when is nmls id required?

Disclosure Requirements in Regulation G. Section 1007.105 of Regulation G requires credit unions to make available to consumers the unique identifiers of registered mortgage loan originators. For the purposes of the act, a mortgage loan originator is an individual who “takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain”. A residential mortgage loan is “any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in section 103(v) of the Truth in Lending Act, 15 USC 1602(v)) or residential real estate upon which is constructed or intended to be constructed a dwelling, and includes refinancings, reverse mortgages, home equity lines of credit and other first and additional lien loans that meet the qualifications listed in this definition.” See, 12 CFR §1007.102 (2)(C)(ii)(1).

Credit unions are required to provide the NMLS IDs to consumers “(1) upon request, (2) before acting as a mortgage loan originator; and (3) through the originator's initial written communication with a consumer, whether on paper or electronically”. See, 12 CFR § 1007.105 (b). These requirements apply whether the communication is provided in writing on paper or through electronic means.

The regulation requires credit unions to "make available the unique identifiers of its registered mortgage loan originators in a manner and method practicable to the institution." See, 12 CFR § 1007.105 (a). There is some guidance in the preamble to this rule indicating how NCUA expects credit unions to comply with generally providing the credit union's NMLS IDs:

“As noted in the SUPPLEMENTARY INFORMATION section of the proposed rule, an Agency-regulated institution may comply with the § __.105(a) requirement in a number of ways. For example, the institution may choose to direct consumers to a listing of registered mortgage loan originators and their unique identifiers on its Web site; post this information prominently in a publicly accessible place, such as a branch office lobby or lending office reception area; and/or establish a process to ensure that institution personnel provide the unique identifier of a registered mortgage loan originator to consumers who request it from employees other than the mortgage loan originator…”(emphasis added.) See, 75 FR 51642.

Many credit unions have made the business decision to include NMLS IDs on emails and business cards to ensure the disclosure is given at the appropriate time, due to the “initial communication requirement” in Regulation G.

It is important to point out that even though Regulation G does not require institutions to include the unique identifier on loan program descriptions, advertisements, business cards, stationary, notepads, and other similar materials, credit unions are not prohibited from doing so. Also, while the rule does not specifically require the NMLS IDs on a credit union’s website, credit unions can choose to implement such practice.

Other Regulatory Requirements. In addition to the requirements in Regulation G, section 1026.36(g) of Regulation Z requires a loan originator organization (a loan originator who is not an individual loan originator) to include its name and NMLS ID and the name and NMLS ID of the individual loan originator on certain loan documents.

Under Regulation Z, a loan originator “means a person who, in expectation of direct or indirect compensation or other monetary gain or for direct or indirect compensation or other monetary gain, performs any of the following activities: takes an application, offers, arranges, assists a consumer in obtaining or applying to obtain, negotiates, or otherwise obtains or makes an extension of consumer credit for another person; or through advertising or other means of communication represents to the public that such person can or will perform any of these activities…”

As the rules don’t clearly address this, one question I have received is this: Does the NMLS number need to be included on an Adverse Action Notice?

Disclosure requirements can often be a bit tricky when a mortgage loan is denied within the first three days of application.  Many loan officers incorrectly believe that the Adverse Action Notice is the only disclosure required when a loan is denied within the first 3 business days after application.  That is certainly not the case. For example, while TRID disclosures are not required for loans denied in the first three days of application, Regulation B still requires the delivery of an appraisal notice and certain situations still require the delivery of the FCRA credit score exception notice (https://www.compliancecohort.com/blog/credit-score-exception-notice-for-denied-applications).

So, what about the NMLS Number?

While the NMLS number is often provided to an applicant prior to the delivery of the Adverse Action Notice, there are some cases where the NMLS number will not have been previously provided.  For example, if a mortgage application is taken by phone and the application is denied within the first three business days after application, the applicant may not have been previously provided with any written communication.

Specifcially, SAFE Act rules require the delivery of an MLO’s unique identifier (NMLS #) to a consumer in three cases:

Therefore, in cases where the Adverse Action Notice is the first written communication to an applicant, an MLO’s unique identifier (NMLS #) must be provided with the Adverse Action Notice.

(b) A registered mortgage loan originator shall provide his or her unique identifier to a consumer: (1) Upon request; (2) Before acting as a mortgage loan originator; and (3) Through the originator's initial written communication with a consumer, if any, whether on paper or electronically.

Let’s first understand – WHAT is the NMLS? And then, we can dig deeper into the importance of the NMLS number.

The NMLS is an online platform for various regulatory agencies to issue license applications (like your MLO license) and ongoing compliance requirements.

According to the NMLS website:

“The Nationwide Multistate Licensing System (“Nationwide Mortgage Licensing System,” NMLS,” or the “System”) is the system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam.

