[House Report 114-584]
[From the U.S. Government Publishing Office]


114th Congress   }                                           {     Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                           {    114-584

======================================================================



 
           ELIMINATING BARRIERS TO JOBS FOR LOAN ORIGINATORS

                                _______
                                

  May 23, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2121]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2121) to amend the S.A.F.E. Mortgage Licensing 
Act of 2008 to provide a temporary license for loan originators 
transitioning between employers, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. ELIMINATING BARRIERS TO JOBS FOR LOAN ORIGINATORS.

  (a) In General.--The S.A.F.E. Mortgage Licensing Act of 2008 (12 
U.S.C. 5101 et seq.) is amended by adding at the end the following:

``SEC. 1518. EMPLOYMENT TRANSITION OF LOAN ORIGINATORS.

  ``(a) Temporary Authority to Originate Loans for Loan Originators 
Moving From a Depository Institution to a Non-depository Institution.--
          ``(1) In general.--Upon employment by a State-licensed 
        mortgage company, an individual who is a registered loan 
        originator shall be deemed to have temporary authority to act 
        as a loan originator in an application State for the period 
        described in paragraph (2) if the individual--
                  ``(A) has not had an application for a loan 
                originator license denied, or had such a license 
                revoked or suspended in any governmental jurisdiction;
                  ``(B) has not been subject to or served with a cease 
                and desist order in any governmental jurisdiction or as 
                described in section 1514(c);
                  ``(C) has not been convicted of a felony that would 
                preclude licensure under the law of the application 
                State;
                  ``(D) has submitted an application to be a State-
                licensed loan originator in the application State; and
                  ``(E) was registered in the Nationwide Mortgage 
                Licensing System and Registry as a loan originator 
                during the 12-month period preceding the date of 
                submission of the information required under section 
                1505(a).
          ``(2) Period.--The period described in paragraph (1) shall 
        begin on the date that the individual submits the information 
        required under section 1505(a) and shall end on the earliest 
        of--
                  ``(A) the date that the individual withdraws the 
                application to be a State-licensed loan originator in 
                the application State;
                  ``(B) the date that the application State denies, or 
                issues a notice of intent to deny, the application;
                  ``(C) the date that the application State grants a 
                State license; or
                  ``(D) the date that is 120 days after the date on 
                which the individual submits the application, if the 
                application is listed on the Nationwide Mortgage 
                Licensing System and Registry as incomplete.
  ``(b) Temporary Authority to Originate Loans for State-licensed Loan 
Originators Moving Interstate.--
          ``(1) In general.--A State-licensed loan originator shall be 
        deemed to have temporary authority to act as a loan originator 
        in an application State for the period described in paragraph 
        (2) if the State-licensed loan originator--
                  ``(A) meets the requirements of subparagraphs (A), 
                (B), (C), and (D) of subsection (a)(1);
                  ``(B) is employed by a State-licensed mortgage 
                company in the application State; and
                  ``(C) was licensed in a State that is not the 
                application State during the 30-day period preceding 
                the date of submission of the information required 
                under section 1505(a) in connection with the 
                application submitted to the application State.
          ``(2) Period.--The period described in paragraph (1) shall 
        begin on the date that the State-licensed loan originator 
        submits the information required under section 1505(a) in 
        connection with the application submitted to the application 
        State and end on the earliest of--
                  ``(A) the date that the State-licensed loan 
                originator withdraws the application to be a State-
                licensed loan originator in the application State;
                  ``(B) the date that the application State denies, or 
                issues a notice of intent to deny, the application;
                  ``(C) the date that the application State grants a 
                State license; or
                  ``(D) the date that is 120 days after the date on 
                which the State-licensed loan originator submits the 
                application, if the application is listed on the 
                Nationwide Mortgage Licensing System and Registry as 
                incomplete.
  ``(c) Applicability.--
          ``(1) Any person employing an individual who is deemed to 
        have temporary authority to act as a loan originator in an 
        application State pursuant to this section shall be subject to 
        the requirements of this title and to applicable State law to 
        the same extent as if such individual was a State-licensed loan 
        originator licensed by the application State.
          ``(2) Any individual who is deemed to have temporary 
        authority to act as a loan originator in an application State 
        pursuant to this section and who engages in residential 
        mortgage loan origination activities shall be subject to the 
        requirements of this title and to applicable State law to the 
        same extent as if such individual was a State-licensed loan 
        originator licensed by the application State.
  ``(d) Definitions.--In this section, the following definitions shall 
apply:
          ``(1) State-licensed mortgage company.--The term `State-
        licensed mortgage company' means an entity licensed or 
        registered under the law of any State to engage in residential 
        mortgage loan origination and processing activities.
          ``(2) Application state.--The term `application State' means 
        a State in which a registered loan originator or a State-
        licensed loan originator seeks to be licensed.''.
  (b) Table of Contents Amendment.--The table of contents in section 
1(b) of the Housing and Economic Recovery Act of 2008 (42 U.S.C. 4501 
note) is amended by inserting after the item relating to section 1517 
the following:

