[Federal Register Volume 75, Number 162 (Monday, August 23, 2010)]
[Rules and Regulations]
[Pages 51623-51651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: C1-2010-18148]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 34

[Docket ID OCC-2010-0007]
RIN 1557-AD23

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 211

[Docket No. R-1357]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 365

RIN 3064-AD43

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563

[Docket No. 2010--0021]
RIN 1550-AC33

FARM CREDIT ADMINISTRATION

12 CFR Part 610

RIN 3052-AC52

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 741 and 761

RIN 3133-AD59


Registration of Mortgage Loan Originators

Correction

    In rule document 2010-18148 beginning on page 44656 in the issue of 
Wednesday, July 28, 2010, make the following corrections:
    On pages 44656 through 44684, in Separate Part IV, footnotes 1 
through 67 were not correctly numbered. The entire preamble is being 
reprinted to include the correctly numbered footnotes.

AGENCY: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, 
Treasury (OTS); Farm Credit Administration (FCA); and National Credit 
Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The OCC, Board, FDIC, OTS, FCA, and NCUA (collectively, the 
Agencies) are adopting final rules to implement the Secure and Fair 
Enforcement for Mortgage Licensing Act (the S.A.F.E. Act). The S.A.F.E. 
Act requires an employee of a bank, savings association, credit union 
or Farm Credit System (FCS) institution and certain of their 
subsidiaries that are regulated by a Federal banking agency or the FCA 
(collectively, Agency-regulated institutions) who acts as a residential 
mortgage loan originator to register with the Nationwide Mortgage 
Licensing System and Registry, obtain a unique identifier, and maintain 
this registration. The final rule further provides that Agency-
regulated institutions must: require their employees who act as 
residential mortgage loan originators to comply with the S.A.F.E. Act's 
requirements to register and obtain a unique identifier, and adopt and 
follow written policies and procedures designed to assure compliance 
with these requirements.

DATES: This final rule is effective on October 1, 2010. Compliance with 
Sec.  ----.103 (registration requirement) of the final rule is required 
by the end of the 180-day period for initial registrations beginning on 
the date the Agencies provide in a public notice that the Registry is 
accepting initial registrations.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Michele Meyer, Assistant Director, Heidi Thomas, Special 
Counsel, or Patrick T. Tierney, Senior Attorney, Legislative and 
Regulatory Activities, (202) 874-5090, and Nan Goulet, Senior Advisor, 
Large Bank Supervision, (202) 874-5224, Office of the Comptroller of 
the Currency, 250 E Street SW., Washington, DC 20219.
    Board: Anne Zorc, Counsel, Legal Division, (202) 452-3876, Virginia 
Gibbs, Senior Supervisory Analyst, (202) 452-2521, and Stanley Rediger, 
Supervisory Financial Analyst, (202) 452-2629, Division of Banking 
Supervision and Regulation, Board of Governors of the Federal Reserve 
System, 20th and C Streets, NW., Washington, DC 20551.
    FDIC: Thomas F. Lyons, Examination Specialist, (202) 898-6850, 
Victoria Pawelski, Senior Policy Analyst, (202) 898-3571, or John P. 
Kotsiras, Financial Analyst, (202) 898-6620, Division of Supervision 
and Consumer Protection; or Richard Foley, Counsel, (202) 898-3784, or 
Kimberly A. Stock, Counsel, (202) 898-3815, Legal Division, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429.
    OTS: Charlotte M. Bahin, Special Counsel (Special Projects), (202) 
906-6452, Vicki Hawkins-Jones, Special Counsel, Regulations and 
Legislation Division, (202) 906-7034, Debbie Merkle, Project Manager, 
Credit Risk, (202) 906-5688, and Rhonda Daniels, Senior Compliance 
Program Analyst, Consumer Regulations, (202) 906-7158, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.
    FCA: Gary K. Van Meter, Deputy Director, Office of Regulatory 
Policy, (703) 883-4414, TTY (703) 883-4434, or Richard A. Katz, Senior 
Counsel, or Jennifer Cohn, Senior Counsel, Office of General Counsel, 
(703) 883-4020, TTY (703) 883-4020, Farm Credit Administration, 1501 
Farm Credit Drive, McLean, VA 22102-5090.
    NCUA: Regina Metz, Staff Attorney, Office of General Counsel, 703-
518-6561, or Lisa Dolin, Program Officer, Division of Supervision, 
Office of Examination and Insurance, 703-518-6360, National Credit 
Union Administration, 1775 Duke Street, Alexandria, VA 22314-3428.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Requirements

    The S.A.F.E. Act,\1\ enacted on July 30, 2008, mandates a 
nationwide licensing and registration system for mortgage loan 
originators. Specifically, the Act requires all States to provide for a 
licensing and registration regime for mortgage loan originators who are 
not employed by Agency-regulated institutions within one year of 
enactment (or two years for States whose legislatures meet biennially). 
In addition, the S.A.F.E. Act requires the OCC, Board, FDIC, OTS and 
NCUA,\2\ through the Federal Financial Institutions Examination Council 
(FFIEC), and the FCA to develop and

[[Page 51624]]

maintain a system for registering mortgage loan originators employed by 
Agency-regulated institutions. The S.A.F.E. Act specifically prohibits 
an individual from engaging in the business of residential mortgage 
loan origination without first obtaining and maintaining annually: (1) 
A registration as a registered mortgage loan originator and a unique 
identifier if employed by an Agency-regulated institution (Federal 
registration), or (2) a license and registration as a State-licensed 
mortgage loan originator and a unique identifier.\3\ The S.A.F.E. Act 
requires that Federal registration and State licensing and registration 
must be accomplished through the same online registration system, the 
Nationwide Mortgage Licensing System and Registry (Registry).
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    \1\ The S.A.F.E. Act was enacted as part of the Housing and 
Economic Recovery Act of 2008, Public Law 110-289, Division A, Title 
V, sections 1501-1517, 122 Stat. 2654, 2810-2824 (July 30, 2008), 
codified at 12 U.S.C. 5101-5116. Citations in this Supplementary 
Information section are to the ``S.A.F.E. Act'' by section number in 
the public law.
    \2\ The OCC, Board, FDIC, OTS, and NCUA are referred to both in 
the S.A.F.E. Act and in this rulemaking as the ``Federal banking 
agencies.''
    \3\ If the Secretary of Housing and Urban Development (HUD) 
determines that any State fails, within the statutorily prescribed 
timeframe, to establish a licensing regime that meets the 
requirements of the S.A.F.E. Act, the Secretary is required to 
establish a system for the licensing and registration of mortgage 
loan originators in that State. S.A.F.E. Act at section 1508. See 
HUD proposed rule implementing this requirement at 75 FR 66548 (Dec. 
15, 2009). HUD has reviewed the model legislation developed by the 
Conference of State Bank Supervisors and the American Association of 
Residential Mortgage Regulators to assist States in meeting the 
minimum requirements of the S.A.F.E. Act and found it to meet these 
requirements. See 74 FR 312 (Jan. 5, 2009) and http://www.hud.gov/offices/hsg/ramh/safe/cmsl.cfm.
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    In connection with the Federal registration, the Agencies at a 
minimum must ensure that the Registry is furnished with information 
concerning the mortgage loan originator's identity, including: (1) 
Fingerprints for submission to the Federal Bureau of Investigation 
(FBI) and any other relevant governmental agency for a State and 
national criminal history background check; and (2) personal history 
and experience, including authorization for the Registry to obtain 
information related to any administrative, civil, or criminal findings 
by any governmental jurisdiction.\4\ On June 9, 2009, the Agencies 
issued a notice of proposed rulemaking to implement these requirements 
for Agency-regulated institutions.\5\
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    \4\ S.A.F.E. Act at section 1507(a) (12 U.S.C. 5106(a)).
    \5\ 74 FR 27386 (June 9, 2009).
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B. Implementing the Requirements for Federal Registration

    The Conference of State Bank Supervisors (CSBS) and the American 
Association of Residential Mortgage Regulators (AARMR) have developed 
and maintain a Web-based system, the Nationwide Mortgage Licensing 
System (NMLS), for the State licensing of mortgage loan originators in 
participating States.\6\ Mortgage loan originators in these States 
electronically complete a single uniform form (the MU4 form). The data 
provided on the form is stored electronically in a centralized 
repository available to State regulators of mortgage companies, who use 
it to process license applications and to authorize individuals to 
engage in mortgage loan origination, as well as for other supervisory 
purposes.
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    \6\ The NMLS system is owned and operated by the State 
Regulatory Registry LLC (SRR), which is a limited-liability company 
established by CSBS and the American Association of Residential 
Mortgage Regulators as a subsidiary of CSBS to develop and operate 
nationwide systems for State regulators in the financial services 
industry. SRR has contracted with the Financial Industry Regulatory 
Authority (FINRA) to build and maintain the system. FINRA operates 
similar systems in the securities industry. More information about 
this system is available at http://www.stateregulatoryregistry.org.
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    The Federal banking agencies, through the FFIEC, and the FCA are 
working with CSBS to modify the NMLS so that it can accept 
registrations from mortgage loan originators employed by Agency-
regulated institutions. This modified registry will be renamed the 
Nationwide Mortgage Licensing System and Registry. The existing NMLS 
was not designed to support the Federal registration of Agency-
regulated institution employees, who are not required to obtain 
additional authorization from the appropriate Federal agency to engage 
in mortgage loan origination activities that are permissible for an 
Agency-regulated institution. Accordingly, the system must be modified 
to accommodate the differences between the requirements for State 
licensing/registration and Federal registration. It also must be 
modified to accommodate the migration of an individual between the 
State licensing/registration and the Federal registration regimes or 
the dual employment of an individual by both an Agency-regulated 
institution and a non-Agency-regulated institution.\7\ Furthermore, the 
S.A.F.E. Act requires new enhancements to the current system, such as 
the processing of fingerprints and public access to certain mortgage 
loan originator data. These modifications and enhancements require 
careful analysis and raise complex legal and system development issues 
that the Agencies are addressing both through this rulemaking and 
through consultation with the CSBS and the SRR. The OCC, on behalf of 
the Agencies, has entered into an agreement with the SRR that will 
provide for appropriate consultation between the Agencies and the 
Registry concerning Federal registrant information requirements and 
fees, system functionality and security, and other operational matters. 
The issuance of this final rule establishing the requirements for 
Federal registrants will enable the Agencies and SRR to complete 
modifications that will enable the system to accept Federal 
registrations. As described in the SUPPLEMENTARY INFORMATION section of 
the proposed rule, the Agencies will publicly announce the date on 
which the Registry will begin accepting Federal registrations, which 
will mark the beginning of the period during which employees of Agency-
regulated institutions must complete the initial registration process. 
When fully operational, mortgage loan originators and their Agency-
regulated institution employers are expected to have access to the 
Registry, seven days a week, to establish and maintain their 
registrations.\8\
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    \7\ The Agencies note that some employees of Agency-regulated 
institutions also may be subject to the State licensing and 
registration regime. For example, employees who act as mortgage loan 
originators for a bank and a nondepository subsidiary of a bank 
holding company that is not a subsidiary of a depository institution 
would be subject to both the Federal and State regimes.
    \8\ Pursuant to section 1503(11) of the S.A.F.E. Act (12 U.S.C. 
5102(11)), Agency-regulated institutions and their employees who are 
acting within the scope of their employment with the Agency-
regulated institutions are not subject to State licensing or 
registration requirements for mortgage loan originators.
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II. Overview of the Proposal and Public Comments

    The proposed rule required individuals employed by Agency-regulated 
institutions who act as mortgage loan originators and who do not 
qualify for the de minimis exception set forth in the proposal to 
register with the Registry, obtain unique identifiers, and maintain 
their registrations through updates and renewals. The proposal also 
directed Agency-regulated institutions to require compliance with these 
requirements, and to adopt and follow written policies and procedures 
to assure such compliance. The S.A.F.E. Act does not require the 
Registry to screen or approve registrations received from employees of 
Agency-regulated institutions and the Registry will not do so. Instead, 
the Registry will be the repository of, and conduit for, information on 
those employees who are mortgage loan originators at Agency-regulated 
institutions. Pursuant to Sec. Sec.  ----.104(d) and (h) of the 
proposed rule, it would be the responsibility of each Agency-regulated 
institution to establish reasonable procedures for

[[Page 51625]]

confirming the adequacy and accuracy of employee registrations as well 
as to establish a process for reviewing any criminal history background 
reports received from the Registry.
    The proposal provided for a 180-day period within which to complete 
initial registrations after the Registry is capable of accepting 
registrations from employees of Agency-regulated institutions. During 
this period, employees of Agency-regulated institutions would not be 
subject to sanctions if they originate residential mortgage loans 
without having completed their registration.
    The Agencies received over 140 different comment letters from 
financial institutions and holding companies, trade associations, 
Federal government agencies, a training company, and individuals. A 
number of Agency-regulated institutions objected to the registration 
requirement in general, suggesting that the registration requirement 
should not be applied to them because they were not involved in the 
abuses that led to the enactment of the S.A.F.E. Act. In addition, many 
of these commenters found the registration requirement overly 
burdensome, especially as they are subject to regular examinations by 
the Agencies and they already closely supervise the activities of their 
employees.
    Many commenters raised concerns related to the proposed de minimis 
exception from the registration requirement. Under the proposed de 
minimis exception, a mortgage loan originator would not have to 
register if he or she acted as a mortgage loan originator for five or 
fewer loans and the Agency-regulated institution employs mortgage loan 
originators who, while excepted from registration pursuant to the 
individual exception, in the aggregate acted as mortgage loan 
originators in connection with 25 or fewer residential mortgage loans. 
Commenters suggested raising the mortgage loan originator and 
institution loan limits or eliminating one of the limits. Community 
bank trade associations were particularly concerned that the narrowness 
of the exception would exclude most community banks. Some commenters 
suggested that the exception should be tied to an asset-based threshold 
in the range of $250 million to $1 billion.
    Most commenters objected to having employees who engage in loan 
modifications or assumptions register under the rule, noting that these 
activities are fundamentally different than the mortgage loan 
origination process in that loan modifications and assumptions: (1) Are 
loss mitigation activities, not loan originations; (2) provide loan 
modification or assumption personnel little to no discretion in 
negotiating the terms and conditions of any changes; and (3) are 
outside of the Congressional intent and the plain language of the 
S.A.F.E. Act.
    While some commenters found the 180-day initial registration period 
adequate, a number of commenters suggested alternative periods ranging 
up to one year. Some trade associations and institutions supported 
staggering registration periods in order to reduce system demands and 
to tailor an implementation schedule to the particular capacities of an 
institution or group of institutions, as long as the implementation 
period would still be 180 days for each institution.
    A number of commenters also raised issues related to the provision 
of fingerprints to the Registry. Commenters asserted that it was not 
appropriate to have an age limit on fingerprints as they tend not to 
change; that the Registry should be able to accept fingerprints in a 
variety of formats, such as paper and scanned digital prints; and that 
Agency-regulated institutions should be permitted to use existing 
channels to process fingerprints.
    Many commenters expressed privacy and security concerns regarding 
the types of personal information that mortgage loan originators would 
have to provide to the Registry and the ability of the public to have 
Internet access to such information.
    Trade associations and large Agency-regulated institutions 
overwhelmingly requested that the Registry accommodate batch processing 
of registrations in order to reduce the costs and burden of data input, 
reduce errors, and efficiently register bank employees.
    The Agencies have modified the proposal to take into account many 
of these comments. A detailed discussion of these comment letters and 
the Agencies' responses to them appears in the section-by-section 
description of the final rule that follows.\9\
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    \9\ In addition to the changes described in this Supplementary 
Information section, the Agencies have replaced the cites in the 
proposed rule to sections of the S.A.F.E. Act with cites to the 
relevant provisions in the U.S. Code.
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III. Section-By-Section Description of the Final Rule

Section ----.101--Authority, Purpose, and Scope

    The Agencies adopt paragraphs (a) and (b) of Sec.  ----.101 as 
proposed.\10\ Paragraph (a) identifies the authority for this rule as 
the S.A.F.E. Act.\11\ Paragraph (b) states that this rule implements 
the S.A.F.E. Act's Federal registration requirements, which apply to 
individuals who originate residential mortgage loans. This provision 
also describes the objectives of the S.A.F.E. Act, which are derived 
from section 1502 of the Act (12 U.S.C. 5101).
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    \10\ Because each Agency's proposed rule will amend a different 
part of the Code of Federal Regulations, but will have similar 
numbering, relevant sections are cited as ``Sec.  ----.'' followed 
by a number, unless otherwise noted.
    \11\ The Board and the OCC note that the authority in paragraph 
(a) of their respective rules supplements their authority to 
implement the S.A.F.E. Act, for example, Section 11 of the Federal 
Reserve Act (12 U.S.C. 248(a)) for the Board and section 5239A of 
the Revised Statutes (12 U.S.C. 93a) for the OCC.
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    As in the proposal, paragraph (c)(1) of Sec.  ----.101 of the final 
rule identifies the specific entities that employ individual mortgage 
loan originators--entities referred to in this SUPPLEMENTARY 
INFORMATION section as Agency-regulated institutions--and that also are 
covered by this rule. Under the S.A.F.E. Act, a mortgage loan 
originator must be Federally-registered if that individual is an 
employee of a depository institution, an employee of any subsidiary 
owned and controlled by a depository institution and regulated by a 
Federal banking agency, or an employee of an institution regulated by 
the FCA.\12\ Section 1503(2) of the S.A.F.E. Act (12 U.S.C. 5102(2)) 
provides that ``depository institution'' has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (FDI Act),\13\ and 
includes any credit union. As we noted in the proposal, the definition 
of ``depository institution'' in the FDI Act and in the S.A.F.E. Act 
does not include bank or savings association holding companies or their 
non-depository subsidiaries. Employees of these entities

