With Oregon scheduled to begin accepting mortgage loan servicer license applications through the Nationwide Multistate Licensing System ("NMLS") on November 1, 2017, we wanted to update our August 16, 2017 blog post for those who may be subject to the licensing requirements.
Temporary rules were issued on October 20, 2017 so that the licensing process can commence. Rules applicable to the non-licensing requirements of the new Oregon Mortgage Loan Servicer Practices Act (the "Servicer Act"), will be proposed later this year or early 2018, and will be incorporated with the temporary rules when the final servicer rules are issued.
Licensing Obligations Under the Servicer Act
The new Oregon Servicer Act provides for a dedicated mortgage loan servicer license, separate from the license as a mortgage banker or mortgage broker obtained under Oregon's Mortgage Lender Law. Although the Oregon Servicer Act was effective upon Governor Katherine Brown's signature on August 2nd, the legislation expressly provides that the Servicer Act will become operative on January 1, 2018, and that it will apply "to service transactions for residential mortgage loans that occur on or after [the] operative date.
The Servicer Act provides that "a person may not directly or indirectly service a residential mortgage loan in this state unless the person obtains or renews a license under section 4 of this 2017 Act." Under the Servicer Act, the term "service a residential mortgage loan" means to:
- Receive a scheduled periodic payment from a borrower under the terms of a residential mortgage loan, including any amounts for deposit into an escrow account the lender establishes in accordance with the Real Estate Settlement Procedures Act;
- Pay to the lender or another person principal, interest, and other amounts associated with a residential mortgage loan in accordance with the terms of any contract or agreement for servicing the residential mortgage loan; or
- Pay an amount to a borrower, if the residential mortgage loan is a home equity conversion mortgage or a reverse mortgage.
The Servicer Act does not expressly define a residential mortgage loan servicer as one who purchases or holds mortgage loan servicing rights, but applies to one who indirectly, or directly, services residential mortgage loans. Oregon regulators had indicated on several occasions that it was not their intent to license all entities who merely hold mortgage loan servicing rights ("master servicer"), but that certain entities who hold mortgage loan servicing rights will need to be licensed. Although not set out in the temporary rules, Oregon regulators have reiterated that a master servicer will not be subject to licensing unless one or both of the following apply:
- the servicing is conducted in the name of the master servicer; or
- the master servicer has a financial obligation to advance fees (such as taxes and insurance) for the borrowers.
This raises certain questions that we do not expect to be clarified until the final rules are issued. In the meantime, we will be submitting comments to the Oregon regulators to clarify certain requirements in the temporary rule. Should you have any issues you would want us to address with Oregon regulators, please let us know.
Licensing under the Servicer Act
As the Servicer Act becomes operative on January 1, 2018, state regulators have indicated that they will expect that those who service residential mortgage loans to be licensed by January 1, 2018. Checklists for mortgage servicers are available in the NMLS, and applications for a license will be available for submission in the NMLS on November 1, 2017. Based on conversations with Oregon regulators, information requested on the NMLS checklist to include the applicants servicing data for the previous quarter, may be provided as a supplement to the business plan, rather than uploading a new business plan to the NMLS which include the applicants servicing data for the previous quarter. Also, state regulators have indicated that the servicing data requested to be included with the business plan are not required to be updated on a quarterly basis.
Our previous post on this topic provided information on advancing funds on HECMs, the regulation of loan modification activities, and certain exemptions that may be available under the Servicer Act.
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