In these jurisdictions, NMLS is the official system for companies and individuals seeking to apply for, amend, renew, and surrender license authorities managed through NMLS by 64​ state or territorial governmental agencies.

NMLS itself does not grant or deny license authority.”

In fact, NMLS is the SOLE system of licensure for mortgage companies (for 58 states) AND mortgage loan originators (59 states and territorial agencies).

This document provides an overview of use of the NMLS ID under the following sections:

The SAFE Act mandated that NMLS establish protocols for assigning a unique identifier to each licensed or registered loan originator that will “facilitate electronic tracking and uniform identification of, and public access to, the employment history of and the publicly adjudicated disciplinary and enforcement actions against loan originators.”  All individuals who maintain a record in the system are assigned a unique identifier which is permanently attached to that person or entity and remains attached to the individual’s record regardless.  Companies and branch offices that are licensed or registered through NMLS are also assigned unique identifiers.

The large majority of states adopted the following provision contained in the CSBS/AARMR Model State Law that mandates the use of the unique identifier.  State laws should be consulted to determine specific jurisdictional requirements.

MSL XX.XXX.210 UNIQUE IDENTIFIER SHOWN - The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations or advertisements, including business cards or websites, and any other documents as established by rule, regulation or order of the Commissioner.

The following language has been adopted by all agencies:

Use of unique identifier

(a) The shall make the unique identifier(s) of its registered mortgage loan originator(s) available to consumers in a manner and method practicable to the institution.(b) A registered mortgage loan originator shall provide his or her unique identifier to a consumer: (1) Upon request; (2) Before acting as a mortgage loan originator; and (3) Through the originator’s initial written communication with a consumer, if any, whether on paper or electronically.

Supplementary Information 

Section __.105—Use of Unique Identifier

The Agencies proposed in § __.105(a) to require an Agency-regulated institution to make the unique identifier(s) of its registered mortgage loan originator(s) available to consumers in a  manner and method practicable to the institution. Proposed § __.105(b) required a registered mortgage loan originator to provide the originator’s unique identifier to a consumer upon request, before acting as a mortgage loan originator, and through the originator’s initial written communication with a consumer, if any.  Although a mortgage loan originator may change his or her name, change employment, or move, the unique identifier assigned to the originator by the Registry at the originator’s original registration will remain the same. Once public access to the Registry is fully functional, the unique identifier will enable consumer access to an individual mortgage loan originator’s profile stored in the Registry, including the mortgage loan   originator’s publicly available registration information, any State mortgage licenses held (active or inactive), employment history, and publicly adjudicated disciplinary and enforcement actions. If a mortgage loan originator is simultaneously employed by more than one State or agency regulated institution, that information also will be readily visible to the consumer. We received a number of comments on this requirement—some noting that it is cumbersome and of limited benefit to the consumer. However, the S.A.F.E. Act requires each mortgage loan originator to obtain a unique identifier to facilitate the electronic tracking of loan originators, and the uniform identification of, and public access to, the employment history and publicly adjudicated disciplinary and enforcement actions against a mortgage loan originator. In order to effectuate this requirement, a mortgage originator and the employing institution must ensure that the  consumer has access to the originator’s unique identifier. This access must be made available early enough in the relationship with the originator to enable the consumer to access the Registry before the consumer commits to the mortgage loan transaction. Because a consumer may not be aware of the Registry, it is important that both the institution and originator make this information available to the consumer, and not only just upon the consumer’s request, as suggested by a number of commenters. Therefore, we adopt this requirement as proposed, with one clarifying change described below.

As noted in the SUPPLEMENTARY INFORMATION section of the proposed rule, an Agency-regulated institution may comply with the § __.105(a) requirement in a number of ways. For example, the institution may choose to direct consumers to a listing of registered mortgage loan originators and their unique identifiers on its Web site; post this information prominently in a publicly accessible place, such as a branch office lobby or lending office reception area; and/or establish a process to ensure that institution personnel provide the unique identifier of a  registered mortgage loan originator to consumers who request it from employees other than the mortgage loan originator. Furthermore, the Agencies intend § __.105(b)(3) of the rule to cover written communication from the originator specifically for his or her customers, such as a commitment letter, good faith estimate or disclosure statement, and not written materials or promotional items distributed by the Agency-regulated institution for general use by its customers. While, this provision does not require institutions to include the unique identifier on loan program descriptions, advertisements, business cards, stationary, notepads, and other similar materials, institutions are not prohibited from doing so. We also clarify that the requirement to provide the unique identifier to the consumer through the originator’s initial written communication, if any, applies whether that communication is provided in writing on paper or through electronic means. We have clarified this requirement in the final rule. The Agencies also clarify that the unique identifier may be provided orally, except pursuant to paragraph (b)(3) under which the unique identifier would be provided with the written or electronic communication. We note that the Board has proposed amendments to 12 CFR 226 (Regulation Z) that would require disclosure of the unique identifier as part of TILA disclosures, which generally must be provided to a borrower within three business days of the residential mortgage loan application and seven business days before consummation of the transaction.1 In addition, as indicated above, Fannie Mae and Freddie Mac are requiring all mortgage loan applications taken on or after the compliance date for the unique identifier requirement to include the mortgage loan originator’s unique identifier.  We therefore believe that providing consumers with the originator’s unique identifier will not be difficult or burdensome.