[[Page 51626]]

who act as mortgage loan originators are not covered by the Federal 
registration requirement and, therefore, must comply with State 
licensing and registration requirements.
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    \12\ Agency-regulated institutions and their employees acting 
within the scope of their employment are subject only to the Federal 
registration requirements of the S.A.F.E. Act as implemented by the 
Agencies through this rulemaking, even if registration in the State 
system is available before Federal Registration. In consultation 
with the Agencies, CSBS/SRR are modifying the Registry so that it 
can accept registrations from employees of Agency-regulated 
institutions. An employee of an Agency-regulated institution may be 
engaged in activities outside the scope of his or her employment at 
an Agency-regulated institution that subject that employee to State 
licensing and registration requirements, such as dual employment at 
a non-Agency-regulated institution.
    \13\ Section 3 of the FDI Act defines ``depository institution'' 
as any bank or savings association. The term ``bank'' in section 3 
of the FDI Act means any national bank, State bank, Federal branch, 
and insured branch and includes any former savings association. The 
term ``savings association'' means any Federal savings association, 
State savings association, and any corporation other than a bank 
that the FDIC and the OTS jointly determine to be operating in 
substantially the same manner as a savings association. 12 U.S.C. 
1813.
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    With respect to the OCC, this rule applies to national banks, 
Federal branches and agencies of foreign banks, their operating 
subsidiaries, and their employees who are mortgage loan 
originators.\14\ For the Board, this rule applies to member banks of 
the Federal Reserve System (other than national banks); their 
respective subsidiaries that are not functionally regulated within the 
meaning of section 5(c)(5) of the Bank Holding Company Act, as amended 
(12 U.S.C. 1844(c)(5)); \15\ branches and agencies of foreign banks 
(other than Federal branches, Federal agencies and insured State 
branches of foreign banks); commercial lending companies owned or 
controlled by foreign banks; \16\ and their employees who act as 
mortgage loan originators. For the FDIC, this rule applies to insured 
State nonmember banks (including State-licensed insured branches of 
foreign banks) and their subsidiaries (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers) and 
their employees who are mortgage loan originators. For the OTS, this 
rule applies to savings associations and their operating subsidiaries, 
and their employees who are mortgage loan originators. For the FCA, 
this rule applies to FCS institutions that originate residential 
mortgage loans under sections 1.9(3), 1.11 and 2.4(a)(2) and (b) of the 
Farm Credit Act of 1971, as amended (12 U.S.C. 2017(3), 2019, and 
2075(a)(2) and (b)), and their employees who are mortgage loan 
originators.\17\ For the NCUA, this rule applies to credit unions and 
their employees who are mortgage loan originators. Because non-
Federally insured credit unions generally are not Federally regulated 
institutions, special registration conditions apply to them as 
discussed below.
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    \14\ The S.A.F.E. Act's definition of depository institution 
includes Federal branches of foreign banks but not Federal agencies 
of foreign banks. Federal agencies are authorized by sections 
1(b)(1) and 4(b) of the International Banking Act of 1978 (12 U.S.C. 
3101(b)(1) and 3102(b)) and 12 CFR 28.11(g) and 28.13(a)(1) of the 
OCC's regulations to lend money, which would include originating 
mortgage loans, subject to the same duties, restrictions, penalties, 
liabilities, conditions, and limitations that would apply to a 
national bank. Thus, the Federal registration requirements apply to 
Federal agencies of foreign banks to the extent the registration 
requirements apply to national banks.
    \15\ The S.A.F.E. Act, by its terms, applies the Federal 
registration requirements to employees of a subsidiary that is owned 
and controlled by a State member bank and regulated by the Board. 
For purposes of the scope of the Board's rules, these subsidiaries 
are described as those that are not functionally regulated within 
the meaning of section 5(c)(5) of the Bank Holding Company Act. 
Subsidiary has the meaning given that term in section 2 of the Bank 
Holding Company Act (12 U.S.C. 1841), as applied to State member 
banks.
    \16\ The Board notes that its final rule covers branches and 
agencies of foreign banks (other than Federal branches, Federal 
agencies, and insured State branches of foreign banks) and 
commercial lending companies owned or controlled by foreign banks 
pursuant to its authority under the International Banking Act (IBA) 
(Chapter 32 of Title 12) to issue such rules it deems necessary in 
order to perform its respective duties and functions under the 
chapter and to administer and carry out the provisions and purposes 
of the chapter and prevent evasions thereof. 12 U.S.C. 3108(a). The 
Board notes that the IBA provides, in relevant part, that the above 
entities shall conduct their operations in the United States in full 
compliance with provisions of any law of the United States which 
impose requirements that protect the rights of consumers in 
financial transactions, to the extent that the branch, agency, or 
commercial lending company engages in activities that are subject to 
such laws, and apply to State-chartered banks, doing business in the 
State in which such branch or agency or commercial lending company, 
as the case may be, is doing business. 12 U.S.C. 3106a(1). Under the 
Board's final rule, the above entities would be subject to the same 
Federal registration requirements as Federal branches, Federal 
agencies, and insured State branches of foreign banks, which are 
covered in the OCC and FDIC rules, respectively.
    \17\ Some FCS associations may not exercise their statutory 
authority to make residential mortgage loans, and FCS banks no 
longer engage in residential mortgage origination activities because 
they have transferred their direct lending authority to their 
affiliated associations. The FCA emphasizes that employees of FCS 
banks and associations that do not engage in residential mortgage 
loan origination activities are not subject to the registration 
requirements of the S.A.F.E. Act and these regulations. The Federal 
Agricultural Mortgage Corporation (Farmer Mac) is an FCS institution 
that among other activities operates a secondary market for rural 
residential mortgage loans. The FCA determines that Farmer Mac 
employees are not subject to the registration requirements of the 
S.A.F.E. Act and these implementing regulations because Farmer Mac 
does not engage in mortgage loan origination activities for rural 
residents. The Farmer Mac secondary market is modeled after Fannie 
Mae and Freddie Mac, and the provisions of the S.A.F.E. Act do not 
expressly apply to employees at Fannie Mae and Freddie Mac.
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    As discussed in Section II, a number of commenters objected to the 
application of this registration requirement to employees of Agency-
regulated depository institutions because, in general, they are subject 
to regular examinations, would be overly burdened by the registration 
requirement, and already closely supervise the activities of their 
employees. Some commenters noted that this registration requirement 
would penalize them for the inappropriate actions of other lenders that 
led to the enactment of the S.A.F.E. Act.
    The Agencies note that the registration of mortgage loan 
originators employed by Agency-regulated institutions is explicitly 
required by the S.A.F.E. Act. The statute imposes a registration 
requirement, rather than a licensing requirement, on the employees of 
Agency-regulated institutions. The Agencies note that such institutions 
(other than non-Federally insured credit unions) already are subject to 
a Federal regime of examination and supervision. The S.A.F.E. Act does 
not authorize the Agencies to create exceptions to the registration 
requirement other than the de minimis exception described below.
    Some credit union-related commenters discussed whether the final 
rule should apply to credit union service organizations (CUSOs). The 
NCUA notes that it answered these questions in a public legal opinion 
letter 08-0843, dated October 8, 2008, available on NCUA's Web site, 
http://www.ncua.gov. The S.A.F.E. Act treats employees of depository 
institution subsidiaries the same as employees of the depository 
institution, if the subsidiary is owned and controlled by the 
depository institution and regulated by a Federal banking agency.\18\ 
In the case of CUSOs, however, NCUA does not have direct regulatory 
oversight or enforcement authority. Instead, NCUA regulation permits 
Federal credit unions to invest in or lend only to CUSOs that conform 
to the limits specified in the CUSO rule, 12 CFR Part 712.\19\ NCUA has 
not, historically, asserted that CUSOs or their employees are exempt 
from applicable State licensing regimes, and the S.A.F.E. Act does not 
alter that approach. Nor do NCUA regulations have any applicability to 
CUSOs owned by State-chartered credit unions.\20\ Accordingly, 
individuals employed by CUSOs that engage in residential mortgage loan 
origination activities, whether the CUSO is owned by a State or a 
Federal credit union, would need to be licensed in accordance with 
applicable State requirements.
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    \18\ Section 1503(7)(A)(ii) of the S.A.F.E. Act (12 U.S.C. 
5102(7)(A)(ii)).
    \19\ 12 CFR part 712.
    \20\ In April 2008, the NCUA Board issued a proposed rule that 
would extend some provisions of the CUSO rule to State-chartered 
institutions. See 73 FR 23982 (May 1, 2008). The proposal has not 
yet been finalized.
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    Some commenters also asked whether non-Federally insured credit 
unions must register with the Registry. NCUA's proposed rule applied to 
Federally insured credit unions and their employees who are mortgage 
loan originators but commenters requested NCUA include non-Federally 
insured credit unions and their employees who are mortgage loan 
originators in the scope of NCUA's final rule. The S.A.F.E. Act 
requires the Agencies to develop and maintain a system for registering 
employees of a depository institution,

[[Page 51627]]

defined to include ``any credit union.'' \21\ Consistent with the 
S.A.F.E. Act and in response to comments, NCUA's final rule provides 
for a system for registering employees of any credit union. NCUA's 
final rule applies to Federally insured credit unions and their 
employees who are mortgage loan originators and non-Federally insured 
credit unions and their employees who are mortgage loan originators 
when certain conditions are met and formal agreements reached.
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    \21\ Sections 1507(a)(1) and 1503(1) and (2) of the S.A.F.E. Act 
(12 U.S.C. 5106(a)(1) and 5102(1) and (2)).
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    When drafting its final rule, NCUA considered that, with the 
exception of non-Federally insured credit unions, entities covered by 
the Federal registration system are subject to Federal oversight. 
Entities subject to the Federal registration system are labeled 
throughout the rule as ``Agency-regulated institutions.'' Unlike 
Federal credit unions and Federally insured State-chartered credit 
unions, non-Federally insured credit unions are neither Federally 
insured nor subject to NCUA's oversight. In order for non-Federally 
insured credit unions and their employees who are mortgage loan 
originators to qualify for Federal registration, they must be subject 
to oversight for purposes of compliance with NCUA's rule. Therefore, 
due to the unique nature of non-Federally insured credit unions 
compared with all other credit unions, NCUA is working with State 
supervisory authorities in those States with non-Federally insured 
credit unions to implement an oversight program to enable them to 
participate in the Federal registration system.
    The oversight program will require a State supervisory authority 
seeking to allow non-Federally insured credit unions in its State to 
participate in the Federal registration system to enter into a 
memorandum of understanding (MOU) with NCUA. The MOU will need to 
address various requirements such as, but not limited to: The 
requirement for an applicable State supervisory authority to maintain 
such an MOU to allow non-Federally insured credit unions and their 
employees in its State to have continuous access to, and use of, the 
registry; examination of the non-Federally insured credit unions' 
compliance with the rule by either the State supervisory authority or 
NCUA; non-Federally insured credit unions' payment of examination fees 
and payment for any necessary Registry modifications; and enforcement 
authority and penalties for non-Federally insured credit unions for 
noncompliance. Any information provided by the Registry to the public 
about a non-Federally insured credit union and its employees must 
include a clear and conspicuous statement that the non-Federally 
insured credit union is not insured by the National Credit Union Share 
Insurance Fund.
    If any State supervisory authority where non-Federally insured 
credit unions are located fails to enter into or maintain an agreement 
with NCUA for this registration process and oversight, the non-
Federally insured credit unions and their employees in that State 
cannot register or maintain an existing registration under the Federal 
system. They instead must use the appropriate State licensing and 
registration system, or if the State does not have such a system, the 
licensing and registration system established by the Department of 
Housing and Urban Department (HUD) for mortgage loan originators and 
their employees.\22\ In addition, NCUA's final rule requires that the 
State supervisory authorities who seek to have non-Federally insured 
credit unions in their States participate in the Federal registration 
system enter into the applicable agreement with NCUA on or before the 
date the Agencies provide in a public notice that the Registry is 
accepting initial registrations.
---------------------------------------------------------------------------

    \22\ HUD published its proposed rule to establish this system on 
December 15, 2009. See 74 FR 66548.
---------------------------------------------------------------------------

    Finally, NCUA acknowledges that, while it is an added requirement 
for non-Federally insured credit unions to have their State supervisory 
authorities enter into an agreement with NCUA, this is necessary to 
have any oversight or enforcement authority at all over these entities. 
Absent any agreement, non-Federally insured credit unions cannot 
participate in the Federal registration system. They are not subject to 
a Federal regime of examination and supervision, and are unlike any 
other Agency-regulated depository institutions covered under this rule. 
Therefore, they are subject to a different procedure to participate in 
the same Federal registration system.
    Section 1507 of the S.A.F.E. Act (12 U.S.C. 5106) requires the 
Federal banking agencies to make such de minimis exceptions ``as may be 
appropriate'' to the Act's registration requirements.\23\ Paragraph 
(c)(2) of Sec.  ----.101 of the proposed rule provided a de minimis 
exception based on an individual's and, in the aggregate, an 
institution's total number of residential mortgage loans originated in 
a rolling 12-month period. Specifically, the proposal provided that the 
registration requirements would not apply to an employee of an Agency-
regulated institution if, during the last 12 months: (1) The employee 
acted as a mortgage loan originator for 5 or fewer residential mortgage 
loans; and (2) the Agency-regulated institution employs mortgage loan 
originators who, while excepted from registration pursuant to this 
section, in the aggregate, acted as a mortgage loan originator in 
connection with 25 or fewer residential mortgage loans.
---------------------------------------------------------------------------

    \23\ See S.A.F.E. Act at sections 1507(c) (12 U.S.C. 5106(c)) 
(de minimis exceptions), 1504(a)(1)(A) (12 U.S.C. 5103(a)(1)(A)) 
(requirement to register), 1504(a)(2) (12 U.S.C. 5103(a)(2)) 
(requirement to obtain a unique identifier). As discussed in the 
Supplementary Information section of the proposed rule, the FCA has 
authority under section 5.17(a)(11) of the Farm Credit Act of 1971, 
as amended, 12 U.S.C. 2252(a)(11), to apply the de minimis exception 
to FCS institutions. Section 5.17(a)(11) of the Farm Credit Act 
authorizes the FCA to ``exercise such incidental powers as may be 
necessary or appropriate to fulfill its duties. * * *'' In this 
case, the FCA is exercising its incidental powers to fulfill the 
requirement in the S.A.F.E. Act that it work together with the 
Federal banking agencies to develop and maintain a system for 
registering residential mortgage loan originators at Agency-
regulated institutions with the Registry. A coordinated and uniform 
approach to the de minimis exception among the Agencies is 
appropriate because it best fulfills the objectives of the S.A.F.E. 
Act.
---------------------------------------------------------------------------

    The Agencies received many, and varied, comments on this de minimis 
exception. Most commenters supported an exception to the rule's 
requirements. However, a majority of the commenters did not agree with 
the proposal's formulation of this exception, nor did they agree on an 
alternative. Specifically, some commenters requested that the Agencies 
raise the threshold number of loans originated by an individual 
mortgage loan originator and/or the institution so that more low-volume 
originators would qualify for the exception. These commenters indicated 
that, because of its narrowness, too few institutions would be able to 
use the exception as proposed and others would unnecessarily register 
employees solely to avoid accidental non-compliance with the rule. 
Some, however, thought that the proposed threshold numbers were too 
high, and could cause an institution to spread its originations over 
numerous employees to avoid registration. Still others said that the 
proposed de minimis exception would be fairer, and much easier to 
apply, if the threshold limitation applied only to the employee or to 
the institution, but not both. A Federal government agency commenter 
found that the proposed definition of de minimis would make the rule 
unduly burdensome on small community banks.
    A number of commenters also suggested that the final rule base a de

[[Page 51628]]

minimis exception on a percentage of total loans or the total loan 
volume made at each institution, instead of the number of loans. Some 
trade associations and smaller institutions requested that the de 
minimis exception be based on an institution's asset-size, with 
suggestions ranging from the Home Mortgage Disclosure Act \24\ 
threshold for institutions regulated by a Federal banking agency, 
currently set by the Board at $39 million in assets,\25\ to $1 billion, 
which would be consistent with exceptions for small institutions in 
other provisions of law. Other commenters opposed an asset-based 
approach, with larger Agency-regulated institutions noting that the 
exceptions should not be structured to benefit only small institutions.
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 2801 et seq.
    \25\ See 12 CFR 203.2 (Regulation C).
---------------------------------------------------------------------------

    Other commenters wanted the exception to be applied to institutions 
with no prior history of mortgage origination fraud or to institutions 
with good performance histories from previous supervisory examinations, 
regardless of the number of loans originated. Some commenters also 
suggested that the exception should apply only to individuals who do 
not regularly or principally function as a mortgage loan originator. 
Some commenters noted that the exception could instead be based on the 
percentage of time an employee spends engaged in the origination of 
residential mortgage loans.
    The Agencies also received conflicting comments on whether to 
aggregate a subsidiary's loans with the parent institution for 
determining de minimis qualification. One commenter opposed such 
aggregation, while another stated that an institution should be 
required to aggregate its loan data with that of its subsidiaries so 
that institutions could not ``game'' the system by creating new 
subsidiaries each time a subsidiary approaches the de minimis limit. 
Still other commenters pointed out that it would be very time consuming 
and burdensome to game the de minimis limit--rendering gaming 
opportunities essentially unrealistic.
    Many commenters noted the complexity of the proposed exception. One 
commenter stated that the de minimis exception would not have any 
significant effect because the complexity of complying with it would 
outweigh its benefits. Others noted that the proposed exception would 
be difficult for an institution to monitor and maintain. Some 
commenters appeared to misinterpret the proposed aggregate exception.
    The Agencies agree that the de minimis exception should be 
simplified, and, in particular, that it should be structured so that it 
may be utilized by an individual who does not regularly or principally 
function as a mortgage loan originator employed by any Agency-regulated 
institution, regardless of the size or loan volume of the institution. 
Therefore, the final rule eliminates the aggregate exception and 
includes only the first prong of the proposed de minimis exception, 
which applies only to individuals. The final rule also provides that 
this exception only applies if the employee has never before been 
registered or licensed through the Registry.
    Final Sec.  ----.101(c)(2) thus provides that the registration 
requirements of this section do not apply to an employee of an Agency-
regulated institution who has never been registered or licensed through 
the Registry as a mortgage loan originator and who has acted as a 
mortgage loan originator for 5 or fewer residential mortgage loans 
during the last 12 months. In order to prevent manipulation of the 
registration requirement by structuring this exception to apply to 
multiple employees who each would not meet the exception's threshold 
for registration, the final rule prohibits any Agency-regulated 
institution from engaging in any act or practice to evade the limits of 
the de minimis exception. The Agencies believe that replacing the 
proposed institution limit with this anti-evasion prohibition is 
appropriate and will discourage circumvention of registration 
requirements without increasing an institution's administrative burden.
    Monitoring compliance with the exception as revised should be less 
burdensome for Agency-regulated institutions. In addition, in the 
Agencies' view, this revised exception better balances the usefulness 
of the exception to Agency-regulated institutions and their mortgage 
loan originators with the consumer protection and fraud prevention 
purposes of the S.A.F.E. Act. Although the final rule specifically 
applies this anti-evasion provision to the de minimis exception, 
Agency-regulated institutions must not engage in any act or practice to 
evade any other requirement of the S.A.F.E. Act or this final rule.
    The Agencies note that, as with the proposal, an employee must 
register with the Registry prior to engaging in mortgage loan 
origination activity that exceeds the exception limit. In addition, the 
Agencies note that the de minimis exception contained in the final rule 
is voluntary; it does not prevent a mortgage loan originator who meets 
the criteria for the exception from registering with the Registry if 
the originator chooses to do so or if his or her employer requires 
registration.
    The Agencies note that the Federal Housing Finance Agency (FHFA) 
has directed Fannie Mae and Freddie Mac to require all mortgage loan 
applications to include the mortgage loan originator's unique 
identifier. For Agency regulated institutions, Fannie Mae and Freddie 
Mac have announced that this requirement will apply to applications 
dated on or after the date the Agencies require mortgage loan 
originators to obtain unique identifiers.\26\ Agency-regulated 
institutions should be aware of this requirement and any future 
guidance that FHFA may issue to address the Agencies' implementation of 
the Federal registration process, including the de minimis exception.
---------------------------------------------------------------------------

    \26\ See FNMA LL 02-2009: New Mortgage Loan Data Requirements 
(02/13/09); Fannie Mae Announcement 09-11, Mortgage Loan Data 
Requirements Update (10/6/09) and Announcement 09-11, Mortgage Loan 
Data Requirements Related FAQs (2/4/10); and Freddie Mac Single-
Family Seller/Servicer Guide Bulletin, No: 2009-27 (12/4/09). The 
Agencies contemplate that the Registry will provide aggregate public 
data on unique identifier information stored in the system to Fannie 
Mae and Freddie Mac for compliance purposes.
---------------------------------------------------------------------------

    The Agencies received a comment from one large financial 
institution requesting that we clarify whether the failure of a 
mortgage loan originator to register pursuant to this rulemaking has 
any substantive impact on a mortgage loan made by an institution that 
employs that originator. Neither the S.A.F.E. Act nor this final rule 
provides that a mortgage loan originator's failure to register as 
required affects the validity or enforceability of any mortgage loan 
contract made by the institution that employs the originator.
    A few commenters suggested that in addition to the registration 
requirements, the final rule should impose educational and testing 
requirements on mortgage loan originators, as the S.A.F.E. Act does for 
State-licensed originators. The Agencies decline to impose such 
requirements. The S.A.F.E. Act does not include educational or testing 
requirements for mortgage loan originators employed by Agency-regulated 
institutions. In addition, as noted previously, the statute imposes 
different requirements on mortgage loan originators employed by Agency-
regulated institutions. The Agencies note that these institutions 
already are subject to extensive Federal oversight, including regular 
on-site examination of their mortgage lending activities.