``Sec. 1518. Employment transition of loan originators.''.

SEC. 2. AMENDMENT TO CIVIL LIABILITY OF THE BUREAU AND OTHER OFFICIALS.

  Section 1513 of the S.A.F.E. Mortgage Licensing Act of 2008 (12 
U.S.C. 5112) is amended by striking ``are loan originators or are 
applying for licensing or registration as loan originators'' and 
inserting ``are applying for licensing or registration using the 
Nationwide Mortgage Licensing System and Registry''.

SEC. 3. EFFECTIVE DATE.

  This Act and the amendments made by this Act shall take effect on the 
date that is 18 months after the date of the enactment of this Act.

                          Purpose and Summary

    Introduced by Representative Stivers on April 29, 2015, 
H.R. 2121 amends the S.A.F.E. Mortgage Licensing Act of 2008 to 
provide temporary loan-origination authority for registered 
loan originators: (1) moving from a financial institution to a 
state-licensed non-bank originator, or (2) moving interstate to 
a state-licensed loan originator in another state. Section 2 of 
H.R. 2121 includes a technical change to Section 1513 of the 
S.A.F.E. Act intended to update the Act's existing civil 
liability protections to ensure that those protections continue 
to apply where state regulators use the National Mortgage 
Licensing System and Registry (NMLS) as a licensing system for 
financial services providers other than loan originators.