The Federal Housing Finance Agency (FHFA) requires Fannie Mae and Freddie Mac to include the identifiers for the loan originator and loan origination company on each loan application FHFA requires all mortgage applications to include loan-level identifiers for the loan originators, loan origination companies, field appraisers and supervisory appraisers.  In October 2008, FHFA sent notices to Fannie Mae and Freddie Mac that, effective January 1, 2010, all mortgage applications must include loan-level identifiers for the loan originators, loan origination companies, field appraisers and supervisory appraisers.    The agency issued a public statement of this requirement in a press release dated January 15, 2009.   The effective date was subsequently extended to July 1, 2010 but full compliance is not required until such time as all jurisdictions require NMLS unique IDs for mortgage loan originators and mortgage company licensees, and, for federal registrants, the date by which the federal registration of loan originators must be completed.

Specifically, the FHFA requires:

Both Fannie Mae and Freddie Mac have issued general FAQs and technical delivery requirement documents to advise their sellers about compliance.   The most recent guidance was issued in February 2011 and the major clarifications outlined by the agencies are summarized below:

Links:https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/pdf/mortgageloandelreqsfaqs.pdf  http://www.freddiemac.com/sell/secmktg/new_details.htm

Under the provisions of the Helping Families Save Their Homes Act of 2009 (Pub.L. 111-22) the failure of a FHA-approved lender to comply with the requirements of the SAFE Act and applicable state law is cause for withdrawal of FHA lender approval or loss of authorization to participate in FHA lending programs.  In order for FHA to be able to ensure compliance, HUD is mandating that FHA-approved mortgagees and sponsored third party originators provide their NMLS unique identifiers.

HUD issued a mortgagee letter on January 5, 2011 regarding FHA capture of NMLS information.  HUD will begin collecting the NMLS unique identifiers of all individuals and entities participating in the origination of FHA loans.  All FHA-approved mortgagees and their employees must comply with the NMLS registration requirements and “entities with jurisdiction over their activities” and must register in accordance with the guidance set forth by NMLS.

Also, FHA-approved mortgagees that act as sponsor for a third party originator should ensure that those originators obtain and maintain an NMLS ID as required by the states and entities with jurisdiction over their activities.

HUD will capture NMLS IDs at a number of points in the lender approval and loan origination processes:

The states, through CSBS and the American Association of Residential Mortgage Regulators (AARMR), developed and launched NMLS to enhance supervision of the residential mortgage market.  The unique identifier granted to residential mortgage loan originators and companies through NMLS allows regulators to track mortgage providers across state lines to ensure a provider will not escape regulatory action in one state, simply by crossing into another state.  The unique identifier also allows consumers and the industry to easily track specific originators’ histories and qualifications through NMLS Consumer Access.

For more on how the NMLS ID is being used, see Required Uses of NMLS ID.

NMLS assigns a unique identifier (NMLS ID) to each entity that has a record in the system.  An NMLS ID is assigned to each company (Form MU1), branch (Form MU3), and natural person (Form MU2 or Form MU4) when the entity first creates its record in NMLS.  Once assigned, an entity’s NMLS ID cannot be changed.

For more information on the characteristics of the NMLS ID, see NMLS ID Specifications.

When is a NMLS Unique Identifier Valid?When a company or individual creates an account in NMLS, a unique identifier is automatically assigned and reserved for use by the applicant.  However, the NMLS unique identifier is not valid until a state license (or the denial of a state license) or federal registration has been issued.

How do I verify a NMLS Unique Identifier?The NMLS Unique Identifier can be verified for a state-licensed company, branch or individual by searching NMLS Consumer Access.  If a company, branch or individual purporting to be state-licensed does not appear on NMLS Consumer Access, then they do not have a valid NMLS Unique Identifier.

• Apply for your NMLS account and ID number.
• Complete your NMLS Pre-License Education.
• Pass the NMLS Mortgage licensing exam.
• Apply for your CA MLO license.
• Complete background checks and pay all fees.
• Associate your NMLS account with your employer.