[[Page 51629]]

Section ----.102--Definitions

    Section ----.102 defines the terms used in the final rule. If a 
term is defined in the S.A.F.E. Act, the Agencies generally have 
incorporated the same definition in the final rule. The final rule also 
includes other definitions currently used by the NMLS in order to 
promote consistency and comparability, insofar as is feasible, between 
Federal registration requirements and the States' licensing 
requirements.
    Annual renewal period. Proposed Sec.  ----.102(a) required that a 
mortgage loan originator renew his or her registration annually during 
the annual renewal period and defined this period as November 1 through 
December 31 of each year. This is the same annual renewal period 
currently provided by the NMLS to mortgage loan originators regulated 
by a State.
    This time period for renewals generated many comments. A few 
commenters suggested that the renewal period for Agency-regulated 
institutions should be at a different time of year than for originators 
regulated by a State. Others stated that the renewal period should be 
based upon the original registration date or original hire date, noting 
that a staggered registration process would be less burdensome for the 
Registry. Another commenter suggested that the employing institution 
determine its own renewal period for its employees. Still other 
commenters requested that this renewal period be lengthened from 60 to 
90 days.
    The Agencies decline to change the dates for the annual renewal 
period. As indicated above, the current system for originators 
regulated by a State is configured for an annual renewal period from 
November 1 through December 31. A different renewal period for 
originators employed by Agency-regulated institutions would involve 
functionality changes to the existing system, adding costs and 
lengthening the implementation time. In addition, the Agencies note 
that different renewal periods could cause confusion and added burden 
to those originators who may work for both a State-regulated and 
Agency-regulated institution or who may switch from a State-regulated 
institution to an Agency-regulated institution during the year, and to 
employers of such originators, as well as for institutions that control 
both State- and Agency-regulated institutions. For these same reasons, 
the Agencies also decline to increase the renewal period from 60 to 90 
days. Therefore, the final rule retains the proposed renewal period of 
November 1 through December 31 of each year.
    Mortgage loan originator. The proposed definition of ``mortgage 
loan originator'' was based on the definition of the term ``loan 
originator'' included in the S.A.F.E. Act at section 1503(3) (12 U.S.C. 
5102(3)). As defined by the S.A.F.E. Act, this term means an individual 
who takes a residential mortgage loan application and offers or 
negotiates terms of a residential mortgage loan for compensation or 
gain. The term does not include an individual who is not a mortgage 
loan originator and: (1) Performs purely administrative or clerical 
tasks on behalf of an individual who is a mortgage loan originator; (2) 
performs only real estate brokerage activities (as defined in section 
1503(3)(D) of the S.A.F.E. Act (12 U.S.C. 5102(3)(D)) \27\ and is 
licensed or registered as a real estate broker in accordance with 
applicable State law, unless the individual is compensated by a lender, 
a mortgage broker, or other loan originator or by any agent of such 
lender, mortgage broker, or other mortgage loan originator; or (3) is 
solely involved in extensions of credit related to timeshare plans, as 
that term is defined in 11 U.S.C. 101(53D).\28\
---------------------------------------------------------------------------

    \27\ The S.A.F.E. Act defines ``real estate brokerage activity'' 
to mean any activity that involves offering or providing real estate 
brokerage services to the public, including: (i) Acting as a real 
estate agent or real estate broker for a buyer, seller, lessor, or 
lessee of real property; (ii) bringing together parties interested 
in the sale, purchase, lease, rental, or exchange of real property; 
(iii) negotiating, on behalf of any party, any portion of a contract 
relating to the sale, purchase, lease, rental, or exchange of real 
property (other than in connection with providing financing with 
respect to any such transaction); (iv) engaging in any activity for 
which a person engaged in the activity is required to be registered 
or licensed as a real estate agent or real estate broker under any 
applicable law; and (v) offering to engage in any activity, or act 
in any capacity, described in clause (i), (ii), (iii), or (iv), 
above. S.A.F.E. Act at section 1503(3)(D) (12 U.S.C. 5102(3)(D)). 
Nothing in this rule would constitute an authorization for Agency-
regulated institutions to engage in real estate brokerage, or any 
other activity, for which the institution does not have independent 
authority pursuant to Federal or State law, as applicable.
    \28\ ``Timeshare plan'' is defined in 11 U.S.C. 101(53D) as an 
interest purchased in any arrangement, plan, scheme, or similar 
device, but not including exchange programs, whether by membership, 
agreement, tenancy in common, sale, lease, deed, rental agreement, 
license, right to use agreement, or by any other means, whereby a 
purchaser, in exchange for consideration, receives a right to use 
accommodations, facilities, or recreational sites, whether improved 
or unimproved, for a specific period of time less than a full year 
during any given year, but not necessarily for consecutive years, 
and which extends for a period of more than three years. A 
``timeshare interest'' is that interest purchased in a timeshare 
plan which grants the purchaser the right to use and occupy 
accommodations, facilities, or recreational sites, whether improved 
or unimproved, pursuant to a timeshare plan.
---------------------------------------------------------------------------

    For purposes of the definition of mortgage loan originator, section 
1503(3)(C) of the S.A.F.E. Act (12 U.S.C. 5102(3)(C)) defines 
``administrative or clerical tasks'' to mean: (1) The receipt, 
collection, and distribution of information common for the processing 
or underwriting of a loan in the mortgage industry; and (2) 
communication with a consumer to obtain information necessary for the 
processing or underwriting of a residential mortgage loan. The proposal 
included this definition as well, with one nonsubstantive difference--
the proposal used the phrase ``residential mortgage industry'' instead 
of ``loan in the mortgage industry'' in the first prong of the 
definition.
    The Agencies included an appendix to the proposal that listed 
examples of the types of activities the Agencies consider to be both 
within and outside the scope of residential mortgage loan origination 
activities. The final rule retains this appendix with certain changes 
as discussed in this SUPPLEMENTARY INFORMATION section. Individuals who 
receive ``compensation or gain'' as used in the definition of mortgage 
loan originator and described in this appendix include individuals who 
earn salaries, commissions or other incentive, or any combination 
thereof.
    The Agencies specifically requested comment on whether the 
definition of ``mortgage loan originator'' should cover individuals who 
modify existing residential mortgage loans, engage in approving loan 
assumptions, or engage in refinancing transactions and, if so, whether 
these individuals should be excluded from the definition. While a few 
commenters believed the Agencies should cover individuals engaged in 
such transactions, the majority of commenters on this issue stated that 
this rulemaking should not cover these individuals. In general, they 
indicated that mortgage loan modifications and assumptions are very 
different from mortgage loan originations, and that employees engaged 
in these transactions do not meet the S.A.F.E. Act's definition of 
mortgage loan originator. Specifically, commenters indicated that these 
employees neither accept residential mortgage loan applications nor 
negotiate the terms of a new residential mortgage loan. Instead, they 
renegotiate an existing loan with the goals of mitigating any loss to 
the institution and, in the case of modifications, providing the 
borrower with a more affordable payment option or other type of 
modification, or, in the case of assumptions, replacing the party 
responsible for repaying the mortgage loan. Many commenters indicated 
that their employees who engage in modifications and assumptions do not

[[Page 51630]]

ever originate mortgage loans, and that modifications and assumptions 
are performed in different departments of the institution. Many 
commenters also noted that applying the S.A.F.E. Act's registration 
requirements to employees engaged in loan modifications and assumptions 
could significantly hamper loan modification efforts.
    The determining factor in whether the S.A.F.E. Act applies to 
residential mortgage loan-related transactions is whether the employee 
engaged in the transaction meets the definition of ``mortgage loan 
originator.'' In general, neither modifications nor assumptions result 
in the extinguishment of an existing loan and the replacement by a new 
loan, but rather the terms of an existing loan are revised or the loan 
is assumed by a new obligor. Thus, Agency-regulated institution 
employees engaged in these activities typically do not take loan 
applications, within the meaning of the S.A.F.E. Act. Therefore, the 
Agencies conclude that the S.A.F.E. Act's definition of ``mortgage loan 
originator'' generally would not include employees engaged in loan 
modifications or assumptions because they typically would not meet the 
two-prong test of this definition. However, if an employee engaged in a 
transaction labeled a loan ``modification'' or ``assumption'' can be 
found to meet the definition of ``mortgage loan originator,'' due to 
the nature of the specific transaction in question, he or she would be 
subject to the S.A.F.E. Act and this final rule. The substance of a 
transaction, not the label attached to it, is determinative of whether 
the Agency-regulated institution employee associated with it is a 
mortgage loan originator for purposes of this rule. For example, the 
Agencies believe that Agency-regulated institution employees engaged 
solely in bona fide cost-free loss mitigation efforts that result in 
reduced and sustainable payments for the borrower generally would not 
meet the definition of ``mortgage loan originator.'' In this regard, it 
should be noted that third parties involved in foreclosure prevention 
activities for compensation or gain, although outside the scope of this 
rulemaking, may be subject to licensing and registration pursuant to 
State law.
    The Agencies sought comment on whether the individuals who engage 
in certain refinancing transactions, specifically cash-out refinancing 
with the same lender, should be excluded from the definition of 
residential mortgage loan originator. Some industry commenters did not 
believe that such an exclusion was appropriate primarily because of the 
nature of a refinancing as a new loan and the potential for consumer 
abuse in these transactions. Other commenters also requested that we 
exclude individuals engaged in refinancings from the final rule's 
definition of mortgage loan originator, and that refinancings be 
excluded from the final rule's definition of residential mortgage loan, 
if the refinancing involves the same lender and the borrower obtained 
no cash proceeds. We decline to make this change. Refinancings are new 
loans, regardless of the lender, the loan terms, or proceeds, that 
involve a new application and an offer or negotiation of new loan 
terms. If an individual engaged in a refinancing transaction of a 
residential mortgage loan meets the two prongs of the definition of 
mortgage loan originator, he or she must comply with the requirements 
of the S.A.F.E. Act and this final rule.\29\
---------------------------------------------------------------------------

    \29\ Some commenters noted that the Agencies should require only 
one mortgage loan originator for each mortgage loan. The Agencies 
decline to take this approach because the S.A.F.E. Act defines a 
mortgage loan originator according to the two-prong test set forth 
in the statute.
---------------------------------------------------------------------------

    Other commenters suggested that the Agencies exclude loan servicing 
personnel from the requirements of this rulemaking. We decline to take 
this suggested approach because the S.A.F.E. Act definition is based on 
the activities of mortgage loan origination, rather than the job 
classification of the individual. An individual, regardless of job 
title, is a mortgage loan originator if he or she engages in the 
activities of mortgage loan origination within the meaning of the 
S.A.F.E. Act. For example, if a loan servicing employee of an Agency-
regulated institution mainly performs loan servicing activities but 
also occasionally engages in residential mortgage loan origination, 
that person is a mortgage loan originator, regardless of whether he or 
she is called ``servicing personnel.'' On the other hand, for example, 
as discussed above in connection with loan modifications, a loan 
servicing employee engaged solely in bona fide cost-free loss 
mitigation efforts which result in reduced and sustainable payments for 
the borrower generally would not meet the definition of ``mortgage loan 
originator.'' Loan servicing employees of Agency-regulated institutions 
must comply with the registration requirements of the final rule if 
they meet both prongs of the definition of ``mortgage loan 
originator,'' unless they qualify for the de minimis exception under 
Sec.  ----.101(c)(2) of the final rule. Some commenters requested 
clarification that, when a servicing employee of an Agency-regulated 
institution works with a borrower to collect unpaid taxes or other 
costs pursuant to a repayment or collection plan, the employee is not 
acting as a mortgage loan originator under the Agencies' rules. The 
Agencies agree that such activities would generally not meet the two-
prong test of this definition.
    Some commenters asked the Agencies to explain whether the S.A.F.E. 
Act and this rule apply to residential mortgage loan originations made 
through an automated underwriting system, whereby an applicant inquires 
about, applies for, and/or receives a decision on an application 
electronically through an institution's Web site.\30\ Although some 
institutions may choose to establish an automated system to collect 
application information and make an initial decision on a loan 
application, from a risk management and compliance perspective, an 
institution is expected to set the system parameters and monitor system 
output for compliance with various laws, regulations, and guidance on 
an ongoing basis. Such institutions are expected to register employees 
involved in that process who meet the definition of ``mortgage loan 
originator,'' as appropriate. As indicated above, the Agencies note 
that Fannie Mae and Freddie Mac are requiring all residential mortgage 
loan applications dated on or after the compliance date for the unique 
identifier requirement to include the mortgage loan originator's unique 
identifier.\31\ Institutions should keep apprised of any future 
guidance FHFA may issue to address this requirement.
---------------------------------------------------------------------------

    \30\ Section 107(5)(A)(x) of the Federal Credit Union Act (12 
U.S.C. 1757(5)(A)(x)) requires all loans to be approved by a credit 
committee or loan officer. For all Federal credit unions, and to the 
extent State-chartered credit unions operate under a similar State 
law or regulation, the statutory and regulatory definition of 
mortgage loan originator is met and the S.A.F.E Act does apply.
    \31\ See footnote 26.
---------------------------------------------------------------------------

    For the reasons discussed above, the final rule includes the 
definition of ``mortgage loan originator'' as proposed, with one 
technical change to the definition of ``administrative or clerical 
tasks'' to make it identical to the definition of this term in section 
1503(3)(C) of the S.A.F.E. Act (12 U.S.C. 5102(3)(C)).
    Nationwide Mortgage Licensing System and Registry or Registry. 
Section ----.102(c) of the proposed rule's definition of these terms is 
based on the definition included in section 1503(5) of the S.A.F.E. Act 
(12 U.S.C. 5102(5)). Specifically, these terms mean the system 
developed and maintained by CSBS and the AARMR for the State licensing 
and registration of State-licensed mortgage loan originators and the 
registration of mortgage loan

[[Page 51631]]

originators pursuant to section 1507 of the S.A.F.E. Act (12 U.S.C. 
5106). As explained above, CSBS and the AARMR have established an 
online system, NMLS, that currently supports the licensing and 
registration of mortgage loan originators regulated by a State. The 
Agencies are working with CSBS to modify the NMLS to support the 
registration of mortgage loan originators employed by Agency-regulated 
institutions, and will rename this system the Nationwide Mortgage 
Licensing System and Registry. The Agencies received no comments on 
this definition and adopt it as proposed.
    Registered mortgage loan originator. Pursuant to section 1503(7) of 
the S.A.F.E. Act (12 U.S.C. 5102(7)), the proposed rule defined this 
term to mean any individual who meets the definition of mortgage loan 
originator, is an employee of an Agency-regulated institution, and is 
registered pursuant to the requirements of this rule with, and 
maintains a unique identifier through, the Registry. This definition is 
the same as that included in the S.A.F.E. Act, except that the Agencies 
have modified it to apply only to individuals registered pursuant to 
regulations issued by the Agencies. The Agencies received no comments 
on this definition and adopt it as proposed.
    Residential mortgage loan. As in section 1503(8) of the S.A.F.E. 
Act, (12 U.S.C. 5102(8)), the proposal defined ``residential mortgage 
loan'' as any loan primarily for personal, family, or household use 
that is secured by a mortgage, deed of trust, or other equivalent 
consensual security interest on a dwelling (as defined in section 
103(v) of the Truth in Lending Act (TILA) (15 U.S.C. 1602(v)) \32\ or 
residential real estate upon which is constructed or intended to be 
constructed a dwelling. In addition, the proposal specifically included 
refinancings, reverse mortgages, home equity lines of credit and other 
first and second lien loans secured by a dwelling in this definition in 
order to clarify that originators of these types of loans are covered 
by the rule's requirements.
---------------------------------------------------------------------------

    \32\ TILA defines ``dwelling'' as a residential structure or 
mobile home which contains one-to-four family housing units, or 
individual units of condominiums or cooperatives. 15 U.S.C. 1602(v). 
Board regulations and commentary include in this definition any 
residential structure that contains one to four units, whether or 
not that structure is attached to real property, and includes an 
individual condominium unit, cooperative unit, mobile home, and 
trailer, if it is used as a residence. See 12 CFR 226.2(a)(19) 
(Regulation Z).
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    One commenter suggested that ancillary liens on an underlying 
mortgage loan or liens taken to provide consumers with potential tax 
advantages should not be considered residential mortgage loans. In 
addition, another commenter asked that the definition of residential 
mortgage loan include an exception to exclude seller-sponsored 
financing of the sale of lender-owned property. The Agencies decline to 
adopt these exclusions to the definition of ``residential mortgage 
loan'' and adopt this definition as proposed. These types of loans 
clearly fall within the statutory definition of ``residential mortgage 
loans,'' and the S.A.F.E. Act makes no exceptions for these two 
situations. We do clarify, however, that this definition does not 
include loans for business, commercial, or agricultural purposes that 
use as collateral property that meets the definition of a ``dwelling.''
    As indicated in the SUPPLEMENTARY INFORMATION section to the 
proposed rule, the FCA emphasizes that section 1503(8) of the S.A.F.E. 
Act (12 U.S.C. 5102(8)) and Sec.  ----.102(e) do not amend or supersede 
sections 1.11(b) and 2.4(b) of the Farm Credit Act of 1971, as amended 
(12 U.S.C. 2019(b) and 2075(b)), and their implementing regulation, 12 
CFR 613.3030(c), which establish the purposes for which FCS 
institutions may originate residential mortgage loans for eligible 
rural home borrowers.
    Unique Identifier. The proposed rule's definition of this term was 
almost identical to that in section 1503(12) of the S.A.F.E. Act (12 
U.S.C. 5102(12)). The Agencies received no comments on this definition 
and adopt it as proposed. Specifically, the final rule defines ``unique 
identifier'' to mean a number or other identifier that: (1) Permanently 
identifies a registered mortgage loan originator; (2) is assigned by 
protocols established by the Registry and the Agencies to facilitate 
electronic tracking of mortgage loan originators, and uniform 
identification of, and public access to, the employment history of and 
the publicly adjudicated disciplinary and enforcement actions against 
mortgage loan originators; and (3) must not be used for purposes other 
than those set forth in the S.A.F.E. Act.
    Other terms. The Agencies note that Sec.  ----.103(d) of the 
proposed and final rule uses the terms ``control'' and ``financial 
services-related'' in the descriptions of the information that is 
required of an employee who is a mortgage loan originator. These terms 
are currently defined in the Web-based MU4 form collecting information 
on State-licensed mortgage loan originators. In order to promote 
consistency of the information collected for Agency-regulated and 
State-licensed mortgage loan originators, the Agencies reiterate that 
the MU4 form's definitions of those two terms also will be used in the 
Web-based form collecting information on Agency-regulated mortgage loan 
originators and, therefore have not defined them in this 
rulemaking.\33\
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    \33\ The Registry currently defines ``control'' as the power, 
directly or indirectly, to direct the management or policies of a 
company, whether through ownership of securities, by contract, or 
otherwise. Any person that (i) is a general partner or executive 
officer, including Chief Executive, Chief Financial Officer, Chief 
Operations Officer, Chief Legal Officer, Chief Credit Officer, Chief 
Compliance Officer, Director, and individuals occupying similar 
positions or performing similar functions; (ii) directly or 
indirectly has the right to vote 10% or more of a class of a voting 
security or has the power to sell or direct the sale of 10% or more 
of a class of voting securities; or (iii) in the case of a 
partnership, has the right to receive upon dissolution, or has 
contributed, 10% or more of the capital, is presumed to control that 
company. The Registry's current definition of ``Financial services-
related'' means pertaining to securities, commodities, banking, 
insurance, consumer lending, or real estate (including, but not 
limited to, acting as or being associated with a bank or savings 
association, credit union, Farm Credit System institution, mortgage 
lender, mortgage broker, real estate salesperson or agent, 
appraiser, closing agent, title company, or escrow agent).
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    A number of commenters requested that the Agencies define 
``employee'' for purposes of this rulemaking to provide more clarity 
regarding the individuals covered by the rule. Agency-regulated 
institutions must have a process for identifying which employees of the 
institution are required to be registered mortgage loan 
originators.\34\ As the Supreme Court has explained, ``where Congress 
uses terms that have accumulated settled meaning under * * * the common 
law, a court must infer, unless the statute otherwise dictates, that 
Congress means to incorporate the established meaning of these terms * 
* *. In the past, when Congress has used the term `employee' without 
defining it, we have concluded that Congress intended to describe the 
conventional master-servant relationship as understood by common-law 
agency doctrine.'' \35\ Section 7.07(3)(a) of the Restatement (Third) 
of Agency explains that ``an employee is an agent whose principal 
controls or has the right to control the manner and means of the 
agent's performance of work.'' \36\ The Agencies thus intend that the 
meaning of ``employee'' under the S.A.F.E. Act and this rule is 
consistent with the right-to-control test under the common law agency 
doctrine. The Agencies note in this regard that the IRS uses the common 
law right-to-control test as its basis for classification of

