States unveil new nationwide mortgage regulatory frameworkMortgagePress.comCSBS, AARMR, MBA, NAMB, consumer protection, mortgage supervision
On Jan. 2, the Nationwide
Mortgage Licensing System (NMLS), an Internet-based system
created by the Conference of State
Bank Supervisors (CSBS) and the American Association of Residential
Mortgage Regulators (AARMR) that will serve as the foundation
of a coordinated state mortgage regulatory framework, successfully
launched. To date, 42 state agencies representing mortgage
regulators in 40 states have indicated their intent to transition
onto the system. The NMLS currently has seven states as initial
participants, including Idaho, Iowa, Kentucky, Massachusetts,
Nebraska, New York and Rhode Island.
"This is the culmination of a four-year effort by state
regulators to provide a new and more solid foundation for mortgage
supervision and consumer protection," said CSBS Executive Vice
President John Ryan. "NMLS provides the underpinnings of a
regulatory framework to address the weaknesses of our current
fragmented and complex system of mortgage origination and
In the fall of 2004, through CSBS and AARMR, state banking and
mortgage regulators came together to create a new regulatory
framework for the nation's residential mortgage lending industry.
The primary objectives of this framework are to enhance consumer
protection, strengthen supervision and streamline the regulatory
"In 2004, we rolled up our sleeves and started the development
of NMLS, and moreover, a new model for mortgage supervision," said
David Bleicken, president of AARMR. "We recognized that we had to
apply today's technology to the regulation of an evolving and
complex system of origination fueled by securitization."
One group critical of the registry is the National Association of Mortgage
Brokers, noting that it doesn't go far enough. The system only
oversees state-regulated banks and lenders, not the largest banks
that are regulated by the federal government.
"From a consumer standpoint, this isn't the perfect scenario
because if there's a bad originator out there, they can easily fall
through the cracks and work for someone else, such as a federally
regulated bank," said NAMB President George Hanzimanolis, CRMS in
an early January interview with Stateline.org. "If this is
about consumer protection, there can't be an argument that anybody
should be left out of this."
The launch of NMLS is just one part of a multi-faceted plan
being implemented by CSBS and AARMR to improve regulation and bring
about greater uniformity across state lines in mortgage
supervision. These efforts include coordinated supervision,
improved regulatory practices and consistent standards for testing
and training for mortgage originators. To accomplish this, many
states have changed or are in the process of changing their laws
"The state-based approach of NMLS has the benefits of localized
accountability and an on-the-ground regulatory system combined with
the efficiencies of a nationwide framework," said Ryan. "You can
create high and consistent regulatory standards without preempting
the states' important role in the development of consumer
protections and the enforcement of lending standards."
Eventually, CSBS expects all 50 states will transition onto the
system. CSBS and AARMR project enrollment of more than 500,000
company and professional licensees eventually to be registered
through the NMLS repository. Plans call for consumers to have
access to the system's public licensing and enforcement information
in 2009, enabling them to make a more informed decision when
selecting a mortgage loan officer and lender.
For more information, visit www.stateregulatoryregistry.org/nmls.