The North Carolina Commissioner of Banks recently amended its rules governing mortgage lenders, brokers, servicers, MLOs, and mortgage origination support registrants under the North Carolina Secure and Fair Enforcement Mortgage Licensing Act (NC SAFE Act) and reverse mortgages. The amendments took effect on August 1, 2018.
Amendments to NC SAFE Act Rules
Applications. As amended, persons submitting applications without required fees, or that are missing material facts or required information, will be notified through NMLS&R, instead of in writing, that the application will be held in pending status for 30 calendar days and will be considered withdrawn if the deficiencies are not timely remedied.
Financial Responsibility. Prior to amendment, the rules required applicants to provide evidence of minimum net worth and a history of satisfying debt obligations, as well as evidence of the funding capacity to conduct mortgage originations (if a lender), an explanation of corporate ownership structure and information regarding required distributions to investors or owners (if a lender or servicer), evidence of minimum cash deposits under the firm’s name in an FDIC-insured financial institution (if a broker), and evidence of a credit score of 600 or greater and no foreclosures or accounts delinquent in excess of 90 days within the past three years (if a loan originator). As amended, applicants are no longer required by the rules to provide such information, but must continuously demonstrate financial responsibility as required by statute. Evidence of failure to demonstrate such responsibility includes: (i) current outstanding judgments, except judgments resulting solely from medical expenses, and current outstanding tax liens or other government liens and filings; and (ii) foreclosures or a pattern of serious delinquent accounts within the past three years.
Nontransferability, Name Changes, Reporting Requirements, and Form and Location of Records. As amended, the rules governing nontransferability, name changes, reporting requirements, and form and location of records have been updated to specify that they are applicable to mortgage origination support registrants, as well as licensees.
Security Breaches. As amended, the rules no longer require notification of the Commissioner within 30 days of a material change in any document or information previously submitted to or otherwise filed with the Commissioner.
Termination of Operations or Employment. The amendments add mortgage origination support registrants to the list of persons required to provide the Commissioner with written notice of a decision to cease operations. The rules, as amended, also provide that a registrant that has not processed or underwritten a mortgage loan within a 12-month period is considered to have ceased operations, prohibit licensees and registrants from sponsoring a MLO who is not an employee, and require that the Commissioner be notified within 30 days of the termination of a MLO’s employment and sponsorship.
Amendments to Reverse Mortgage Rules
Application for Authorization as a Reverse Mortgage Lender. As amended, the information that must be included in an application has been reduced to: (i) a business plan that includes a description of the applicant’s reverse mortgage business operations; (ii) the addresses where the applicant intends to engage in business as a reverse mortgage lender, including branch offices and the name of each branch manager; (iii) a description of the applicant’s business experience and current business activities, its partners, directors, principal officers and controlling persons; (iv) three business references, including one bank reference; and (v) any additional information required by the Commissioner.
Current Authorized Lender Information. The amendments expand the items constituting a material change under the rules that require notification to be provided to the Commissioner to include the cessation of North Carolina reverse mortgage activities.
Nontransferability of Certificate of Authorization. As amended, the rules continue to prohibit the transfer or assignment of a Certificate of Authorization, but no longer describes the circumstances under which the Commissioner may deem a change in an authorized lender’s organizational structure to constitute a transfer or assignment.
Record and Bookkeeping Requirements. The amendments remove the requirements under the rules that financial records must be prepared in accordance with generally accepted accounting principles and that out-of-state reverse mortgage lenders must designate the Commissioner as agent for service of process.
Impairment of Surety Bond. As amended, the rules no longer require applicants to notify the Commissioner of a failure to meet minimum net worth requirements.
The amendments also make various technical changes to the NC SAFE Act and Reverse Mortgage rules to modernize and clarify the language, improve readability, update the rules to current practices, and delete unnecessary or outdated language. Corresponding changes have also been made to several defined terms under each set of rules. Additionally, the amendments repeal the Reverse Mortgage rules titled Notification of Intent to Engage in Reverse Mortgage Lending, Certificate of Authorization, Minimum Net Worth Requirements for Authorized Lender or Lenders, Certified Financial Statements, Reverse Mortgage Lender Application Disclosure, Permitted Fees, Counseling, Prohibited Acts, and Hearings.
The amended rules can be viewed here.