[[Page 51632]]

workers as employees.\37\ The result of this test generally determines 
whether an institution files a W-2 or a 1099 for an individual. The 
Agencies therefore expect an Agency-regulated institution would 
identify a mortgage loan originator as an individual subject to this 
final rule if, following consideration of the relevant facts, the 
institution determines that the individual is an employee of the 
Agency-regulated institution.\38\
---------------------------------------------------------------------------

    \34\ See Sec.  ----.104(a).
    \35\ Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 322-23 
(1992) (citing Community for Creative Non-Violence v. Reid, 490 U.S. 
730, 739-40 (1989) (other citations omitted).
    \36\ Restatement (Third) of Agency Sec.  7.07(3)(a) (2006).
    \37\ IRS Publication 1779; see also Form SS-8, Determination of 
Worker Status for Purposes of Federal Employment Taxes and Income 
Tax Withholding.
    \38\ Agency-regulated institutions that are credit unions 
sometimes rely upon volunteers to originate mortgage loans. The 
right-to-control test under the common law agency doctrine likewise 
applies to these credit unions. Credit union management establishes 
the policies, procedures, and practices that volunteers use in 
performing their functions. Therefore, these volunteers qualify as 
employees of the Agency-regulated institution for purposes of the 
S.A.F.E. Act and this rule.
---------------------------------------------------------------------------

Section ----.103--Registration of Mortgage Loan Originators

    Section 1504(a) of the S.A.F.E. Act (12 U.S.C. 5103(a)) prohibits 
an individual who is an employee of an Agency-regulated institution 
from engaging in the business of a loan originator without registering 
as a loan originator with the Registry, maintaining annually such 
registration, and obtaining a unique identifier through the Registry. 
As in the proposal and described more specifically below, Sec.  --
--.103 of the final rule imposes the responsibility for complying with 
these requirements on both the individual employee and the employing 
institution. In addition, both the employee and the employing 
institution must submit information to the Registry for each 
registration to be complete. The Agencies note that an employee of an 
Agency-regulated institution who is not actively engaged in residential 
mortgage loan activity is not prohibited from registering with the 
Registry.
    Employee registration requirement. In general, Sec.  ----.103(a)(1) 
of the proposed rule required an employee of an Agency-regulated 
institution who acts as a mortgage loan originator to register with the 
Registry, obtain a unique identifier, and maintain his or her 
registration. This section further provided that any employee who is 
not in compliance with the registration and unique identifier 
requirements set forth in the proposed rule is in violation of the 
S.A.F.E. Act and this rule.\39\ The Agencies note that this 
registration requirement would not apply if the employee qualifies for 
the de minimis exception.
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    \39\ The OCC, Board, FDIC, and OTS have the authority to take 
enforcement actions against their respective Agency-regulated 
institutions and individual employees of those institutions who 
violate the S.A.F.E. Act and this final rule, pursuant to 12 U.S.C. 
1818. The FCA has authority to take enforcement actions against Farm 
Credit System institutions and individual employees who violate the 
S.A.F.E. Act and this final rule pursuant to Title V, Part C of the 
Farm Credit Act of 1971, as amended, 12 U.S.C. 2261 et seq. The NCUA 
has the authority to take enforcement actions against Federally-
insured credit unions and their employees who violate the S.A.F.E. 
Act and this final rule under 12 U.S.C. 1786. For privately insured 
credit unions, memoranda of understanding between NCUA and 
applicable State supervisory authorities will establish enforcement 
authority.
---------------------------------------------------------------------------

    The Agencies did not receive substantive comments specifically on 
this section and therefore adopt it as proposed.
    Institution requirement. Proposed paragraph (a)(2) of Sec.  --
--.103 provided that an Agency-regulated institution must require its 
employees who are mortgage loan originators to register with the 
Registry, maintain this registration, and obtain a unique identifier in 
compliance with this final rule. This provision also prohibited an 
Agency-regulated institution from permitting its employees to act as 
mortgage loan originators unless registered with the Registry pursuant 
to this final rule, after the applicable implementation periods 
specified in Sec. Sec.  ----.103(a)(3) and (a)(4)(ii) expire.
    One commenter objected to this requirement as not being based on 
statutory language. Although the S.A.F.E. Act does not contain the same 
express prohibition as in the Agencies' proposed rule, determining the 
scope of mortgage loan origination activities that subject an 
individual or institution to the Act's requirements is well within the 
Agencies' authority to implement the statute. The imposition of this 
requirement on Agency-regulated institutions implements the purposes of 
the S.A.F.E. Act and ensures Agency-regulated institutions and their 
employees comply with all applicable laws. This commenter also stated 
that this requirement would be difficult to enforce because an 
employing institution may not know of the activities of its employees 
outside of their scope of employment at that institution. We agree with 
this commenter that the language in Sec.  ----103(a)(2)(ii) should be 
clarified so that an institution's oversight of a mortgage loan 
originator applies only to the extent the originator is acting within 
the scope of his or her employment at that institution. We therefore 
adopt Sec.  ----.103(a)(2)(ii) with this one change.
    Implementation period for initial registrations. Proposed Sec.  --
--.103(a)(3) provided a 180-day implementation period for initial 
registrations beginning on the date the Agencies provide public notice 
that the Registry is accepting initial registrations. The Agencies have 
adopted this provision as proposed with one minor change to clarify 
that the implementation period begins on the date that the Agencies 
provide in their public notice, not the actual date of the public 
notice. Pursuant to the proposal, an employee could continue to 
originate residential mortgage loans without complying with the rule's 
registration requirement before and during this 180-day period. After 
this 180-day period expires, any existing employee or newly-hired 
employee of an Agency-regulated institution who is subject to the 
registration requirements would be prohibited from originating 
residential mortgage loans without first meeting such requirements.
    The Agencies specifically requested comment on whether this 180-day 
implementation period would provide Agency-regulated institutions and 
their employees with adequate time to complete the initial registration 
process. The Agencies also inquired as to whether an alternative 
schedule for implementation and initial registrations would be 
appropriate, what such an alternative schedule should be, and whether, 
and how, a staggered registration process should be developed.
    The Agencies received many comments on this implementation period. 
Some commenters supported a 180-day period. Others supported the 
proposed 180-day implementation period provided that certain conditions 
are met, such as excluding loan modification and mitigation employees 
from the registration requirements, allowing batch processing, 
simplifying the employer verification requirements, and immediate 
confirmation of registration without delay for fingerprint or 
background check results.
    Other commenters, however, stated that the proposed 180-day 
implementation period would not provide sufficient time to register the 
large number of employees subject to the registration requirement, 
properly train all employees, develop compliance policies, and program 
and implement system controls. Many noted that a longer period would 
prevent the Registry from being overwhelmed with registrations. Two 
commenters, including one Federal agency, stated that additional time 
will particularly benefit smaller financial institutions. Another 
commenter indicated that the time, effort, and resources required to 
meet new systems requirements can be

[[Page 51633]]

extensive, and that a 180-day implementation period for such major 
changes would be extremely difficult for larger institutions. These 
commenters suggested an implementation period of nine months to one 
year. One commenter stated that each Agency should have the flexibility 
to grant additional time to register in the event the Registry becomes 
backlogged or inundated with a large volume of registrations. No 
commenter requested a shorter implementation period.
    The Agencies understand that Agency-regulated institutions and 
their mortgage loan originator employees will face certain 
implementation issues in complying with the registration requirements 
established by this rulemaking. However, as indicated above, due to 
various system modifications and enhancements required to make the 
existing system capable of accepting Federal registrants, the system is 
not expected to be available to accept Federal registrations before 
January 2011. The 180-day implementation period will not begin until 
the system is available to accept Federal registrations. This in effect 
provides institutions with an implementation period longer than 180 
days as institutions and their employees can begin to implement the 
final rule's requirements before the Registry is operational, i.e., 
develop policies and procedures, train employees, gather information 
needed for registration, and program and implement system controls 
before registration is required. In addition, CSBS and SRR will provide 
information to, and assist Agency-regulated institutions in preparation 
for, registration during this period. The Agencies believe that this 
additional time will provide mortgage loan originators, and the Agency-
regulated institutions that employ them, adequate opportunity to 
prepare for the registration requirements. Any extension of the 180-day 
implementation period provided in the final rule will only further 
delay the registration of residential mortgage loan originators and, as 
a result, the consumer protection benefits of the S.A.F.E. Act. In 
addition, as described below, batch processing of at least some 
information likely will be available, which should make the 
registration process more efficient for both the institution and the 
registering employee. For these reasons, the Agencies decline to 
provide an implementation period longer than the proposed 180 days.
    Many commenters indicated support for a staggered implementation 
period. Some noted that this could be based on institution size, loan 
origination volume, or employee qualifiers (such as birth date or last 
name). Some of these commenters, however, noted that they would support 
a staggered schedule only if it would provide a registration period of 
equal length for all registrants. Other commenters supported a 
staggered process that would give smaller institutions or institutions 
that do not originate many residential mortgage loans the greatest 
amount of time to comply with the requirements.
    The Agencies agree that a staggered implementation process for 
those institutions that prefer one would be useful. Such a process 
would allow institutions to register their employees within specific 
time periods during the implementation period with the assistance of 
dedicated staff. Staggered registration would limit the number of 
originators registering at any one time and spread the registration of 
originators throughout the implementation period. Although such a 
schedule mostly would benefit those institutions with the largest 
number of mortgage loan originators, it also should enable the Registry 
to accommodate all registrations in a more timely and efficient manner, 
thereby benefiting all institutions. Accordingly, the Agencies will 
work with CSBS and SRR to develop a staggered registration schedule for 
institutions, in particular those that are estimated to have a large 
number of mortgage loan originators subject to Federal registration, 
that request such a schedule. This staggered process would occur within 
the 180-day implementation period in order not to delay the 
registration of mortgage loan originators and the ability of consumers 
to fully utilize the Registry. Because institutions that request a 
staggered registration process would have a dedicated period during 
which to register within the 180-day period, registration burdens may 
be eased for these institutions, lessening their need for the full 180-
day registration period. Details on this staggered approach will be 
provided to applicable institutions when they have been finalized and 
may include the availability of this dedicated staff prior to the start 
of the registration period.
    Special rule for previously registered employees. Under paragraph 
(a)(4) of Sec.  ----.103 of the proposed and final rule, properly 
registered or licensed mortgage loan originators would not have to 
register again with the Registry when they change employment by moving 
from one Agency-regulated institution to another or from a State-
regulated institution to an Agency-regulated institution, regardless of 
whether the change in employment is made voluntarily, through an 
acquisition or merger of the employee's prior employer, or through a 
reorganization where previously State-licensed mortgage loan 
originators become subject to the registration requirements of Agency-
regulated institutions. Instead, the employee and employing institution 
need only update information in the Registry and complete the required 
authorizations and attestation.
    Specifically, proposed paragraph (a)(4) of Sec.  ----.103 provided 
that if a new employee of an Agency-regulated institution had 
previously registered with, and obtained a unique identifier from, the 
Registry prior to becoming an employee of that institution and has 
maintained that registration (or license, if previously employed by a 
non-Agency-regulated institution), the registration requirements of 
this final rule are deemed to be met provided that: (1) The employee's 
employment information in the Registry is updated and the employee has 
completed the required authorizations and attestation; (2) new 
fingerprints of the employee are provided to the Registry for a 
background check, except in the case of mergers, acquisitions or 
reorganizations; (3) information concerning the new employing 
institution is provided to the Registry pursuant to Sec.  --
--.103(e)(1)(i), to the extent the institution has not previously met 
these requirements, and Sec.  ----.103(e)(2)(i); \40\ and (4) the 
registration is maintained pursuant to the requirements of Sec. Sec.  
----.103(b) and (e)(1)(ii) as of the date that the employee becomes 
employed by the institution.
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    \40\ These provisions require: The institution's name; main 
office address; IRS Employer Tax Identification Number; Research 
Statistics Supervision Discount (RSSD) number; identification of the 
institution's primary Federal regulator; contact information for 
individuals at the institution for Registry purposes; applicable 
subsidiary information, and confirmation that it employs the 
registrant. Information regarding an institution's RSSD number is 
available from the Board.
---------------------------------------------------------------------------

    Some commenters requested that the Agencies reduce these 
requirements in order to further facilitate the movement of employees 
from one institution to another and prevent unnecessary interruption of 
mortgage origination activity. However, the Agencies believe that the 
current provision adequately reduces regulatory burden on Agency-
regulated institutions as well as the residential mortgage industry 
when registered mortgage loan originators change employers and will 
allow a mortgage origination transaction in process at the time of the 
employment change to proceed smoothly. It requires less than what would 
be needed to

[[Page 51634]]

complete a new registration and requires only that information 
necessary to update the employee's registration and confirm the 
identity of the originator and the employer, thereby preventing 
fraudulent information from being submitted to the Registry. However, 
we have amended Sec.  ----.103(a)(4)(i)(B) to provide that new 
fingerprints are not required to be submitted, pursuant to Sec.  --
--.103(d)(1)(ix), if the registered loan originator has fingerprints on 
file with the Registry that are less than three years old. The Registry 
will use these existing prints for purposes of the background check. 
This three-year age limit is consistent with the procedures to be used 
by SRR for mortgage loan originators licensed by a State. We note that, 
as proposed, the final rule does not require fingerprints or a new 
background check when the change in employers is due to an acquisition, 
merger, or reorganization because these transactions carry a lower risk 
of fraud and identity theft. The Agencies note that institutions should 
still conduct prudent screening of prospective employees to confirm 
their identities.
    In response to a comment, the Agencies note that paragraph (a)(4) 
of Sec.  ----.103 applies when an employee of an Agency-regulated 
institution becomes an employee of another Agency-regulated 
institution, regardless of whether the entities are affiliated. 
Similarly, when an employee of a subsidiary of an Agency-regulated 
institution becomes an employee of the institution, the requirements of 
Sec.  ----.103 apply.
    In order to reduce regulatory burden and to prevent an interruption 
in mortgage origination activity, the proposed Sec.  ----.103(a)(4)(ii) 
provided a 60-day grace period to comply with the Sec.  --
--.103(a)(4)(i) requirements when a registered mortgage loan originator 
becomes an employee of an Agency-regulated institution as a result of 
an acquisition, merger, or reorganization. Some commenters agreed that 
this 60-day grace period is appropriate and provides the proper balance 
between implementing the purpose of the S.A.F.E. Act and protecting 
consumers. Other commenters, however, requested that this period be 
extended to 90 or 180 days due to the complexity and protracted nature 
of the merger and acquisition process. Some commenters also requested 
that a 60-day grace period apply to all changes in employment, 
regardless of whether the change is the result of a merger or 
acquisition transaction.
    Final Sec.  ----.103(a)(4)(ii) retains the proposed 60-day grace 
period for a change in employers due to acquisitions, mergers, or 
reorganizations. The Agencies find that 60 days is an adequate time for 
institutions and their employees to update registrations in the case of 
these transactions and agree with the commenters who stated that this 
time period balances the purposes of the S.A.F.E. Act and consumer 
protection.
    Additionally, the Agencies find that a grace period is not 
necessary when a mortgage loan originator changes employers for other 
reasons. This situation does not raise the same compliance burden as 
does an acquisition, merger, or reorganization, in which a large number 
of employees are switching employers at the same time. Therefore, as 
proposed, the final rule requires that these registered mortgage loan 
originators comply with the requirements of Sec.  ----.103(a)(4) before 
they may originate residential mortgage loans for their new employer.
    Another commenter requested that the Agencies permit an employer to 
submit one update concerning all affected employees in the case of an 
acquisition, merger, or reorganization, rather than having each 
individual employee submit what is largely identical information about 
their change in employer. The Agencies agree that this approach would 
reduce burden for the employee, institution, and the Registry. We 
specifically have instructed CSBS and SRR to develop a process for 
these transactions that would allow the bulk transfer of business 
location and contact information for all mortgage loan originators from 
one institution to another. However, each individual employee still 
must complete the authorization and attestation for their own updated 
registration record.
    The Agencies adopt proposed Sec.  ----.103(a)(4) with the addition 
of the language discussed above related to fingerprints in Sec.  --
--.103(a)(4)(i)(B). The Agencies also have modified Sec.  --
--.103(a)(4) to clarify that an employee of a bank who has been 
properly registered or licensed as a mortgage loan originator need only 
update information in the Registry, and complete the required 
authorizations and attestation, whether that employee is a new employee 
of the Agency-regulated institution or becomes subject to this final 
rule while an employee of the institution.
    The Agencies note that the registration of a mortgage loan 
originator who leaves any employer will be recorded as inactive in the 
Registry until he or she is hired by another entity, his or her record 
is updated in accordance with the final rule's requirements, and the 
new employer acknowledges employing the mortgage loan originator 
through the Registry. The individual will be prohibited from acting as 
a mortgage loan originator at an Agency-regulated institution until 
such time as the registration is reactivated, unless covered by the 60-
day grace period for acquisitions, mergers, and reorganizations.
    Maintaining Registration. Under proposed Sec.  ----.103(b)(1)(i), a 
registered mortgage loan originator must renew his or her registration 
with the Registry during the annual renewal period, November 1 through 
December 31 of each year. To renew, the employee must confirm that the 
information previously submitted to the Registry remains accurate and 
complete, updating any information as appropriate. Any registration 
that is not renewed during this period will become inactive, and the 
individual will be prohibited from acting as a mortgage loan originator 
at an Agency-regulated institution until such time as the registration 
requirements are met. However, an individual who fails to update 
information during this period may renew his or her registration at any 
time and does not need to wait until the start of the next annual 
renewal period. Inactive mortgage loan originators will not be assigned 
a new unique identifier if they reactivate their registration.
    Some commenters opposed the requirement to renew registrations 
annually as overly burdensome and unnecessary. Some suggested 
alternatively that a registration remain valid until there is a change 
in employment status or other change that requires an update of 
database information. Others recommended that the renewal be every two, 
three, or five years, or based on the experience of the originator. The 
Agencies understand that an annual renewal process requires an 
expenditure of time and resources by individual originators and their 
employing Agency-regulated institutions. However, section 1504 of the 
S.A.F.E. Act (12 U.S.C. 5103), requires that mortgage loan originators 
maintain their registration annually. Therefore, the Agencies can not 
eliminate, or lengthen, the time between renewals. For this reason, the 
Agencies adopt Sec.  ----.103(b)(1)(i) as proposed without revision. We 
note that the automated processing of annual renewals, as more fully 
described below, could lessen the impact on the resources needed for 
these renewals.
    One commenter suggested that the final rule not require a mortgage 
loan originator to renew his or her

