage loans to obtain a residential mortgage loan servicer license (See North Dakota House Bill 1068).
On June 7, 2023, North Dakota posted information regarding the new residential mortgage lending and servicing license requirements on the Nationwide Multistate Licensing System ("NMLS"), as well as information on how companies holding a North Dakota Money Broker License to engage in residential mortgage brokering and/or lending will need to transition to the new residential mortgage lender license type to maintain compliance with the recent changes.
The NMLS instructions for the new residential mortgage broker/lender license set forth the following activities as authorized under the new license:
- First mortgage brokering/lending
- High cost home loans – broker/lender
- Home equity lending/lines of credit – broker/lender
- Lead generation – may vary based on details of activity and compensation
- Reverse mortgage brokering/lending
- Second mortgage brokering/lending
The NMLS ND Residential Mortgage Lender Transition Checklist confirms that the transition request to the Residential Mortgage Lender License will be available in NMLS starting August 1, 2023, and that the transition to NMLS for this license is only required for those Money Broker licensees that engage in Residential Mortgage Lending/ Brokering. Current Money Broker license holders engaged in such activities must transition to the new license type by December 31, 2023. As we noted in our April Licensing Link, entities that engage in other lending activity, such as commercial or non-residential real estate secured consumer loans, for example, may need to maintain both the North Dakota Money Broker License and the new Residential Mortgage Lender license. The license transition process will include a fee that will cover the license renewal for 2023 and licensees will not need to renew this license until the 2025 renewal period beginning Nov. 1, 2024, through Dec. 31, 2024.
With regard to the new Residential Mortgage Servicer license, which will also be available for application on NMLS beginning on August 1, 2023, the NMLS instructions for new applicants set forth the following activities as authorized under the new license:
- First mortgage servicing
- Master servicing
- Reverse mortgage servicing
- Subordinate lien mortgage servicing
- Third party first mortgage servicing
- Third party subordinate lien mortgage servicing
Based on communications with regulators, we understand that the first license renewal period for the Residential Mortgage Loan Servicer license will be in 2024. Thus, even if a new servicer license is granted shortly after the August 1, 2023 application date, the licensee will not be required to renew the license until the license renewal period beginning on November 1, 2024.
The NMLS also includes instructions for registration of both Residential Mortgage Lender branches and Residential Mortgage Loan Servicer branches. The instructions make clear that registration is required for any branch office currently licensed as a Money Broker branch, and will be engaged in brokering and/or originating loans in North Dakota, as well as branch offices at which an entity is engaged in servicing North Dakota residential mortgage loans. Finally, starting August 1, 2023, the North Dakota Department of Financial Institutions will begin receiving new electronic surety bonds through the NMLS for both the Residential Mortgage Lender and Loan Servicer licenses.
While applications for the new North Dakota residential mortgage licenses cannot be filed through NMLS until August 1, 2023, residential mortgage lenders and servicers should begin using the NMLS checklists to prepare for upcoming applications and transitions, as applicable to each entity's business activities.
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