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A Higher Standard for Bank HR Departments (Part 2)

on Monday, 28 April 2014 in Banking Update

With an additional overlay of state and federal regulation, employment law issues at financial institutions take on an additional level of complexity. Whether it is the new regulations affecting permissible compensation practices for mortgage loan originators, state and federal licensing requirements or complex rules applicable to insider transactions, human resource professionals who work in financial services need to be attuned to the special rules that apply to employees and executives at their institutions.

This article is the second installment in a six-part series on banking regulations that impact your financial institution’s Human Resources Department. These materials originally were presented to attendees of 26th Annual Baird Holm Labor Law Forum.

Part 2: SAFE Act Licensing & Registration

In addition to the MLO Compensation Rule, MLOs are subject to state and federal licensure rules implementing the Federal Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). For federally chartered financial institutions, the licensing obligations are implemented through the Nationwide Mortgage Licensing System & Registry (NMLS). Each state also has implemented their local registration requirements through the NMLS as well.

MLO Registration Requirements

Each MLO employed by a covered financial institution must:

  • Register with NMLS by providing:
    • Identifying information, including name, home address, SSN, gender, date of birth, and principal business location;
    • Financial-services-related employment history for the prior 10 years;
    • Disclosure of specified criminal, civil judicial, or state, federal, or foreign financial authority regulatory actions against the employee; and
    • Fingerprints, for purposes of an FBI background check.
  • Obtain a “unique identifier.”
  • Maintain the registration by updating certain information within 30 days of specified changes; and
  • Renew the registration each year during the annual renewal period.

Policy and Procedure Requirements

Financial institutions that employ one or more MLOs must adopt and follow written policies and procedures to carry out their SAFE Act responsibilities. The requirement to adopt and follow policies and procedures applies to all financial institutions that employ individual MLOs, where MLOs act within the scope of their employment, and regardless of the application of any de minimis exception to their employees (i.e., employees who originate 5 or fewer mortgages per year).

In addition, covered financial institutions must conduct annual independent compliance tests to ensure compliance with the SAFE Act. The policies and procedures must be appropriate to the nature, size, complexity, and scope of the institution’s mortgage lending activities, and apply only to those employees acting within the scope of their employment at the institution. The policies and procedures must:

  • Establish a process for identifying which employees must register;
  • Require MLOs be informed of the registration requirements and instructed on how to comply;
  • Establish procedures to comply with the “unique identifier” requirements;
  • Establish reasonable procedures for confirming the adequacy and accuracy of MLO employee registrations, including updates and renewals, by comparisons with its own records;
  • Establish reasonable procedures and tracking systems for monitoring compliance with registration and renewal requirements;
  • Provide for annual independent testing for compliance either internally or by an outside party;
  • Provide for appropriate action if an employee fails to comply, including prohibiting such employees from acting as MLOs or other appropriate disciplinary actions;
  • Establish a process for reviewing employee criminal history background reports received pursuant to the regulation; and
  • Establish procedures designed to ensure that any third party with which the institution has arrangements related to mortgage loan origination has policies and procedures to comply with the SAFE Act.

Part 3>>

Jonathan J. Wegner


1 When an MLO registers with the NMLS, he or she receives a unique identifier – a series of numeric characters assigned for the life of the MLO. The unique identifiers allow MLOs to be tracked if they move between state and federal jurisdictions and/or change employers, and help consumers to find certain information about a particular MLO when they search on the NMLS’ consumer access portal

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