[[Page 51635]]

registration during this annual renewal period if registration was made 
less than six months prior to the end of the renewal period. The 
Agencies believe this change is reasonable and within the scope of the 
S.A.F.E. Act. We have amended the final rule accordingly by adding new 
paragraph (b)(3) to final Sec.  ----.103. However, a mortgage loan 
originator still is required to update his or her registration during 
this six month period if any information provided to the Registry at 
the time of registration changes, pursuant to Sec.  ---- 
.103(b)(1)(ii), described below.
    In addition to the annual renewal, proposed Sec.  --
--.103(b)(1)(ii) provided that a registration must be updated within 30 
days of the occurrence of any of the following events: (1) A change in 
the employee's name; (2) the registrant ceases to be an employee of the 
institution; or (3) any of the employee's responses to the information 
required for registration pursuant to paragraphs (d)(1)(iii) through 
(viii) of Sec.  ----.103 become inaccurate.
    A few commenters requested that the Agencies increase this 30-day 
period for updates to 60 or 90 days. The Agencies believe that the 
Registry should be updated as soon as possible and therefore have not 
adopted this requested change. Updates are needed on only a case-by-
case basis and therefore, unlike in the case of mergers and 
acquisitions, should not be burdensome to registrants or employing 
institutions. In addition, the 30-day updating period is consistent 
with what is required currently for State-licensed mortgage loan 
originators. Therefore, final Sec.  ----.103(b)(1)(ii) includes a 30-
day update requirement, as proposed.
    Proposed Sec.  ----.103(b) also required any employee who registers 
with the Registry to maintain his or her registration unless the 
employee is no longer a mortgage loan originator. As a result of this 
provision, once an employee registers as a loan originator with the 
Registry, the employee will be required to continue this registration 
until he or she is no longer engaged in the activity of a mortgage loan 
originator, even if, in any subsequent 12-month period, the employee 
originates fewer mortgage loans than the number specified in the de 
minimis exception provision. The purpose of this requirement is to 
prevent the creation of a timing loophole that could allow mortgage 
loan originators to avoid registration requirements.
    As indicated in the proposal's SUPPLEMENTARY INFORMATION section, 
the Agencies have considered whether the rule should provide for a 
temporary waiver of the rule's registration requirements or for 
extension of the initial registration or renewal period, in case of 
emergency, system malfunction, or other event beyond the control of the 
Agency-regulated institution or the mortgage loan originator. One 
commenter expressed support for this concept but noted that such an 
exception should be narrowly drawn so as not to create a loophole in 
the registration requirement and suggested that each Agency select an 
official who has authority to designate an emergency deadline extension 
for good cause. Another commenter also supported a waiver when events 
beyond the institution's control made timely registration impossible.
    The Agencies agree that on rare occasions there may be exigent 
circumstances or situations when the Agencies may deem it appropriate 
to temporarily waive or suspend the requirements of this rule or extend 
the initial registration or renewal periods. The Agencies do not 
believe, however, that the final rule must include specific language to 
effectuate such waivers, suspensions, or extensions. As is the 
Agencies' practice in other supervisory contexts, if a situation arises 
that warrants such an action, such as a serious interruption of 
communication, computer, or fingerprint collection systems at one or 
more institution(s) caused by circumstances beyond the institution's 
control, or an extended interruption of Registry service, the Agencies 
will announce the availability of waivers, suspensions, or extensions 
of time. In addition, Agency-regulated institutions may contact their 
regulators to discuss possible relief on a case-by-case basis.
    Effective date of registrations and renewals. Proposed Sec.  --
--.103(c) provided that a registration is effective on the date that 
the registrant receives notification from the Registry that all 
employee and institution information required by paragraphs (d) and (e) 
of Sec.  ----.103 has been submitted and the registration is complete, 
and that a renewal or update of a registration is effective on the date 
the registrant receives notification from the Registry that all 
applicable information required by paragraphs (b) and (e) of Sec.  --
--.103 has been submitted and the renewal or update is complete.
    We have made two changes to this provision in the final rule. 
Because the Registry is not technically capable of determining when a 
registrant actually receives its notification that the registration is 
complete, we have amended this provision to indicate that a 
registration is effective when the Registry transmits notification to 
the registrant that the registrant is registered. In addition, we have 
streamlined this provision to clarify that this notification of 
registration completes the registration process. We have made similar 
changes to Sec.  ----.103(c)(2) regarding renewals and updates.
    We note that, except as provided by the 180-day implementation 
period in Sec.  ----.103(a)(3) or the 60-day grace period provided in 
Sec.  ----.103(a)(4), an employee must not engage in residential 
mortgage loan origination activity if his or her registration is not 
yet effective or has not been renewed or updated pursuant to this rule.
    A number of commenters requested further clarification of this 
effective date, and specifically requested that the effectiveness of 
the registration not be delayed for the processing of a registrant's 
fingerprints or receipt of a criminal background check. The Agencies 
did not intend to delay the effective date for fingerprint or criminal 
background check processing. There is no requirement for the processing 
of these fingerprints or the completion of a background check before a 
registration becomes effective. Nor, as indicated previously in this 
SUPPLEMENTARY INFORMATION section, is the effectiveness of a 
registration contingent on Agency or Registry review or approval of the 
information submitted to the Registry. Pursuant to the rule, in order 
to register, the information required by Sec.  ----.103(d) and (e) must 
be submitted, and, in order to renew or update a registration, the 
information required by Sec.  ----.103(b) must be submitted. The 
Registry will conduct a completeness check of the information submitted 
by or on behalf of the registrant. At the time the Registry determines 
all required information has been submitted and all Registry 
requirements have been met, such as payment of applicable fees charged 
by the Registry, it will transmit notification electronically to the 
registrant that he or she is registered or that his or her registration 
is renewed or updated, as applicable. The employing institution will be 
responsible for reviewing the criminal history background report once 
it is completed, and taking any necessary action based on the findings 
of this report, pursuant to the institution's policies and procedures, 
as required by this final rule. We note that the registrant will obtain 
a unique identifier during the registration process and not when the 
registration is complete.
    Section 1510 of the S.A.F.E. Act (12 U.S.C. 5109), expressly 
authorizes the Registry to ``charge reasonable fees to cover the costs 
of maintaining and providing access to information from

[[Page 51636]]

the [Registry], to the extent that such fees are not charged to 
consumers for access to such [Registry].'' We anticipate that the 
Registry will charge fees for registration, change in employment, 
renewal, and fingerprint processing and background checks. Although 
some commenters specifically requested information on the anticipated 
costs associated with registering with the Registry, the Agencies are 
at this time unable to provide this information as the fees have yet to 
be established by CSBS and SRR. The Agencies are consulting with the 
CSBS and SRR regarding the fees that the Registry expects to impose. 
One commenter specifically asked the Agencies to grant Agency-regulated 
institutions the opportunity to comment on fees. CSBS has indicated 
that it intends to provide an opportunity for the public to comment on 
these fees, and any future adjustments to such fees, before their 
imposition on Federal registrants and/or their employing 
institutions.\41\
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    \41\ The agencies note that the NMLS currently charges fees for 
the licensing of State originators; however, fees for Federal 
registrants and their employing Agency-regulated institutions may 
differ from those currently imposed on State licensees. See the NMLS 
Web site at http://www.stateregulatoryregistry.org for information 
regarding fees imposed on State originators.
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    Required employee information. Section 1507(a)(2) of the S.A.F.E. 
Act (12 U.S.C. 5106(a)(2)) specifically requires, in connection with 
the registration of a mortgage loan originator, the Agencies to 
furnish, or cause to be furnished, to the Registry information 
concerning an employee's identity, including fingerprints and personal 
history and experience. Final Sec.  ----.103(d) implements this 
requirement and lists the categories of information that mortgage loan 
originators, or the employing Agency-regulated institution on behalf of 
the mortgage loan originator, will be required to submit to the 
Registry. Agency-regulated institutions may select one or more 
individuals to submit the employee information required by this 
paragraph to the Registry on behalf of each of their mortgage loan 
originators to facilitate the registration process. At the request of 
commenters, we have added a new paragraph (d)(3) to the final rule that 
specifically permits institutions to select such individuals to submit 
employee information on behalf of mortgage loan originators employed by 
the institution. The final rule specifically prohibits these selected 
individuals from acting as mortgage loan originators. We note that 
regardless of the manner that the information is provided to the 
Registry, the registering employee, and not the employing institution 
or other employees, must complete the authorizations and attestation 
required by Sec.  ----.103(d)(2), and described below, for the 
registration to be complete.
    Under proposed Sec.  ----.103(d), the employing Agency-regulated 
institution would have been required to have its registering employees 
submit, or to submit on behalf of its employees, information regarding 
the employee's identity (name and former names, social security number, 
gender, and date and place of birth) and home and business contact 
information; date the employee became an employee of the Agency-
regulated institution; financial services-related employment and 
financial history for the past 10 years; criminal history involving 
certain felonies and misdemeanors; history of financial services-
related civil actions, arbitrations and regulatory and disciplinary 
actions or orders; financial services-related professional license 
revocations or suspensions; voluntary or involuntary employment 
terminations based on violations of law or industry standards of 
conduct; and certain actions listed above that are pending against the 
employee. This information is similar to that required by the current 
NMLS data collection form for mortgage loan originators regulated by a 
State, form MU4. The information applies to employees but includes 
responsive information prior to their employment at the Agency-
regulated institution.
    The Agencies received many comments on this provision. Although 
some supported the proposed list of information to be submitted to the 
Registry, many others requested that the Agencies narrow this list, 
stating that the extent of personal information required by the 
proposal is overbroad, intrusive, and burdensome. Commenters also 
requested that we clarify the information that is required to be 
submitted.
    Based on the comments received, the Agencies have carefully 
reviewed this list and agree that some of this information is more 
relevant for licensing purposes than for registration. In particular, 
we found that the collection of some of this information, which would 
not be publicly available to consumers, is not necessary to implement 
the purposes and requirements set forth in section 1502 of the S.A.F.E. 
Act (12 U.S.C. 5101).
    Based on this review, we have deleted proposed Sec.  --
--.103(d)(1)(iii) from the final rule, which would have required 
submission of the registrant's financial history information (such as 
bankruptcies, unsatisfied judgments, liens, paid-out bonds, etc.). This 
information would not be available to consumers under this rulemaking 
and is not required for registration by the statute. It therefore does 
not further the objectives of the S.A.F.E. Act.
    In addition, the submission of employment termination information 
to the Registry is more appropriate for the purpose of licensing, as a 
State regulator would use this information to make a decision on 
licensure, conducting further inquiry, if appropriate. Because this 
sensitive information would not be made public, we have deleted 
proposed Sec.  ----.103(d)(1)(x), which required submission of 
information regarding employment terminations to the Registry, from the 
final rule.
    We also have not included in the final rule the requirement to 
provide information on pending matters. Because these matters are not 
final actions, requiring this information would effectively penalize 
mortgage loan originators before a decision had been rendered. We note 
that if a pending action does become final, it must be reported to the 
Registry and made publicly available within 30 days, pursuant to Sec.  
----.103(b)(1)(ii).
    The Agencies also have revised the requirement in proposed Sec.  --
--.103(d)(1)(iv) to provide information on the mortgage loan 
originator's felony and misdemeanor criminal history. The proposal 
provided that the registrant supply information regarding felony 
convictions or other final criminal actions involving a felony against 
the employee or organizations controlled by the employee; or 
misdemeanor convictions or other final misdemeanor actions against the 
employee or organizations controlled by the employee involving 
financial services, a financial services-related business, dishonesty, 
or breach of trust. After further review, the Agencies found the 
proposal's language too broad, and as a result, would have required the 
registrant to disclose convictions that are not directly relevant to 
his or her work as a mortgage loan originator. As such, this 
information is not necessary to meet the purposes or requirements of 
the S.A.F.E. Act.
    Final and redesignated Sec.  ----.103(d)(1)(iii) removes the 
distinction between felonies and misdemeanors and narrows the category 
of final actions an employee must disclose to the Registry to final 
criminal actions that involve dishonesty or breach of trust or money 
laundering. In addition, to fully encompass all relevant final criminal 
actions, the final rule amends this category of information to include 
an agreement to enter into a pretrial diversion or similar program in

[[Page 51637]]

connection with the prosecution for such offense.\42\ This language 
derives from section 19(a)(1) of the FDI Act (12 U.S.C. 1829), which, 
in general, prohibits the participation of individuals convicted of 
such offenses from participating in the affairs of an insured 
depository institution. The Agencies intend to rely on FDIC rules and 
guidance interpreting section 19(a)(1) of the FDI Act with respect to 
the interpretation of criminal offenses covered under section 19 of the 
FDI Act.\43\ Therefore, amending the proposal to include this language 
in the final rule provides clearer guidance to originators and their 
Agency-regulated institution employers of the types of criminal 
offenses required to be disclosed. For example, the FDIC excludes 
expunged, sealed and juvenile offenses and, therefore, the Agencies 
would not expect this information to be provided to the Registry.\44\ 
The final rule also would not require acquittals to be reported.
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    \42\ An agreement to enter into a pretrial diversion or similar 
program is defined by the FDIC as a suspension or eventual dismissal 
of charges or criminal prosecution upon agreement of the accused to 
treatment, rehabilitation, restitution, or other noncriminal or 
nonpunative alternatives. FDIC Statement of Policy for Section 19 of 
the FDIC Act, 63 FR 66177 (Dec. 1, 1998).
    \43\ See Id. and 12 CFR 303.220-223.
    \44\ Id.
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    The Agencies find the remaining information required by the 
proposal to be submitted to the Registry relevant to the registration 
process and the purposes and requirements of the S.A.F.E. Act. Section 
1507(a)(2) of the S.A.F.E. Act (12 U.S.C. 5106(a)(2)) specifically 
requires that information regarding the registrant's identity, 
including personal history and experience, be furnished to the 
Registry. Identifying information, such as name (and any other names 
used, such as a nickname, full legal name, or maiden name), home 
address, address of principal business location and business contact 
information (business phone number and e-mail address) and the 
registrant's prior financial services-related employment history (not 
all of which will be made public) is necessary to meet this 
requirement. In addition to this information, the registrant's social 
security number, gender, and date and place of birth are necessary to 
conduct the criminal history background check required by section 
1507(a)(2)(A) of the S.A.F.E. Act (12 U.S.C. 5106(a)(2)(A)). Likewise, 
the required information concerning final criminal actions (as 
amended), financial services-related civil judicial actions, publicly-
adjudicated regulatory and disciplinary actions or orders, financial 
services-related professional license revocations or suspensions, and 
financial services-related customer-initiated arbitration and civil 
actions will be made public on the Registry, and, therefore, further 
the purpose of the S.A.F.E. Act to provide consumers with easily 
accessible information on disciplinary and enforcement actions against 
the originator. The Agencies therefore adopt the final rule with the 
requirement to provide this information to the Registry.
    Pursuant to section 1507(a)(2)(A) of the S.A.F.E. Act (12 U.S.C. 
5106(a)(2)(A)), proposed Sec.  ----.103(d)(xii) (redesignated as Sec.  
----.103(d)(ix) in the final rule) also required employees to provide 
fingerprints, in digital form if practicable, to the Registry for 
submission to the FBI and any governmental agency or entity authorized 
to receive such information for a State and national criminal history 
background check. The proposal permitted the use of fingerprints 
currently on file with the employing Agency-regulated institution if 
taken less than three years prior to the employee's registration with 
the Registry.
    This requirement elicited many comments. Some commenters requested 
that the Agencies permit institutions to continue accessing existing 
fingerprint channels recognized and supported by existing relations 
with the FBI. Some commenters also suggested that the final rule should 
deem background checks conducted by the institution during the hiring 
process as compliant with the S.A.F.E. Act's fingerprint and background 
check requirement. Commenters also requested that the final rule permit 
the submission of fingerprints collected 10 or 15 years prior to 
registration. Many of the commenters argued that an age limit is 
unnecessary as fingerprints do not change over time. In addition, 
commenters noted that allowing the use of existing fingerprints, no 
matter when collected, will reduce registration costs and delays.
    The S.A.F.E. Act specifically requires fingerprints to be furnished 
to the Registry for purposes of submission to the FBI, and any 
governmental agency or entity authorized to receive such information 
for a State and national criminal history background check.\45\ The 
S.A.F.E. Act does not specifically require certain persons or entities 
to furnish these fingerprints, nor prohibit other entities from 
furnishing fingerprints to the Registry. However, the FBI only will 
accept fingerprints from entities authorized as channelers of this 
information.
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    \45\ Section 1507(a)(2)(A) of the S.A.F.E. Act (12 U.S.C. 
5106(a)(2)(A)). The Agencies note that, in the event that a mortgage 
loan originator is unable to provide fingerprints due to a physical 
condition, he or she should provide identifying information to the 
Registry consistent with FBI protocols.
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    In order to ensure that fingerprints are up-to-date, we have 
amended the redesignated Sec.  ----.103(d)(1)(ix) to provide that 
fingerprints that are less than three years old may be used to satisfy 
the requirement to furnish fingerprints to the Registry. As indicated 
previously, this three-year age limit is consistent with the procedures 
to be used by SRR for mortgage loan originators licensed by a State. 
Institutions should consult their existing channelers regarding the 
furnishing of fingerprints that are less than three years old to the 
Registry.
    CSBS and SRR are currently modifying the NMLS to act as a channeler 
for fingerprints of State license applicants, pursuant to the S.A.F.E. 
Act, and Federal registrants may use this same fingerprinting process 
when the NMLS is modified to accept Federal registrations.\46\ The 
Agencies anticipate that CSBS and SRR will provide guidance to Agency-
regulated institutions and their mortgage loan originators on the 
availability and details of this fingerprint process. CSBS and SRR 
intend that this fingerprinting process will be convenient and 
efficient for both State licensees and Federal registrants.\47\
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    \46\ Further information on the Registry's fingerprint and 
background check procedures can be found on the Registry's Web site 
at http://www.stateregulatoryregistry.org/NMLS/.
    \47\ SRR plans to contract with a nationwide vendor to take the 
fingerprints and forward them to the Registry, which will then 
obtain the criminal history background check based on these 
fingerprints. According to plans, this vendor will have locations 
throughout the country, may be made available on-site at 
institutions, and will provide a mail-in option for mortgage loan 
originators unable to provide their fingerprints in person.
---------------------------------------------------------------------------

    Some commenters asked the Agencies to clarify whether the Registry 
may collect fingerprints and submit a request for a background check 
before the Agency-regulated institution employs a mortgage loan 
originator rather than waiting until after that individual is hired to 
submit fingerprints to the Registry. The Agencies have no objection to 
the Registry processing a background check just prior to the employment 
of a mortgage loan originator, should the Registry provide this 
service, and believe this could satisfy the requirements of the rule.
    Some commenters also expressed the view that the Registry should 
have the capability to accept fingerprints in both

[[Page 51638]]

paper and digital form. As in the proposed rule, the final rule does 
not require digital fingerprints, but does encourage the use of digital 
fingerprint submissions. If digital fingerprints are not available, the 
Registry will accept fingerprint cards, and will convert these cards to 
a digital format. The Agencies note that the rule's authorization to 
submit fingerprints in paper form is intended to assist smaller 
institutions for which compliance with a digital fingerprint 
requirement may not be feasible.
    Employee authorization and attestation. Paragraph (d)(2)(i) of 
Sec.  ----.103 requires the employee to provide authorization for the 
Registry and the employing Agency-regulated institution to obtain 
information related to sanctions or findings in any administrative, 
civil, or criminal action, to which the employee is a party, and, in 
paragraph (d)(2)(ii) of this section, to attest to the correctness of 
all information submitted to the Registry pursuant to paragraph (d) of 
this section.
    In order to provide relevant information to consumers and to 
implement the purposes of the S.A.F.E. Act, paragraph (d)(2)(iii) 
requires the employee to authorize the Registry to make available to 
the public the information required to be submitted to the Registry 
pursuant to Sec.  ----.103(d)(1)(i)(A) and (C) and (d)(1)(ii) through 
(viii) (his or her name, other names used, name of current employer(s), 
current principal business location(s) and business contact 
information, 10 years of relevant employment history, and publicly 
adjudicated disciplinary and enforcement actions and arbitrations 
against the employee).
    Although this rulemaking permits the employing institution or other 
institution employees to submit the information required by Sec.  --
--.103(d)(1) to the Registry on behalf of the registering employee, the 
employee, and not the employing institution or its other employees, 
must complete the attestation and authorizations required by Sec.  --
--.103(d)(2) for the registration to be complete. This task may not be 
delegated because it is necessary for the Registry to authenticate the 
employee's information.
    The Registry plans to make this information available to the public 
in two phases. The first phase, implemented at the end of the initial 
registration period, would provide for public accessibility of the 
employee's name; other names used; name of current employer(s); current 
principal business location(s) and business contact information; and 
employment history. The remaining categories of information (publicly 
adjudicated disciplinary and enforcement actions and arbitrations 
against the employee) would be made public at a later date, once the 
Registry, in consultation with the Agencies, has designed and 
implemented a system through which the registrant may provide 
additional explanatory information to accompany a positive response to 
any of the disclosure questions regarding criminal history or the other 
information requested in paragraphs (d)(1)(iii) through (viii). The 
Agencies note that once the Registry makes this enhancement, registered 
mortgage loan originators will be able to provide this explanatory 
information at any time, including during the annual renewal process, 
and that this explanatory language may be made public. Relevant 
nonpublic information submitted to the Registry will be only accessible 
to the Agencies and State regulators of mortgage originators, as 
appropriate, and the submitting mortgage loan originator and his or her 
employing institution.\48\
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    \48\ SRR plans to make this public information stored on the 
Registry available on an aggregate basis to interested parties for 
compliance purposes.
---------------------------------------------------------------------------