                  Background and Need for Legislation

    Congress enacted the Secure and Fair Enforcement (SAFE) 
Mortgage Licensing Act of 2008 as part of the Housing and 
Economic Recovery Act (HERA). The SAFE Act created state 
licensing or registration requirements for mortgage loan 
originators (MLOs). MLOs working as loan officers in federally-
regulated depository institutions were required to register 
with the NMLS. MLOs working for non-depository mortgage 
companies were required to become licensed at the state level, 
complete annual continuing education, and pass criminal 
background checks.
    Because bank loan officers are not state-licensed MLOs, a 
problem arises when an individual wishes to leave a bank and 
instead work for a non-bank mortgage company: he or she must 
wait until completing the SAFE Act's state licensure 
requirements--a process that can take weeks or months, 
depending upon the state--in order to originate loans for the 
mortgage company, notwithstanding his or her prior experience 
as a registered bank loan officer. Under current law, the SAFE 
Act allows for a 60-day grace period for changes in employment 
due to acquisitions, mergers, and reorganizations, but does not 
provide for a grace period or other transitional accommodation 
for bank loan officers seeking to work for non-bank mortgage 
companies.
    H.R. 2121 makes it easier for a registered bank MLO to 
transition to a non-bank mortgage company, or for a state-
licensed MLO to move to another state. The bill grants such 
persons temporary authority to originate loans for up to 120 
days after submitting their application for licensure.
    H.R. 2121 also establishes eligibility requirements for 
MLOs seeking transitional loan origination authority. For 
instance, registered MLOs seeking to move to a non-depository 
mortgage company must have been a registered as an MLO in the 
NMLS for the 12 months immediately prior to seeking the 
transitional authority. Additionally, the registered MLO must:
           Not have had an application for an MLO 
        license revoked or suspended in any governmental 
        jurisdiction;
           Not have been subject to a cease and desist 
        order;
           Not have been convicted of a felony that 
        would make the individual ineligible for licensure; and
           Have submitted an application to be a state-
        licensed MLO through the NMLS.
    H.R. 2121 establishes similar transitional authority for a 
state-licensed MLO to originate mortgages in a different state, 
provided that the person is employed by the mortgage company in 
the state where licensure is sought and has:
           Not had an application for an MLO license 
        revoked or suspended in any governmental jurisdiction;
           Not been subject to a cease and desist 
        order;
           Not been convicted of a felony that would 
        make the individual ineligible for licensure;
           Submitted an application to be a state-
        licensed MLO through the NMLS; and
           Maintained licensure in the first state for 
        the 30-day period preceding the date of application 
        submission.
    H.R. 2121 provides that both the MLO and the company hiring 
the MLO are subject to the SAFE Act and applicable state law as 
if the MLO were duly licensed, thus enabling state regulators 
to fulfill their obligations as regulators of mortgage 
companies and individual MLOs under the SAFE Act and state 
financial and consumer protection laws. Finally, H.R. 2121 
includes a technical change to Section 1513 of the SAFE Act 
intended to update the SAFE Act's existing civil liability 
protections to ensure that those protections continue to apply 
where state regulators use the NMLS as a licensing system for 
financial services providers other than loan originators.

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Financial Institutions and Consumer Credit held a hearing 
examining matters relating to H.R. 2121 on October 21, 2015.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
March 2, 2016, and ordered H.R. 2121 to be reported favorably 
to the House as amended by a recorded vote of 56 yeas to 0 nays 
(recorded vote no. FC-96), a quorum being present. Before the 
motion to report was offered, the Committee adopted an 
amendment in the nature of a substitute offered by Mr. Stivers 
by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House as amended. The motion 
was agreed to by a recorded vote of 56 yeas to 0 nays (Record 
vote no. FC-96), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 2121 
will reduce regulatory burden and facilitate mortgage lending 
by providing temporary loan-origination authority for loan 
officers (1) moving from a financial institution to a state-
licensed non-bank originator, or (2) moving interstate to a 
state-licensed loan originator in another state.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                     Congressional Budget Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 11, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2121, the SAFE 
Transitional Licensing Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 2121--SAFE Transitional Licensing Act of 2015

