States Unveil New Nationwide Mortgage Regulatory Framework


    WASHINGTON, D.C. – On January 2, a new era for mortgage regulation in the United States will ring in when the states’ Nationwide Mortgage Licensing System (NMLS) goes live.

    The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) announced that NMLS, an Internet-based system that will serve as the foundation of a coordinated state mortgage regulatory framework, officially became operational on the first business day of 2008.

    “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 supervision,” he said.

    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 process.

    “We were clearly seeing the challenge to our supervisory systems,” said Jeff Vogel, CSBS chairman and Wyoming State Banking Commissioner. “The world of mortgage finance and residential mortgage lending was changing at the speed of light while state and federal regulation struggled to keep pace. Also, the industry had a weak track record on self-regulation,” he said. “We recognized that serious reform was needed.”

    “In 2004, we rolled up our sleeves and started the development of NMLS and moreover, a new model for mortgage supervision.  We recognized that we had to apply today’s technology to the regulation of an evolving and complex system of origination fueled by securitization,” said David Bleicken, president of AARMR.

    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 and regulations.

    “The states will continue to play the important front-line role in mortgage supervision and enforcement,” Ryan said.

    “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.  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,” he said.

    “The House of Representatives recognized this when they made NMLS integral to the mortgage reform bill which passed the House on Nov. 15,” Ryan said.

    “This nationwide system will dramatically change the way the mortgage industry is regulated and will drive standardization of state licensing and lending requirements,” said Bill Matthews, president of  State Regulatory Registry LLC, CSBS’s subsidiary that operates NMLS.

    “A major goal of NMLS is to enhance accountability among mortgage brokers and non-depository lenders by having one system, accessible by all state regulators, that tracks licensure, affiliations, employment history and/or enforcement actions for affected parties,” he noted.

    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.

    NMLS is modeled upon the registry used to regulate securities brokers and dealers.

    NMLS has seven states as initial participants: Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York and

    Rhode Island.To date, 42 state agencies representing mortgage regulators in 40 states have indicated their intent to transition onto the system, citing the following reasons to:

    • Improve the efficiency and effectiveness of state supervision of the mortgage industry:
    • Enhance consumer protection;
    • Fight mortgage fraud and predatory lending that costs consumers and the mortgage industry hundreds of millions of dollars in losses each year;
    • Increase accountability among mortgage industry professionals; and
    • Unify and streamline state license processes for mortgage lenders and mortgage brokers.

    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.

    “Through the System, mortgage companies will apply for and manage their licenses electronically. In addition, NMLS is designed to reduce industry and department costs for processing licenses and will streamline the licensing application and renewal process for companies and professionals and thereby reduce industry costs,” Matthews said.  It also will centralize redundant state agency operations through the use of more uniform mortgage licensing requirements.

    “In addition, NMLS will provide greater efficiency to state regulators in the processing of license applications and enhance accountability on the part of brokers and non-depository lenders, with one system, accessible by all regulators, that tracks licenses, affiliations, employment history and/or enforcement actions for affected parties,” said Matthews.

    The System is available over the Internet through a secure web site at


    Information Contacts:
    John Ryan, Executive Vice President, "> (202) 728-5724

    Bill Matthews, President of CSBS’s State Regulatory Registry LLC subsidiary, "> (202) 728-5711

    The Conference of State Bank Supervisors is the nationwide organization for state banking, representing the bank regulators of the 50 states, the District of Columbia, Guam, Puerto Rico and the

    Virgin Islands, and approximately 6,200 state-chartered financial institutions. The Conference also is responsible for improving the quality of state bank supervision by providing department performance evaluation and accreditation programs and supervisory education/training programs for state banking department personnel.AARMR is the national organization representing state residential mortgage regulators. AARMR’s mission is to promote the exchange of information between and among the executives and employees of the various states who are charged with the responsibility for the administration and regulation of residential mortgage lending, servicing and brokering.

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