    The Agencies received many comments on the public availability of 
personal information, particularly on how the Registry will store and 
prevent the unauthorized use of this personal information, and how 
nonpublic personal information will be appropriately protected. One 
commenter specifically stated that the final rule should take 
appropriate measures to ensure that the electronic submissions to the 
Registry are properly encrypted, authorized, and authenticated, and 
that the Registry complies with the FBI Criminal Justice Information 
Services Security Policy (CJIS Security Policy).\49\
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    \49\ CJISD-ITS-DOC-08140-4.5, December 2008.
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    The Agencies are well aware of the security concerns associated 
with providing personal information to the Registry and are contracting 
with SRR to ensure appropriate data protection elements are 
incorporated within the Registry to ensure compliance with the 
requirements of the Federal Information Security Management Act (FISMA) 
of 2002, PL 107-347; the CJIS Security Policy; and the related Security 
and Management Control Outsourcing Standard.\50\ FISMA requires each 
Federal agency to develop, document, and implement an agency-wide 
program to provide information security for the information and 
information systems that support the operations and assets of the 
agency, including those provided or managed by another agency, 
contractor, or other source. Specifically, FISMA directed the 
promulgation of Federal standards for: (1) The security categorization 
of Federal information and information systems based on the objectives 
of providing appropriate levels of information security according to a 
range of risk levels; and (2) minimum security requirements for 
information and information systems in each such category.\51\
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    \50\ See http://www.fbi.gov/hq/cjisd/web%20page/pdf/05132009_outsourcing_standard.pdf.
    \51\ See the National Institute of Standards and Technology 
(NIST) publications FIPS Pub 200, Minimum Security Requirements for 
Federal Information and Information Systems, March 2006 and NIST 
Special Publication 800-53, Recommended Security Controls for 
Federal Information Systems, as amended. These standards specify 
minimum management, operational, and technical safeguards in 17 
security-related areas needed to protect the confidentiality, 
integrity, and availability of Federal information systems and the 
information processed, stored, and transmitted by those systems. 
These security-related areas are: (1) Access control; (2) awareness 
and training; (3) audit and accountability; (4) certification, 
accreditation, and security assessments; (5) configuration 
management; (6) contingency planning; (7) identification and 
authentication; (8) incident response; (9) maintenance; (10) media 
protection; (11) physical and environmental protection; (12) 
planning; (13) personnel security; (14) risk assessment; (15) 
systems and services acquisition; (16) system and communications 
protection; and (17) system and information integrity.
---------------------------------------------------------------------------

    As a channeler and outsourcer of fingerprints, the FBI requires the 
Registry to comply with its CJIS Security Policy. The CJIS provides the 
minimum level of information technology security requirements 
determined acceptable for the transmission, processing, and storage of 
the nation's criminal justice information systems data. The purpose of 
this policy is to establish uniformity and consistency in safeguarding 
criminal justice information security data which is accessed via 
networks throughout the Federal, State, and local user community. 
However, this policy does not prohibit more stringent security 
policies.
    The requirements for protecting the privacy and security of the 
personal information obtained from employees of Agency-regulated 
institutions, and the confidential information obtained from the 
institutions themselves, are essentially similar whether a particular 
mortgage loan originator is State licensed or Federally registered. SRR 
and CSBS will institute security protocols to protect the privacy and 
security of such information.
    The Agencies adopt Sec.  ----.103(d)(2) as proposed, with the 
following conforming and clarifying changes.

[[Page 51639]]

First, we have removed pending disciplinary and enforcement actions and 
arbitrations against the employee from the list of information the 
employee must authorize the Registry to make available to the public to 
conform with our amendment to Sec.  ----.103(d)(1). Second, we have 
amended Sec.  ----.103(d)(2)(ii) to require a registrant to attest to 
any update of their registration, in addition to their initial and 
renewal registrations. This requirement had inadvertently been left out 
of the proposed rule. Finally, we have added language to clarify that 
neither the employing institution, nor any of its other employees, may 
fulfill these attestation and authorization requirements on behalf of 
the registering employee.
    We also have added a new paragraph (d)(3) to clarify that an 
Agency-regulated institution may identify an employee or employees of 
the bank who may submit the employee information required by paragraph 
(d)(1)(i) to the Registry on behalf of the institution's employees, 
provided that this individual, and any employee delegated this 
authority, does not act as a mortgage loan originator, consistent with 
Sec.  ----.103(e)(1)(i)(F). In addition, as more fully explained below, 
this new paragraph specifically authorizes an institution to submit to 
the Registry some or all of the employee information required by 
paragraph (d)(1)(i) and the institution's information required by Sec.  
----.103(e)(2) for multiple employees in bulk through batch processing 
in a format to be specified by the Registry, to the extent such batch 
processing is made available by the Registry.
    Required Agency-regulated institution information. The Agencies 
adopt proposed Sec.  ----.103(e)(1) with the following amendments, 
discussed below.
    Paragraph (e)(1) of Sec.  ----.103 of the final rule requires the 
employing Agency-regulated institution to submit certain information to 
the Registry as a base record in connection with the registration of 
one or more mortgage loan originators. Specifically, the Agency-
regulated institution must provide its name; main office address; 
business contact information, such as business phone number or e-mail 
address (not required by the proposed rule); primary Federal regulator; 
Employer Tax Identification Number (EIN) issued by the Internal Revenue 
Service; primary point of contact information; and contact information 
for ``system administrators.''
    System administrators will have the authority to enter data 
required in paragraph (e) of this section on the Registry and will be 
responsible for keeping institution information and the list of 
employees registered with the Registry current. These individuals, 
however, may not act as mortgage loan originators. The Agencies 
recognize that some small institutions may not be able to comply with 
this latter requirement because all of their staff may be registered 
mortgage loan originators. Therefore, we have amended this provision to 
exempt institutions with 10 or fewer full time equivalent employees 
from the requirement that system administrators do not act as mortgage 
loan originators. However, this exemption does not apply to a 
subsidiary of an Agency-regulated institution as the staff at the 
parent institution could perform this function. In the Agencies' 
experience, institutions with more than 10 full time equivalent 
employees generally have sufficient staff resources to support the 
segregation of these functions. The system administrators may delegate 
their authority and assign as many additional system users as necessary 
to comply with the registration requirements of the S.A.F.E. Act and 
the final rule, provided the delegated administrators meet this 
paragraph's requirements. While the primary point of contact also can 
be one of the institution's system administrators, the institution's 
management is responsible for ensuring proper oversight of the system 
administrator's activities.
    In addition, paragraph (e)(1)(i)(C) of Sec.  ----.103 requires an 
Agency-regulated institution to provide its Research Statistics 
Supervision Discount (RSSD) number as identifying data for validating 
the base record. The RSSD database is maintained by the Board. The 
Agencies will provide the Registry with an extract of the Board's 
database, indexed by RSSD number, to facilitate an Agency-regulated 
institution's authorized access to the Registry and its establishment 
of a new base record. Upon receiving the information for a new base 
record from an Agency-regulated institution, the Registry will confirm 
the information by comparing the application with RSSD data supplied by 
the Agencies. The Agencies will establish a mechanism by which Agency-
regulated institutions that do not have an RSSD number will be added to 
the RSSD database.
    If the institution is a subsidiary of an Agency-regulated 
institution, the final rule requires the subsidiary to indicate that it 
is a subsidiary of the parent and to provide its parent institution's 
RSSD number in addition to its own RSSD number, if it has one. It is 
not required to obtain its own RSSD number. The proposal had required 
that the subsidiary provide its parent's name. We have revised this 
provision in the final rule to require the subsidiary instead to 
provide its parent's RSSD number, which is a more accurate method of 
identifying the parent institution than by name.
    Some Farm Credit System-affiliated commenters requested that the 
Agencies consider using the FCA's existing identification system as an 
alternative for the RSSD number for FCS institutions. The Agencies 
decline to make this modification. Validation of Agency-regulated 
institutions will be most efficient and complete if all institutions 
can be identified through a single identification system. The FCA will 
provide FCS institutions with information on how to obtain an RSSD 
number for the purposes of this rulemaking. The Agencies received no 
other significant comments on Sec.  ----.103(e).
    We also have amended proposed Sec.  ----.103(e)(1) to require 
system administrators to follow NMLS protocols to verify their own 
identity and to attest that they have the authority to enter data on 
behalf of the Agency-regulated institution, that the information 
submitted pursuant to paragraph (e) is correct, and that the Agency-
regulated institution will keep the information required by paragraph 
(e) current and will file accurate supplementary information on a 
timely basis. In addition, we have amended this paragraph to require 
institutions to renew the information they have submitted to the 
Registry pursuant to Sec.  ----.103(e) on an annual basis. We have 
added these two requirements to conform to system protocols identified 
by CSBS and SRR.
    As in the proposal, renumbered paragraph (e)(1)(iii) of Sec.  --
--.103 requires an Agency-regulated institution to update any 
information it has submitted within 30 days of the date that the 
information becomes inaccurate.
    As proposed, Sec.  ----.103(e)(2) of the final rule requires an 
Agency-regulated institution to provide information to the Registry for 
each employee who acts as a mortgage loan originator. The Agency-
regulated institution must: (1) Confirm that it employs the registrant, 
after all the information required by paragraph (d) of this section has 
been submitted to the Registry; and (2) within 30 days of the date the 
registrant ceases to be an employee of the institution, provide 
notification that it no longer employs the registrant and the date the 
registrant ceased being an employee. This information will link the 
registering mortgage loan originator to the Agency-

[[Page 51640]]

regulated institution in order to confirm that the registration of the 
employee is valid and legitimate. The Agencies note that the Registry's 
system protocols will not permit the Agency-regulated institution to 
confirm that it employs the registrant unless all of the employee's 
information required by paragraph (d) of this section has been 
submitted to the Registry and the employee has attested to the accuracy 
of the information. As indicated below, batch processing of certain 
information for multiple employees will likely be available to 
facilitate compliance with this provision.
    Batch Processing of Registrations. The SUPPLEMENTARY INFORMATION 
section of the proposed rule sought comment on whether to permit a 
``batch'' process for Agency-regulated institutions to submit to the 
Registry, in bulk, some or all of the required employee and institution 
information as a way to mitigate the initial and ongoing registration 
burden on Agency-regulated institutions and their employees. Commenters 
overwhelmingly supported the concept of batch processing, indicating 
that such a capability would make registration faster, simpler, more 
efficient, and less costly. They also stated that it would enable them 
to better control and manage the registration process, pursuant to the 
policies and procedures required by this rulemaking.
    The Agencies agree that some form of batch processing would be 
helpful for the registration process to run smoothly and efficiently 
and for all initial registrations to be completed within the 180-day 
initial registration period. Batch processing would be especially 
beneficial to larger institutions who must register tens of thousands 
of employees. The Agencies therefore are working with CSBS and SRR to 
ensure that the Registry supports the batch processing of large numbers 
of registrations by Agency-regulated institutions. As indicated above, 
we have added a new Sec.  ----.103(d)(3) to specifically permit 
institutions to submit a portion of the information required by 
paragraphs (d)(1)(i) and (e)(2) of Sec.  ----.103 for multiple 
employees in bulk through batch processing, to the extent such batch 
processing is made available by the Registry.
    Specifically, it is our intent that the Registry will be able to 
provide Agency-regulated institutions the capability to submit batch 
registration of a portion of the information for multiple mortgage loan 
originators and to electronically notify the originators of the need to 
complete the registration. The Agencies expect the batch file to 
contain at least enough information to establish a mortgage loan 
originator record (such as the institution's name and RSSD number and 
employee name, SSN, and e-mail address). We also expect that the 
Registry will provide the capability for an Agency-regulated 
institution to confirm its relationship with mortgage loan originators 
either individually or in bulk. The Agencies, CSBS, and SRR are in the 
process of specifying the details and means of this batch processing. 
Batch processing should be available for institutions at the start of 
the initial registration period, and we will provide further 
information on batch processing prior to that time.

Section----.104--Policies and Procedures

    Proposed Sec.  ----.104 required Agency-regulated institutions that 
employ mortgage loan originators to adopt and follow written policies 
and procedures designed to ensure compliance with the requirements of 
the final rule. The proposal stated that the policies and procedures 
must be appropriate to the nature, size, complexity, and scope of the 
mortgage lending activities of the Agency-regulated institution and 
must, at a minimum, include eight specified provisions.
    The Agencies received many comments on these required policies and 
procedures. Although some supported them, others found the requirement 
to have detailed written plans for how to comply with the final rule 
unnecessary and overly burdensome, especially in light of other 
regulatory requirements imposed on financial institutions. A few 
commenters suggested that the Agencies develop model guidelines for, or 
samples of, these policies and procedures to reduce implementation and 
compliance costs for Agency-regulated institutions and to reduce burden 
on examiners in monitoring compliance. Commenters also requested 
further clarification of specific provisions and an explanation as to 
the reason for the provision.
    The Agencies continue to believe that requiring Agency-regulated 
institutions to establish policies and procedures is an appropriate way 
to ensure and monitor compliance with this final rule. Appropriate 
policies and procedures provide an institution and its employees with 
the expectations of the institution's board and include the specific 
implementing guidance that is applicable to the activities of that 
institution. Furthermore, such policies and procedures are necessary to 
enable Agency examiners to evaluate the effectiveness of institutions' 
implementation of the S.A.F.E. Act requirements that apply to them. 
Institutions have the responsibility to adopt policies and procedures 
appropriate to their operations. The final rule therefore includes a 
policies and procedures requirement. Comments on specific provisions 
are addressed below.
    First, proposed Sec.  ----.104(a) required policies and procedures 
to establish a process for identifying which employees of the 
institution are required to be registered mortgage loan originators. 
This provision highlights a basic and necessary action each institution 
must take to comply with the rulemaking. We did not receive specific 
substantive comments on this requirement and therefore adopt Sec.  --
--.104(a) as proposed.
    Second, proposed Sec.  ----.104(b) required policies and procedures 
to require that all employees of the institution who are mortgage loan 
originators be informed of the registration requirements of the 
S.A.F.E. Act and the proposed rule and be instructed on how to comply 
with these requirements and procedures, including registering as a 
mortgage loan originator prior to engaging in any mortgage loan 
origination activity. As with the first provision, this action is 
necessary for Agency-regulated institutions to comply with the rule and 
facilitates employee compliance. We did not receive substantive 
comments addressing this requirement and therefore adopt Sec.  --
--.104(b) as proposed.
    Third, proposed Sec.  ----.104(c) required that policies and 
procedures must establish procedures to comply with the unique 
identifier requirements in Sec.  ----.105. Once again, this provision 
merely reiterates that Agency-regulated institutions must ensure 
compliance with a requirement of the rulemaking. We received no 
specific comments on this requirement and therefore adopt it as 
proposed.
    Fourth, proposed Sec.  ----.104(d) required policies and procedures 
to establish reasonable procedures for confirming the adequacy and 
accuracy of employee registrations, including updates and renewals, by 
comparison with the institution's records. We adopt this provision as 
proposed. However, to address the many comments on this requirement, 
the Agencies clarify that they will consider an institution to have 
reasonable procedures if it confirms the information supplied to the 
Registry that is in the institution's personnel files. Typically this 
information would include the employee's identifying information, such 
as the employee's name; home address; business address and contact 
information; social security number; gender; date and place of birth; 
and financial services-related civil actions, arbitrations and 
regulatory

[[Page 51641]]

actions taken against the institution's employee, if any. As noted in 
the SUPPLEMENTARY INFORMATION section of the proposed rule, to comply 
with this requirement, institutions need only compare the information 
supplied by the employee to the Registry with the information contained 
in the institution's own records. The final rule does not require, nor 
do the Agencies expect, Agency-regulated institutions to obtain private 
database searches on their employees to confirm employee registration 
information.
    Fifth, proposed Sec.  ----.104(e) required institutions to 
establish reasonable procedures and tracking systems for monitoring 
compliance with registration requirements and procedures. Under this 
regulatory provision, Agency-regulated institutions will be expected to 
demonstrate compliance with the registration and renewal requirements 
of this final rule, such as by maintaining appropriate records. The 
action required by this provision is one that an institution must take 
to ensure compliance with the rule and may be done in a number of 
different ways, such as by using an institution's existing tracking 
systems. Having received no substantive comments on this requirement, 
the Agencies adopt it as proposed.
    Sixth, proposed Sec.  ----.104(f) required policies and procedures 
that provide for periodic independent testing of the Agency-regulated 
institution's policies and procedures for compliance with the S.A.F.E. 
Act and the final rule and for such testing to be conducted by 
institution personnel or by an outside party. This compliance testing 
is standard procedure for Agency-regulated institutions as part of 
their internal controls, and we adopt it as proposed with one change. 
We have clarified that this compliance testing must be done on an 
annual basis, a necessary internal audit interval.
    Seventh, proposed Sec.  ----.104(g) required policies and 
procedures to provide for appropriate disciplinary action against any 
employee who fails to comply with the registration requirements of the 
S.A.F.E. Act, this rule, or the related policies and procedures of the 
institution, including prohibiting such employees from acting as 
mortgage loan originators or other appropriate disciplinary actions. 
The action required by this provision is one that an institution would 
need to take to ensure compliance with the rule. Having received no 
substantive comments on this requirement, we adopt it as proposed.
    Finally, proposed Sec.  ----.104(h) required policies and 
procedures to establish a process for reviewing the criminal history 
background reports on employees received from the FBI through the 
Registry, taking appropriate action consistent with applicable law and 
rules with respect to these reports, maintaining records of these 
reports, and documenting any action taken with respect to such 
employees consistent with applicable recordkeeping requirements, if 
any. A few commenters requested clarification on this requirement. As 
noted by other commenters, section 19 of the FDI Act (12 U.S.C. 1829), 
in general, prohibits insured depository institutions from employing a 
person who has been convicted of any criminal offense involving 
dishonesty or a breach of trust or money laundering or has entered into 
a pretrial diversion or similar program in connection with a 
prosecution for such offense. Similarly, section 5.65(d) of the Farm 
Credit Act (12 U.S.C. 2277a-14 (d)), states ``[e]xcept with the prior 
written consent of the Farm Credit Administration, it shall be unlawful 
for any person convicted of any criminal offense involving dishonesty 
or a breach of trust to serve as a director, officer, or employee of 
any System institution.'' For Federally insured credit unions, NCUA 
intends to rely upon 12 U.S.C. 1786(i) and 12 CFR 741.3(c). We have 
revised this provision of the final rule to include references to the 
appropriate statutory provision.
    The Agencies have added a new provision to clarify the 
responsibilities of Agency-regulated institutions regarding their 
contracts relating to mortgage loan originations. Institutions must 
establish procedures designed to ensure that any third party with which 
it has arrangements related to mortgage loan origination has policies 
and procedures to comply with the S.A.F.E. Act, including appropriate 
licensing and/or registration of individuals acting as mortgage loan 
originators. Agency-regulated institutions should monitor third party 
entities' compliance with these policies and procedures. This provision 
will ensure that individuals acting as mortgage loan originators on 
behalf of an Agency-regulated institution are either State licensed and 
registered and/or Federally registered.
    One commenter requested that the final rule limit an institution's 
oversight of its employees' compliance with this rulemaking only to 
those activities of the employee that are within the scope of his or 
her employment at the institution. It is not our intention to require 
the institution to enforce the final rule's requirements with respect 
to activities of its employees that are conducted outside of the 
employee's scope of employment with that institution and beyond the 
institution's control, and we have added language to Sec.  ----.104 to 
clarify this.
    This final rule's requirement to adopt these policies and 
procedures applies to all Agency-regulated institutions that employ 
individuals who act as mortgage loan originators, regardless of the 
application of any de minimis exception to their employees. These 
policies and procedures should be in place at an institution prior to 
the registration of its employees pursuant to this rule.
    Furthermore, the Agencies note that, consistent with the S.A.F.E. 
Act, the Registry will not screen or approve registrations received 
from employees of Agency-regulated institutions. Instead, it will be 
the repository of, and conduit for, information on those employees who 
are mortgage loan originators at Agency-regulated institutions. 
Pursuant to Sec. Sec.  ----.104(d) and (h) of the final rule, it will 
be the responsibility of the Agency-regulated institution to establish 
reasonable procedures for confirming the adequacy and accuracy of 
employee registrations as well as to establish a process for reviewing 
any criminal history background reports received from the Registry.

