On May 23, 2018, Illinois enacted an amendment, HB4404 (“Amendment”), to the Residential Mortgage License Act of 1987 (“RMLA”) and created a new exemption for independent loan processing entities from the RMLA licensing requirement, as permitted by the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. The Amendment to the RMLA is effective immediately.
Pursuant to the Amendment, an entity engaged solely in providing loan processing services through the sponsoring of individual mortgage loan originators is a new class of an “exempt person or entity” under the RMLA.
The Amendment, however, requires such exempt loan processing entities to annually apply through the NMLS for an exempt company registration for the purpose of sponsoring one or more mortgage loan originators licensed under the RMLA.
The Amendment also provides that a loan processor who performs clerical or support duties under the supervision of a licensed mortgage loan originator sponsored by an independent loan processing entity is exempt from licensing as a mortgage loan originator.
Finally, the Amendment provides that an independent loan processing entity is not subject to examination by the Illinois Department of Professional and Financial Regulation.
Takeaways
The Amendment provides an opportunity for independent loan processors and underwriters, previously licensed under the RMLA as mortgage loan originators, to form and operate business entities, employ processors and underwriters and scale up operations.
Independent processing entities have the potential of creating economies of scale that could reduce the cost of mortgage loan origination for the benefit of both mortgage lenders and consumers.
Engaging an independent processing entity could also help small depository and non-depository mortgage lenders to be less susceptible to dips in origination volume in the mortgage market.
Finally, although independent processing entities are not going to be subject to examination, to be successful at attracting and maintaining business such entities should still ensure to maintaining policies and procedures covering mortgage lending operations, since their counterparties, depositories and non-depositories mortgage lenders, are required to actively engage in vendor management and a processing entity would likely be regarded as a critical service from a risk management prospective.
If you have any question regarding this Amendment, please reach out to our contact attorney.
Download Related Document