    H.R. 2121 would provide temporary authority for licensed 
mortgage originators to work in a new state or under a new 
employer--if the new employer is a state-licensed mortgage 
company--until a new license is issued. Because enacting H.R. 
2121 would affect direct spending and revenues, pay-as-you-go 
procedures apply. However, on the basis of information from the 
Department of Housing and Urban Development (HUD) and the 
Nationwide Mortgage Licensing System and Registry (NMLS), CBO 
estimates that enacting the bill would have no significant net 
effect on direct spending or revenues.
    The NMLS was established by a consortium of states pursuant 
to requirements under the Housing and Economic Recovery Act of 
2008 that mandated the creation of such a system. The purpose 
of the NMLS is to track mortgage providers across state lines 
and through changes in employment to ensure that the provider 
meets certain qualifications and cannot evade pending 
regulatory action by moving to a new state or changing 
employers. The bill aims to ease mortgage originators' ability 
to move between jobs and between states by allowing them to 
originate mortgages under temporary authority for up to 120 
days or until a new license is issued. Licensed originators 
with certain active or previous regulatory violations would not 
be eligible to obtain this new temporary status.
    On the basis of information from HUD and the NMLS, CBO 
estimates that enacting H.R. 2121 would have no significant net 
effect on the federal budget because any change in either the 
amount or timing of the licensing fees (which are considered to 
be revenues) paid by applicants and subsequently spent by the 
NMLS for its operations would be insignificant.
    CBO also estimates that enacting the bill would not 
increase net direct spending or on-budget deficits in any of 
the four consecutive 10-year periods beginning in 2027.
    H.R. 2121 would impose an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA) by 
preempting state licensing laws. The bill would grant a 
temporary license for some loan originators who become employed 
by a state-licensed mortgage company. Because the preemption 
would impose no duty on state governments that would result in 
additional spending or a loss of revenues, CBO estimates that 
the cost of the intergovernmental mandate would fall well below 
the UMRA threshold ($77 million in 2016, adjusted annually for 
inflation).
    H.R. 2121 contains no private-sector mandates as defined in 
the UMRA.
    The CBO staff contacts for this estimate are Stephen Rabent 
and Aurora Swanson. The estimate was approved by H. Samuel 
Papenfuss, Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2121 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 2121 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 2121 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Eliminating barriers to jobs for loan originators

    This section provides temporary loan-origination authority 
to registered loan originators: (1) moving from a financial 
institution to a state-licensed non-bank originator, or (2) 
moving interstate to a state-licensed loan originator in 
another state. This section further provides that both the 
mortgage loan originator and the company hiring the MLO are 
subject to the SAFE Act and applicable state law as if the MLO 
were duly licensed.

Section 2. Amendment to civil liability of the Bureau and other 
        officials

    This section updates the SAFE Act's existing civil 
liability protections to ensure that those protections continue 
to apply where state regulators use the NMLS as a licensing 
system for financial services providers other than loan 
originators.

Section 3. Effective date

    This section provides that the Act shall take effect 18 
months after enactment.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

               HOUSING AND ECONOMIC RECOVERY ACT OF 2008

SEC. 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Housing and 
Economic Recovery Act of 2008''.
  (b) Table of Content.--The table of contents for this Act is 
as follows:

     * * * * * * *

                   DIVISION A--HOUSING FINANCE REFORM

     * * * * * * *

                TITLE V--S.A.F.E. MORTGAGE LICENSING ACT

     * * * * * * *
Sec. 1518. Employment transition of loan originators.

           *       *       *       *       *       *       *


DIVISION A--HOUSING FINANCE REFORM

           *       *       *       *       *       *       *


                TITLE V--S.A.F.E. MORTGAGE LICENSING ACT

SEC. 1501. SHORT TITLE.

  This title may be cited as the ``Secure and Fair Enforcement 
for Mortgage Licensing Act of 2008'' or ``S.A.F.E. Mortgage 
Licensing Act of 2008''.

           *       *       *       *       *       *       *


SEC. 1513. LIABILITY PROVISIONS.

  The Bureau, any State official or agency, or any organization 
serving as the administrator of the Nationwide Mortgage 
Licensing System and Registry or a system established by the 
Director under section 1509, or any officer or employee of any 
such entity, shall not be subject to any civil action or 
proceeding for monetary damages by reason of the good faith 
action or omission of any officer or employee of any such 
entity, while acting within the scope of office or employment, 
relating to the collection, furnishing, or dissemination of 
information concerning persons who [are loan originators or are 
applying for licensing or registration as loan originators] are 
applying for licensing or registration using the Nationwide 
Mortgage Licensing System and Registry.

           *       *       *       *       *       *       *


SEC. 1518. EMPLOYMENT TRANSITION OF LOAN ORIGINATORS.