Section ----.105--Use of Unique Identifier

    The Agencies proposed in Sec.  ----.105(a) to require an Agency-
regulated institution to make the unique identifier(s) of its 
registered mortgage loan originator(s) available to consumers in a 
manner and method practicable to the institution. Proposed Sec.  --
--.105(b) required a registered mortgage loan originator to provide the 
originator's unique identifier to a consumer upon request, before 
acting as a mortgage loan originator, and through the originator's 
initial written communication with a consumer, if any.
    Although a mortgage loan originator may change his or her name, 
change employment, or move, the unique identifier assigned to the 
originator by the Registry at the originator's original registration 
will remain the same. Once public access to the Registry is fully 
functional, the unique identifier will enable consumer access to an 
individual mortgage loan originator's profile stored in the Registry, 
including the mortgage loan originator's publicly available 
registration information, any State mortgage licenses held (active or 
inactive), employment history, and publicly adjudicated disciplinary 
and enforcement actions. If a mortgage loan originator is 
simultaneously employed by more than one State or Agency-regulated 
institution, that information

[[Page 51642]]

also will be readily visible to the consumer.
    We received a number of comments on this requirement--some noting 
that it is cumbersome and of limited benefit to the consumer. However, 
the S.A.F.E. Act requires each mortgage loan originator to obtain a 
unique identifier to facilitate the electronic tracking of loan 
originators, and the uniform identification of, and public access to, 
the employment history and publicly adjudicated disciplinary and 
enforcement actions against a mortgage loan originator. In order to 
effectuate this requirement, a mortgage loan originator and the 
employing institution must ensure that the consumer has access to the 
originator's unique identifier. This access must be made available 
early enough in the relationship with the originator to enable the 
consumer to access the Registry before the consumer commits to the 
mortgage loan transaction. Because a consumer may not be aware of the 
Registry, it is important that both the institution and originator make 
this information available to the consumer, and not only just upon the 
consumer's request, as suggested by a number of commenters. Therefore, 
we adopt this requirement as proposed, with one clarifying change 
described below.
    As noted in the SUPPLEMENTARY INFORMATION section of the proposed 
rule, an Agency-regulated institution may comply with the Sec.  --
--.105(a) requirement in a number of ways. For example, the institution 
may choose to direct consumers to a listing of registered mortgage loan 
originators and their unique identifiers on its Web site; post this 
information prominently in a publicly accessible place, such as a 
branch office lobby or lending office reception area; and/or establish 
a process to ensure that institution personnel provide the unique 
identifier of a registered mortgage loan originator to consumers who 
request it from employees other than the mortgage loan originator. 
Furthermore, the Agencies intend Sec.  ----.105(b)(3) of the rule to 
cover written communication from the originator specifically for his or 
her customers, such as a commitment letter, good faith estimate or 
disclosure statement, and not written materials or promotional items 
distributed by the Agency-regulated institution for general use by its 
customers. While, this provision does not require institutions to 
include the unique identifier on loan program descriptions, 
advertisements, business cards, stationary, notepads, and other similar 
materials, institutions are not prohibited from doing so. We also 
clarify that the requirement to provide the unique identifier to the 
consumer through the originator's initial written communication, if 
any, applies whether that communication is provided in writing on paper 
or through electronic means. We have clarified this requirement in the 
final rule. The Agencies also clarify that the unique identifier may be 
provided orally, except pursuant to paragraph (b)(3) under which the 
unique identifier would be provided with the written or electronic 
communication.
    We note that the Board has proposed amendments to 12 CFR 226 
(Regulation Z) that would require disclosure of the unique identifier 
as part of TILA disclosures, which generally must be provided to a 
borrower within three business days of the residential mortgage loan 
application and seven business days before consummation of the 
transaction.\52\ In addition, as indicated above, Fannie Mae and 
Freddie Mac are requiring all mortgage loan applications taken on or 
after the compliance date for the unique identifier requirement to 
include the mortgage loan originator's unique identifier.\53\ We 
therefore believe that providing consumers with the originator's unique 
identifier will not be difficult or burdensome.
---------------------------------------------------------------------------

    \52\ See http://www.federalreserve.gov/newsevents/press/bcreg/20090723a.htm.
    \53\ See footnote 26.
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Appendix--Examples of Mortgage Loan Originators

    The proposed Appendix included a nonexclusive list of examples of 
activities that fall within or outside the S.A.F.E. Act's definition of 
a mortgage loan originator. Specifically, the Appendix provided 
examples of activities that are, and are not, illustrative of taking an 
application, and offering or negotiating terms of a mortgage loan for 
compensation or gain. The Agencies note that an employee of an Agency-
regulated institution is only subject to the S.A.F.E. Act to the extent 
that both prongs of the two-part test for acting as a mortgage loan 
originator are met, and that employees who take applications but do not 
offer or negotiate terms of a mortgage loan, or vice versa, do not meet 
the definition. Commenters generally asked the Agencies to provide more 
detail to the examples and to address whether specific activities of 
Agency-regulated institution employees would be covered by the two-
prong test of a mortgage loan originator.
    The Agencies have made several modifications to the examples of 
taking an application. The modified examples clarify that taking an 
application occurs when the mortgage loan originator receives 
information in connection with a request for a mortgage loan that will 
be used to determine whether the consumer qualifies for a loan. The 
Agencies note that the information may be provided by another person on 
behalf of the consumer.
    Some commenters questioned whether an employee takes an application 
if that employee only collects limited data about the consumer or does 
not decide what data to collect. Another commenter suggested that when 
an employee collects the limited information about the consumer that is 
required by an automated loan approval system and quotes interest rates 
and fees for a specific mortgage loan product as generated by the 
system, that employee should not be considered to be engaged in taking 
an application. The Agencies disagree, as the limited information 
described by the commenter is sufficient to qualify the consumer for a 
specific mortgage product and terms. The example of taking an 
application was revised to address the receipt of information to be 
used to determine whether the consumer qualifies for a mortgage loan, 
which includes situations where there are limitations on the data 
collected or on the employee's discretion, as described by the 
commenter.
    Similarly, these commenters also requested clarification as to 
whether an employee takes an application when the employee enters 
information into an online application in the process of receiving 
information from the consumer. The Agencies have provided clarification 
that the example of taking an application applies even if the employee 
is inputting information into an online or other automated approval 
system on behalf of the consumer. The Agencies do not intend this 
example to address employees who are engaged in the clerical act of 
inputting information from a loan application into an automated 
approval system on behalf of a loan officer. Furthermore, contrary to 
the suggestions of some commenters, the Agencies have clarified that an 
employee may take an application even if the employee is not engaged in 
approval of the mortgage loan. An employee also may take an application 
even if the employee does not take an application fee.
    The Agencies also have clarified that, contrary to the suggestion 
of some commenters, an employee may take an application even if the 
employee has received the consumer's information indirectly in order to 
make an offer or negotiate terms of a mortgage loan. An

[[Page 51643]]

employee may receive the consumer's information indirectly, for 
example, through another employee, a broker, or an automated system.
    The Agencies also have provided further detail regarding the 
examples of activities that do not constitute taking an application. In 
response to questions raised by commenters, the Agencies have further 
clarified that the following activities would not constitute taking an 
application: (1) Assisting a consumer who is filling out an application 
by explaining the qualifications or criteria necessary to obtain a 
mortgage loan product, (2) describing the steps that a consumer would 
need to take to provide information to be used to determine whether the 
consumer qualifies for a mortgage loan or otherwise explaining the 
mortgage loan application process, and (3) responding to an inquiry 
regarding a prequalified offer that a consumer has received from an 
Agency-regulated institution, collecting only basic identifying 
information about the consumer and forwarding the consumer to a 
mortgage loan originator.
    The Agencies also have revised the examples of offering or 
negotiating terms of a mortgage loan in response to the comments. The 
Agencies have revised one example to clarify that providing a 
disclosure of the mortgage loan terms after application pursuant to the 
Truth in Lending Act is included in presenting a mortgage loan offer. A 
number of commenters asked the Agencies to modify the examples to carve 
out employees who are limited in their ability to negotiate or finalize 
the terms of a mortgage loan. Some commenters posited that employees 
should be excluded if they only offer the loan rate to a consumer but 
are not permitted to negotiate the rate, or only quote a rate approved 
by an automated online system. Similarly, a commenter expressed the 
view that an employee would not offer or negotiate terms of a mortgage 
loan if involvement of a loan officer also was necessary to finalize 
the loan terms or otherwise conclude the mortgage loan approval 
process. The Agencies believe that many of these situations discussed 
by the commenters would involve an offer or a negotiation of a loan. 
Thus the revised examples clarify that presenting a mortgage loan offer 
to a consumer for acceptance, either verbally or in writing, is 
offering or negotiating terms of a mortgage loan even if other 
individuals must complete the mortgage loan process or if only the rate 
approved by the Agency-regulated institution's loan approval mechanism 
function for a specific loan product is communicated without authority 
to negotiate the rate. Similarly, one commenter suggested that an 
employee does not offer or negotiate terms of a mortgage loan if the 
employee does not lock the rate. The Agencies do not agree and declined 
to address this particular activity in the general example of offering 
or negotiating terms of a mortgage loan.
    The Agencies also have modified and added to the examples of 
activities that are not offering or negotiating terms of a mortgage 
loan. Some commenters noted that the S.A.F.E. Act excludes employees 
who are engaged in administrative and clerical activities. The Agencies 
have considered this exclusion in formulating the examples of mortgage 
loan origination. Specifically, with respect to offering and 
negotiating terms of a mortgage loan, the Agencies have added an 
example that an employee who communicates on behalf of a mortgage loan 
originator that a written offer has been sent to a consumer, without 
providing details of that offer, is not offering or negotiating a loan.
    In addition, in response to commenters' requests for more detail, 
the Agencies have clarified that providing descriptions, in addition to 
explanations, in response to consumer queries regarding qualification 
for a specific mortgage loan product or product-related service does 
not constitute offering or negotiating terms of a mortgage loan. In 
response to the suggestion of another commenter, the Agencies have 
provided another new example, specifying that ``offer or negotiate'' 
does not include explaining or describing the steps or process that a 
consumer would need to take in order to obtain a loan offer, including 
qualifications or criteria that would need to be met without providing 
guidance specific to the consumer's circumstances.
    Some commenters asked whether employees engaged solely in making 
underwriting decisions with respect to mortgage loans are offering 
terms of a mortgage loan. These employees, although they do not 
typically communicate directly with consumers, would appear to fall 
within the definition of taking an application. The Agencies have 
added, as an example of an activity that is not offering or negotiating 
terms of a mortgage loan, making an underwriting decision about whether 
the consumer qualifies for a loan. An employee engaged solely in this 
activity would not offer or negotiate terms of a loan, and would not, 
therefore, meet the two-prong test for acting as a loan originator.
    The Agencies, as described previously, understand from many 
commenters that numerous employees of Agency-regulated institutions are 
engaged solely in modifying loans, such as those which result in 
reduced and sustainable payments for a borrower who is in default. The 
Agencies have provided, as a new example of an activity that is not 
taking an application, receiving information in connection with a 
modification to the terms of an existing loan to a borrower as part of 
the institution's loss mitigation efforts, when the borrower is 
reasonably likely to default. An employee engaged solely in this 
activity does not receive a residential mortgage loan application, and 
would not, therefore, meet the two-prong test for acting as a loan 
originator. The Agencies note that modifying the terms of an existing 
loan to a borrower as part of the institution's loss mitigation efforts 
generally would not constitute acting as a mortgage loan originator for 
purposes of the S.A.F.E. Act. In addition, one commenter requested that 
the Agencies clarify that an employee acts as a mortgage loan 
originator when the employee renews an existing loan at maturity, 
thereby replacing the old loan with a new loan. The Agencies agree with 
this commenter.
    Finally, one commenter queried whether registration requirements 
apply to Agency-regulated institution employees who, in addition to a 
variety of customer service duties, only at times act as a mortgage 
loan originator and only with respect to a limited number of mortgage 
loan products. The Agencies note that an employee who meets the two-
prong test is acting as a mortgage loan originator, even if that 
activity is not their primary job duty or the employee may only act as 
a mortgage loan originator for a limited number of products. As 
described previously, the Agencies have provided a de minimis exception 
to address employees who act as mortgage loan originators with respect 
to a small number of mortgage loans. In this light, the Agencies 
received comments that suggested that an employee would be engaged in 
offering the terms of a loan only if the employee's compensation was 
based on the number of loans closed or the employee's engagement in 
mortgage lending. The Agencies do not agree with this suggestion and 
have finalized the examples relating to compensation as proposed. 
Therefore, an employee offers or negotiates terms of a loan for 
compensation or gain even if the employee does not receive a referral 
fee or commission or other special compensation for the mortgage loan.

[[Page 51644]]

IV. Regulatory Analysis

A. Regulatory Flexibility Act

    OCC: The Regulatory Flexibility Act (RFA) \54\ requires Federal 
agencies to prepare and make available to the public a Final Regulatory 
Flexibility Analysis (FRFA) for a final rule, unless the agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities. See 5 U.S.C. 603-605. For 
purposes of the RFA, a ``small entity'' within the jurisdiction of the 
OCC is a national bank or a Federal branch or agency with assets of 
$175 million or less (small national bank).\55\ In the NPRM, the OCC 
certified, pursuant to section 605(b) of the RFA, that the proposal 
would not have a significant economic impact on a substantial number of 
small entities.\56\ The OCC's certification was based on an estimated 
average total compliance cost of $18,800 per small national bank and 
the impact of compliance costs as a percentage of labor costs, as well 
as compliance costs as a percent of noninterest expenses. The OCC 
received one comment--from the Small Business Administration's Office 
of Advocacy (SBA Advocacy)--on the certification.
---------------------------------------------------------------------------

    \54\ 5 U.S.C. 601-612.
    \55\ 13 CFR 121.201.
    \56\ In addition to the OCC, the Board, the FDIC, the OTS, the 
NCUA, and the FCA also certified in the proposed rule that the 
proposal would not have a significant economic impact on a 
substantial number of small entities. See 74 FR at 27398-27399.
---------------------------------------------------------------------------

    Based in part on this comment letter, the OCC has reevaluated the 
effect of this final rule on small national banks, and, for the reasons 
stated below, has determined that this rule will have a significant 
economic impact on a substantial number of small entities. Therefore, 
we have prepared the following FRFA in accordance with 5 U.S.C. 604.
1. Need for, and Objectives of, the Final Rule
    The need for, and objectives of, this final rule are described in 
detail in the SUPPLEMENTARY INFORMATION section.
2. Significant Issues Raised by Public Comments
    In the comment it submitted, SBA Advocacy expressed concern that 
the factual basis for the OCC's (and other Agencies') conclusion that 
the proposal would not have a significant economic impact on a 
substantial number of small entities may be insufficient, noting that 
the OCC's certification did not specify the assumptions used concerning 
labor costs or noninterest expenses. SBA Advocacy stated its concern 
that OCC's economic impact may be underestimated and sought 
clarification regarding the proposal's impact on the number of small 
national banks.\57\
---------------------------------------------------------------------------

    \57\ A discussion of SBA Advocacy's comments on other provisions 
of the proposed rule, namely, the de minimis exception and the 
proposed 6-month initial compliance period, is contained in the 
SUPPLEMENTARY INFORMATION section of this final rule.
---------------------------------------------------------------------------

    In part as a result of this comment letter, the OCC conducted 
further analysis of the effect of its rule on the banking industry as a 
whole and on small banks in particular. The OCC also obtained 
additional information about the impact of the proposal on national 
banks. As a result of this information we have modified our initial 
conclusions about the economic effect of the rule on small national 
banks.
3. Description and Estimate of Small Entities Affected by the Final 
Rule
    For purposes of OCC regulation, the final rule applies to national 
banks, Federal branches and agencies of foreign banks, their operating 
subsidiaries (collectively referred to as national banks), and their 
employees who act as mortgage loan originators.
    OCC estimates that 623 national banks with employees originating 
loans secured by residential real estate are small entities based on 
the SBA's general principles of affiliation (13 CFR 121.103(a)) and the 
size threshold for a small national bank. The OCC believes the final 
rule will have a significant impact on approximately 10 percent of 
these small national banks (65 banks).\58\ We classify the impact of 
total costs on a small national bank as significant if the total costs 
in a single year are greater than 5 percent of total salaries and 
benefits, or greater than 2.5 percent of total non-interest expense. 
Mean total costs per bank in the group of small banks where compliance 
costs are significant is approximately $25,000 per bank.\59\
---------------------------------------------------------------------------

    \58\ The OCC estimated the impact on small banks both with and 
without employee turnover because it is the OCC's understanding that 
the turnover rate at small banks is significantly lower than the 
rate at large banks and there may be no turnover for several years 
in a row at some banks. However, even without employee turnover, the 
final rule appears to have a significant impact on a substantial 
number of small banks.
    \59\ The mean totals of the cost estimates (i.e., the higher 
cost estimate and the lower cost estimate) for all (623) small banks 
impacted by the final rule are $32,000 and $27,000 respectively. The 
mean total cost per small bank in the group of small banks where 
costs are significant is approximately $26,000 under the higher cost 
estimate, and $23,000 under the lower cost estimate.
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4. Recordkeeping, Reporting, and Other Compliance Requirements
    The final rule imposes requirements on both national banks and 
their employees who engage in the business of mortgage loan 
origination, regardless of the size of the national bank. Typical 
recordkeeping, administrative, computer technology and bank management 
skills will be needed to comply with all of the rule's requirements.
    Reporting Requirements. Unless the de minimis exception applies, 
Sec.  34.103(a) of the final rule requires a mortgage loan originator 
employed by a national bank to register with the Registry, maintain 
such registration, and obtain a unique identifier. Under Sec.  
34.103(b), a bank must require each mortgage loan originator employee 
to comply with these requirements. Section 34.103(d) describes the 
categories of information that an employee, or the employing bank on 
the employee's behalf, must submit to the Registry, along with the 
employee's attestation as to the correctness of the information 
supplied, and the employee's authorization to obtain further 
information and make public some of this information. This section also 
requires the submission of the mortgage loan originator's fingerprints 
to the Registry.
    Section 34.103(e) specifies bank and employee information that a 
bank must submit to the Registry in connection with the initial 
registration of one or more mortgage loan originators. The bank must 
annually renew this information and update this information if 
necessary between renewals. Authorized bank representatives must attest 
to the correctness of this information and that such information will 
be updated on a timely basis.
    Disclosure Requirements. Section 34.105(b) requires the mortgage 
loan originator to provide the unique identifier to a consumer: (i) 
Upon request; (2) before acting as a mortgage loan originator; and (3) 
through the originator's initial written communication with a consumer, 
if any, whether on paper or electronically.
    Section 34.105(a) requires the bank to make the unique 
identifier(s) of its mortgage loan originator(s) available to consumers 
in a manner and method practicable to the bank.
    Recordkeeping and Compliance Requirements.
    Section 34.104 requires a bank that employs one or more mortgage 
loan originators to adopt and follow written policies and procedures 
designed to assure compliance with this final rule.

