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The SAFE Call Report: Feels Like a Punishment

Paul Donohue
Dec 31, 2010

The SAFE Act addresses the “Call Report” with a brief (some would say ambiguous) mention by stating: “Each mortgage licensee shall submit to the Nationwide Mortgage Licensing System and Registry reports of condition, which shall be in such a form and shall contain such information as the NMLSR may require.” The SAFE Act provided no further detail on the subject of Call Reports, leaving its purpose, structure and implementation to the NMLS to define. And define they did, giving a whole new meaning to the cliché, “Give them and inch and they’ll take a mile.” We are living through post-housing-bust regulatory mania. Never underestimate the bureaucrat’s appetite for mandating redundant reporting and duplicative data. The financial Condition Report requires a glossary of 118 explanatory terms just to fill out the form. In its commentary to the NMLS, one member of the American Financial Services Association (AFSA) stated, “It will take 140 additional quarterly accounting reports for a total of 560 additional reports per year.” Whole new departments will have to be created in order to comply and much of the information’s usefulness can easily be challenged. The “Call Report” is a doozy. This one feels like a punishment. Purpose The purpose of the NMLS Call Report is to provide timely, comprehensive and uniform information concerning the financial condition of licensed mortgage companies, their loan activities and production information. The proposed rules call for a company with one or more licenses in any “approved” status to file the NMLS Call Report on a quarterly basis with the following objectives: ►To replace unique state annual reports and standardize financial statement information; ►Provide state regulators with information to supervise licensed production volume and calculate assessments; and ►Give state regulators the ability to develop statewide reports on mortgage activity with the ability to compare across state lines. Two parts to the Call Report The Call Report is comprised of two parts and will roll out in 2011. ►Part 1—Residential Mortgage Loan Activity Report: Shall be state by state, will include volume and reports on all first and subordinate loans including specific government loans, both forward and reverse. ►Part 2—Financial Condition Report: Will be reported on a year-to-date basis and is to include a current balance sheet, income statement and cash flow statement. Failure to submit the Call Report within 45 days of the end of each calendar quarter will result in a deficiency to be placed on the company’s license and may result in state regulatory action. At a minimum, such a deficiency will prevent license or registration renewal. One possible upside is that for smaller entities operating in states that require self-prepared financial statements on an annual basis, the NMLS Call Report may be used to meet this requirement. SAFE observation No doubt this little-mentioned SAFE Act provision morphed into an onerous regulatory requirement. It remains to be seen if it yields meaningful results or inflicts more punishment. On SAFE Act Call Reports, call me skeptical. Paul Donohue, CRMS is a 23-year industry professional and founder of Abacus Mortgage Training and Education. Paul served on two NMLS working groups, establishing the new national education protocols. Go to to find out more about your obligations for testing, education and licensure, or call (888) 341-7767.
Dec 31, 2010