  (a) Temporary Authority to Originate Loans for Loan 
Originators Moving From a Depository Institution to a Non-
depository Institution.--
          (1) In general.--Upon employment by a State-licensed 
        mortgage company, an individual who is a registered 
        loan originator shall be deemed to have temporary 
        authority to act as a loan originator in an application 
        State for the period described in paragraph (2) if the 
        individual--
                  (A) has not had an application for a loan 
                originator license denied, or had such a 
                license revoked or suspended in any 
                governmental jurisdiction;
                  (B) has not been subject to or served with a 
                cease and desist order in any governmental 
                jurisdiction or as described in section 
                1514(c);
                  (C) has not been convicted of a felony that 
                would preclude licensure under the law of the 
                application State;
                  (D) has submitted an application to be a 
                State-licensed loan originator in the 
                application State; and
                  (E) was registered in the Nationwide Mortgage 
                Licensing System and Registry as a loan 
                originator during the 12-month period preceding 
                the date of submission of the information 
                required under section 1505(a).
          (2) Period.--The period described in paragraph (1) 
        shall begin on the date that the individual submits the 
        information required under section 1505(a) and shall 
        end on the earliest of--
                  (A) the date that the individual withdraws 
                the application to be a State-licensed loan 
                originator in the application State;
                  (B) the date that the application State 
                denies, or issues a notice of intent to deny, 
                the application;
                  (C) the date that the application State 
                grants a State license; or
                  (D) the date that is 120 days after the date 
                on which the individual submits the 
                application, if the application is listed on 
                the Nationwide Mortgage Licensing System and 
                Registry as incomplete.
  (b) Temporary Authority to Originate Loans for State-licensed 
Loan Originators Moving Interstate.--
          (1) In general.--A State-licensed loan originator 
        shall be deemed to have temporary authority to act as a 
        loan originator in an application State for the period 
        described in paragraph (2) if the State-licensed loan 
        originator--
                  (A) meets the requirements of subparagraphs 
                (A), (B), (C), and (D) of subsection (a)(1);
                  (B) is employed by a State-licensed mortgage 
                company in the application State; and
                  (C) was licensed in a State that is not the 
                application State during the 30-day period 
                preceding the date of submission of the 
                information required under section 1505(a) in 
                connection with the application submitted to 
                the application State.
          (2) Period.--The period described in paragraph (1) 
        shall begin on the date that the State-licensed loan 
        originator submits the information required under 
        section 1505(a) in connection with the application 
        submitted to the application State and end on the 
        earliest of--
                  (A) the date that the State-licensed loan 
                originator withdraws the application to be a 
                State-licensed loan originator in the 
                application State;
                  (B) the date that the application State 
                denies, or issues a notice of intent to deny, 
                the application;
                  (C) the date that the application State 
                grants a State license; or
                  (D) the date that is 120 days after the date 
                on which the State-licensed loan originator 
                submits the application, if the application is 
                listed on the Nationwide Mortgage Licensing 
                System and Registry as incomplete.
  (c) Applicability.--
          (1) Any person employing an individual who is deemed 
        to have temporary authority to act as a loan originator 
        in an application State pursuant to this section shall 
        be subject to the requirements of this title and to 
        applicable State law to the same extent as if such 
        individual was a State-licensed loan originator 
        licensed by the application State.
          (2) Any individual who is deemed to have temporary 
        authority to act as a loan originator in an application 
        State pursuant to this section and who engages in 
        residential mortgage loan origination activities shall 
        be subject to the requirements of this title and to 
        applicable State law to the same extent as if such 
        individual was a State-licensed loan originator 
        licensed by the application State.
  (d) Definitions.--In this section, the following definitions 
shall apply:
          (1) State-licensed mortgage company.--The term 
        ``State-licensed mortgage company'' means an entity 
        licensed or registered under the law of any State to 
        engage in residential mortgage loan origination and 
        processing activities.
          (2) Application state.--The term ``application 
        State'' means a State in which a registered loan 
        originator or a State-licensed loan originator seeks to 
        be licensed.