[[Page 51645]]

These policies and procedures must be appropriate to the nature, size, 
complexity, and scope of their mortgage lending activities and will 
apply only to those employees acting within their scope of employment 
at the bank. At a minimum, these policies and procedures must establish 
a process for: (i) Identifying which employees are required to 
register, (ii) communicating the registration requirements to 
employees, (iii) complying with the rule's unique identifier 
requirements, (iv) confirming the adequacy and accuracy of employee 
registrations though comparisons with bank records, (v) monitoring 
employee compliance with the rule, (vi) independent compliance testing, 
(vii) taking appropriate actions with respect to employees who fail to 
comply with the registration requirements, (viii) reviewing employee 
criminal history background checks received pursuant to this rule, and 
(ix) monitoring third party compliance with the S.A.F.E. Act.
5. Steps Taken To Address the Economic Impact on Small Entities
    The final rule reflects the consideration given by the OCC, along 
with the other Agencies, to the impact that its requirements would have 
on small entities.
    First, the Agencies have revised the rule's de minimis exception to 
reduce compliance burden. In the proposed rule, the Agencies 
established a de minimis exception that would have excepted from the 
registration requirements an employee of an Agency-regulated 
institution if, during the last 12 months: (1) The employee acted as a 
mortgage loan originator for 5 or fewer residential mortgage loans; and 
(2) the Agency-regulated institution employs mortgage loan originators 
who, while excepted from registration pursuant to this section, in the 
aggregate, acted as a mortgage loan originator in connection with 25 or 
fewer residential mortgage loans. Many commenters on this provision 
noted the complexity of the proposed exception. One commenter stated 
that the de minimis exception would not have any significant effect 
because its complexity would outweigh its benefits. Others noted that 
the proposed exception would be difficult for an institution to monitor 
and maintain. Still others said that the proposed de minimis exception 
would be fairer, and much easier to apply, if the threshold limitation 
applied only to the employee or to the institution, but not both. SBA 
Advocacy specifically commented that the proposed de minimis exception 
would make the rule unduly burdensome on small community banks. In 
response to these and other comments and upon further analysis, the 
Agencies removed the institution threshold from this de minimis 
exception. As a result, the final rule's de minimis exception only 
contains the individual threshold, as well as a prohibition on any 
Agency-regulated institution from engaging in any act or practice to 
evade the limits of the de minimis exception. This revised exception 
should simplify compliance and therefore impose the least burden 
overall for institutions, including small entities.
    The Agencies also considered, pursuant to section 1507(c) of the 
S.A.F.E. Act (12 U.S.C. 5106(c)), applying the requirements of the rule 
only to institutions above a certain asset threshold, such as the 
threshold for Home Mortgage Disclosure Act reporting. However, the 
Agencies agreed that this would not further the consumer protection 
purposes of the S.A.F.E. Act \60\ in that customers of smaller banks 
would not have the same information on mortgage loan originators as 
customers of larger institutions. In addition, we believed the 
exception should be structured so that employees of institutions of all 
sizes could qualify.
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    \60\ Among other things, the objectives of the S.A.F.E. Act 
include: Enhancing consumer protections and supporting anti-fraud 
measures; increasing accountability and tracking of loan 
originators; and providing consumers with easily accessible 
information at no charge regarding the employment history of, and 
publicly adjudicated disciplinary and enforcement actions against, 
loan originators. S.A.F.E. Act at section 1502 (12 U.S.C. 5101).
---------------------------------------------------------------------------

    The OCC also has reviewed alternatives for small entity compliance, 
including eliminating the requirement for small banks to adopt and 
follow written policies and procedures addressing all of the elements 
described in the final rule. For example, under such an approach, a 
small bank's risk based compliance program might include only such 
procedures as are necessary to enable the bank to demonstrate 
compliance with the registration and renewal requirements of the 
S.A.F.E. Act. Although such an approach may have reduced the compliance 
cost per small bank, the OCC does not believe that it would best serve 
the interests of national banks or the OCC. Appropriate policies and 
procedures provide an institution and its employees with the 
expectations of the institution's board and include the specific 
implementing guidance that is applicable to the activities of that 
institution. Furthermore, such policies and procedures are necessary to 
enable examiners to evaluate the effectiveness of institutions' 
implementation of the S.A.F.E. Act requirements that apply to them. In 
reviewing this alternative, we determined that applying the policies 
and procedures requirement in the same way to all institutions, 
regardless of size, is necessary to ensure consistency in 
implementation and enforcement of the S.A.F.E. Act and is, therefore, 
the most appropriate way to ensure that the purposes of the S.A.F.E Act 
are met.
    The OCC, and the other Agencies, also made changes to the final 
rule that reduce the impact that its requirements would have on all 
Agency-regulated financial institutions, including small entities. The 
final rule decreased the amount of information required for submission 
by a mortgage loan originator. Specifically, the final rule does not 
require submission of financial history information such as 
bankruptcies and liens; employment terminations; pending actions; and 
felonies unrelated to crimes of dishonesty. Furthermore, the Agencies 
declined to include loan modification activities in the final rule's 
definition of mortgage loan originator. Under the OCC's rule, Agency-
regulated institution employees engaged solely in bona fide cost-free 
loss mitigation efforts which result in reduced and sustainable 
payments for the borrower generally would not meet the definition of 
``mortgage loan originator.'' This reduces the number of bank employees 
subject to the final rule's requirements.
    Board: Pursuant to section 605(b) of the RFA, 5 U.S.C. 605(b), the 
regulatory flexibility analysis otherwise required under section 604 of 
the RFA is not required if the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities and publishes its certification and a short, explanatory 
statement in the Federal Register along with its rule.
    The final rule implements the S.A.F.E. Act's Federal registration 
requirements for mortgage loan originators. The S.A.F.E. Act states 
that the objectives of this registration include providing increased 
accountability and tracking of mortgage loan originators and providing 
consumers with easily accessible information at no charge regarding 
mortgage loan originators. The Board is not aware of other Federal 
rules which may duplicate, overlap, or conflict with the proposed rule.
    The final rule applies to all banks that are members of the Federal 
Reserve System (other than national banks) and certain of their 
respective subsidiaries, branches and Agencies of foreign banks (other 
than Federal branches, Federal

[[Page 51646]]

agencies, and insured State branches of foreign banks), and commercial 
lending companies owned or controlled by foreign banks.
    Under the Board's final rule, employees of the above entities who 
act as residential mortgage loan originators must register with the 
Registry, obtain a unique identifier, and maintain this registration, 
consistent with the requirements of the S.A.F.E. Act. The above 
institutions must require their employees who act as residential 
mortgage loan originators to comply with the registration requirements 
and obtain a unique identifier. These institutions also must provide 
certain information to the Registry and must adopt and follow written 
policies and procedures designed to assure compliance with these 
requirements. The institutions and their employees must disclose the 
unique identifier of mortgage loan originators in compliance with the 
rule.
    Under regulations issued by the Small Business Administration,\61\ 
a small entity includes a banking organization with assets of $175 
million or less (a small banking organization). As of December 31, 
2008, there were approximately 433 State member banks that are small 
banking organizations. The Agencies proposed the de minimis exception 
in an effort to reduce compliance costs on small businesses.
---------------------------------------------------------------------------

    \61\ See 13 CFR 121.201.
---------------------------------------------------------------------------

    The Board received comment from the Office of Advocacy of the U.S. 
Small Business Administration on its RFA analysis. This commenter 
expressed concern that the factual basis for the Board's (and other 
agencies') RFA analysis was insufficient and that the Board and other 
agencies may have underestimated the costs associated with the proposed 
rule. The commenter queried whether legal compliance costs and training 
and tracking costs should be estimated and included in the analysis. 
Specifically with respect to the Board's RFA analysis, the commenter 
recommended that the Board use revenue, rather than profits, in 
determining economic impact since revenue may be a more transparent 
indicator than profits.
    The Board notes that legal compliance costs, tracking compliance, 
and training have been included in the burden analyses for the rule. 
The Board estimates compliance costs to be $7.6 million in the 
aggregate for the 433 small State member banks. As of December 31, 
2008, these institutions had $2.4 billion in revenues in the aggregate. 
Therefore, compliance costs would be less than 1% of revenues.
    The Board notes that it has adopted in the final rule alternatives 
to the proposed rule, which have reduced compliance costs of the rule. 
The final rule decreased the amount of information required for 
submission by a mortgage loan originator. For example, the final rule 
does not require submission of financial history information such as 
bankruptcies and liens; employment terminations; pending actions; and 
felonies unrelated to crimes of dishonesty. Furthermore, the Agencies 
declined to include loan modification activities in the definition of 
mortgage loan originator, after considering comments on this issue, 
including those regarding the burden and costs of compliance. Under the 
Board's rule, modifying the terms of an existing loan to a borrower as 
part of the institution's loss mitigation efforts would not constitute 
acting as a mortgage loan originator for purposes of the S.A.F.E. Act.
    In addition, the final rule simplifies the de minimis exception to 
registration requirements of the rule, thereby decreasing compliance 
costs and increasing the number of employees who will qualify for the 
individual limits required under the de minimis exception. Under the 
proposed rule, even if an employee was within the individual limit on 
mortgage loan origination activity, the employee still could not 
utilize the exception unless the institution itself was within the 
aggregate limit on unregistered mortgage loan originators. The Board 
notes that it has taken a conservative approach to estimating the 
compliance impact of the revised de minimis exception, assuming that at 
least as many small entities would not incur registration-related 
expenses under the final rule as the proposed rule. Further, the Board 
notes that small institutions typically do not originate a significant 
volume of mortgage loans.
    The Board has not adopted other significant alternatives to the 
proposed rule. For example, the final rule continues to include a 
mandate for Agency-regulated institutions to require their mortgage 
loan originator employees to meet registration requirements and adopt 
policies and procedures to assure compliance. These requirements remain 
in the final rule because the Board believes that these provisions are 
necessary to achieve the objectives of the statute and to assure 
compliance with the rule.
    Therefore, pursuant to section 605(b) of the RFA, the Board hereby 
certifies that this proposal will not have a significant economic 
impact on a substantial number of small entities. Although a regulatory 
flexibility analysis is not needed, the Board has voluntarily provided 
an analysis.
    FDIC: In accordance with the RFA, 5 U.S.C. 601-612, an agency must 
publish a final regulatory flexibility analysis with its final rule, 
unless the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include banks with less than $175 million in 
assets). The FDIC hereby certifies that the final rule will not have a 
significant economic impact on a substantial number of small entities.
    Approximately 3,116 FDIC-supervised banks are small entities. In 
the RFA analysis for the proposed rule, the FDIC determined that 
approximately 2,255 of those small entities would incur only those 
costs related to adopting and following appropriate policies and 
procedures, not registration-related expenses, because they originate 
25 or fewer residential mortgage loans annually and therefore would not 
have qualified for the aggregate institution limit of the proposed 
rule's de minimis exception. Since the aggregate institution limit has 
been eliminated in the final rule, the exception will apply to a 
greater number of employees than under the proposed rule. However, 
because it is difficult to estimate how many more employees would be 
covered by the revised de minimis exception, a more conservative 
approach would be to assume that at least as many small entities would 
not incur registration-related expenses under the final rule as under 
the proposed rule (i.e., 2,255 small entities). For those 2,255 small 
entities, the set up costs are estimated to be about 0.5% of total non-
interest expense and annual costs are estimated to be about 0.2% of 
total non-interest expenses (based on a mean non-interest expense of 
$2.5 million reported by the 3,116 FDIC-supervised small entities for 
fourth quarter 2008).
    Given the foregoing assumptions, only approximately 861 small 
entities supervised by the FDIC--about 28% of FDIC-supervised small 
entities--will be subject to all of the requirements of the final rule. 
For those 861 small entities, the estimated initial costs for complying 
with the final rule would represent, on average, approximately 0.7% of 
total non-interest expenses, and the annual compliance costs would 
represent, on average, approximately 0.3% of total non-interest 
expenses (based on the aforementioned mean non-interest expense of $2.5 
million).
    For the 861 FDIC supervised small entities that will be subject to 
all of the

[[Page 51647]]

requirements of the final rule, the S.A.F.E. Act requirements will cost 
$17,395 for set up and $7,436 annually (based on an estimated 350 hours 
for set up, 113 hours for annual compliance, 11.435 mortgage loan 
originators per entity, and a weighted average labor cost of $49.70 per 
hour). For the 2,255 FDIC supervised small entities that will incur 
only those costs related to adopting and following appropriate policies 
and procedures, the S.A.F.E. Act requirements will cost $12,922 for set 
up (based on an estimated 260 labor hours and the aforementioned labor 
cost) and $4,473 annually (based on an estimated 90 labor hours and the 
aforementioned labor cost).
    OTS: The RFA\62\ requires Federal agencies to prepare and make 
available to the public a Final Regulatory Flexibility Analysis (FRFA) 
for a final rule, unless the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities. See 5 U.S.C. 603-605. For purposes of the RFA and OTS-
regulated entities, a ``small entity'' within the jurisdiction of the 
OTS is a savings association with assets of $175 million or less (small 
savings association). In the NPRM, the OTS certified, pursuant to 
section 605(b) of the RFA, that the regulatory flexibility analysis 
otherwise required under section 604 of the RFA was not required 
because the proposal would not have a significant economic impact on a 
substantial number of small entities.\63\ The OTS's certification was 
based on an estimated average total compliance cost of $13,311 per 
small savings association and the impact of compliance costs as a 
percentage of labor costs, as well as compliance costs as a percent of 
noninterest expenses. The OTS received one comment--from the Small 
Business Administration's Office of Advocacy (SBA Advocacy)--on the 
certification.
---------------------------------------------------------------------------

    \62\ 5 U.S.C. 601-612.
    \63\ In addition to the OTS, the Board, the OCC, the FDIC, the 
NCUA, and the FCA also certified in the proposed rule that the 
proposal would not have a significant economic impact on a 
substantial number of small entities. See 74 FR at 27398-27399.
---------------------------------------------------------------------------

    Based in part on this comment letter, the OTS has reevaluated the 
effect of this final rule on small savings associations, and, based on 
the information provided below, has reaffirmed that this rule will not 
have a significant economic impact on a substantial number of small 
entities. Therefore, OTS is not required to prepare an FRFA under 5 
U.S.C. 604. However, OTS believes that the initial analysis included in 
the proposed rule should be slightly modified, and therefore, we have 
included in the final rule a description of the economic effect on 
small savings associations and additional information addressing the 
final rule and the comment letter on the certification.
1. Description and Estimate of Small Entities Affected by the Final 
Rule
    For purposes of the OTS regulation, the final rule applies to 
savings associations and their operating subsidiaries and their 
employees who act as mortgage loan originators. In determining the 
economic impact on small savings associations, OTS determined that 385 
small savings associations would potentially be affected by the final 
rule. We estimate that 23 of these savings associations, or 6 percent, 
have no mortgage loan originator (MLO) employees, and therefore, will 
incur no costs under the final rule. The remaining 362 small savings 
associations can be expected to incur costs under the final rule. 
Specifically, OTS estimates the average cost of compliance for these 
362 small savings associations to be $17,085. In order to determine 
whether the costs of compliance have a significant economic impact on 
this population of small savings associations, we compared each 
association's projected compliance costs to both its total annualized 
labor costs and to its total annualized noninterest expense. 
(Noninterest expense is typically used as a benchmark for ``overhead'' 
in financial firms.) If projected S.A.F.E. Act compliance costs 
exceeded 5 percent of a small saving association's total labor costs, 
or 2.5 percent of its noninterest expense, OTS considered the impact of 
compliance to be ``significant.'' These benchmarks have been used in 
the past by OTS and other Federal financial regulatory agencies. OTS 
estimates that 32 small savings associations, or 8.3 percent of the 
small savings association population, will experience a significant 
economic impact associated with compliance using the benchmarks 
described above. The average cost of compliance for these 32 savings 
associations is projected to be $17,441. Pursuant to Sec.  605(b) of 
the RFA, OTS therefore certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities, 
and, accordingly, a FRFA is not required.
2. Need for, and Objectives of, the Final Rule
    As described in the SUPPLEMENTARY INFORMATION, the objectives of 
this final rule are to implement the requirements of the S.A.F.E. Act. 
Specifically, the final rule implements:
     Section 1504 of the S.A.F.E. Act (12 U.S.C. 5103(a)), 
which provides that subject to the existence of a registration regime, 
an individual who is an employee of a depository institution may not 
engage in the business of a loan originator without first: (i) 
Obtaining and maintaining annually a registration as a registered loan 
originator, and, (ii) obtaining a unique identifier; and,
     Section 1507 of the S.A.F.E. Act (12 U.S.C. 5106), which 
requires the Agencies to: (i) Jointly develop and maintain a system for 
registering employees of a depository institution and of a subsidiary 
that is owned and controlled by a depository institution and regulated 
by an Agency as registered loan originators with the National Mortgage 
License System and Registry (Registry); and (ii) furnish certain 
information, or cause it to be furnished, to the Registry.
3. Significant Issues Raised by Public Comments
    As indicated above, the OTS did not publish an IRFA with the 
proposed rule. We therefore did not receive any comments specifically 
directed at an analysis in an IRFA. However, in the comment the SBA 
Advocacy submitted, it expressed concern that the factual basis for the 
OTS's (and other Agencies') conclusion that the proposal would not have 
a significant economic impact on a substantial number of small entities 
may be insufficient, noting that the OTS's certification did not 
specify the assumptions used concerning labor costs or noninterest 
expenses. In addition, SBA Advocacy stated its concern that OTS's 
economic impact may be underestimated and sought clarification 
regarding the proposal's impact on the number of small savings 
associations.\64\ SBA Advocacy recommended that the Agencies work with 
the industry to determine an accurate estimate of the economic impact 
of the rule on small entities and develop ways to minimize that burden. 
In part as a result of this comment letter and as noted above, the OTS 
conducted further analysis of the effect of our rule on the savings 
association industry as a whole and on small savings associations in 
particular.
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    \64\ A discussion of SBA Advocacy's comments on other provisions 
of the proposed rule, namely, the de minimis exception and the 
proposed 6-month compliance period, is contained in the 
SUPPLEMENTARY INFORMATION section of this final rule.
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4. Recordkeeping, Reporting, and Other Compliance Requirements
    The final rule applies to savings associations, their operating 
subsidiaries

[[Page 51648]]

(collectively referred to as savings associations), and their employees 
who act as mortgage loan originators. Typical recordkeeping, 
administrative, computer technology and savings association management 
skills will be needed to comply with all of the rule's requirements.
    Reporting Requirements. Unless the de minimis exception applies, 
Sec.  563.103(a) of the final rule requires a mortgage loan originator 
employed by a savings association to register with the Registry, 
maintain such registration, and obtain an unique identifier. Under 
Sec.  563.103(b), an association must require each mortgage loan 
originator employee to comply with these requirements. Section 
563.103(d) describes the categories of information that an employee, or 
the employing savings association on the employee's behalf, must submit 
to the Registry, along with the employee's attestation as to the 
correctness of the information supplied, and the employee's 
authorization to obtain further information and make public some of 
this information. This section also requires the submission of the 
mortgage loan originator's fingerprints to the Registry.
    Section 563.103(e) specifies savings association and employee 
information that an association must submit to the Registry in 
connection with the initial registration of one or more mortgage loan 
originators. The savings association must annually renew this 
information and update this information if necessary between renewals. 
Authorized savings association representatives must attest to the 
correctness of this information and that such information will be 
updated on a timely basis.
    Disclosure Requirements. Section 563.105(b) requires the mortgage 
loan originator to provide the unique identifier to a consumer: (i) 
Upon request; (2) before acting as a mortgage loan originator; and (3) 
through the originator's initial written communication with a consumer, 
if any, whether on paper or electronically.
    Section 563.105(a) requires the savings association to make the 
unique identifiers of its mortgage loan originators available to 
consumers in a manner and method practicable to the association.
    Recordkeeping and Compliance Requirements. Section 563.104 requires 
a savings association that employs one or more mortgage loan 
originators to adopt and follow written policies and procedures 
designed to assure compliance with this final rule. These policies and 
procedures must be appropriate to the nature, size, complexity, and 
scope of their mortgage lending activities and will apply only to those 
employees acting within their scope of employment at the savings 
association. At a minimum, these policies and procedures must establish 
a process for: (i) Identifying which employees are required to 
register, (ii) communicating the registration requirements to 
employees, (iii) complying with the rule's unique identifier 
requirements, (iv) confirming the adequacy and accuracy of employee 
registrations though comparisons with savings association records, (v) 
monitoring employee compliance with the rule, (vi) independent 
compliance testing, (vii) taking appropriate actions with respect to 
employees who fail to comply with the registration requirements, (viii) 
reviewing employee criminal history background checks received pursuant 
to this rule, and (ix) monitoring third party compliance with the 
S.A.F.E. Act.
5. Steps Taken To Address the Economic Impact on Small Entities
    The final rule reflects the consideration given by the OTS, along 
with the other Agencies, to the impact that its requirements would have 
on small entities. First, the Agencies have revised the rule's de 
minimis exception to reduce compliance burden. In the proposed rule, 
the Agencies established a de minimis exception that would have 
excepted from the registration requirements an employee of an Agency-
regulated institution if, during the last 12 months: (1) The employee 
acted as a mortgage loan originator for 5 or fewer residential mortgage 
loans and (2) the Agency-regulated institution employs mortgage loan 
originators who, while excepted from registration pursuant to this 
section, in the aggregate, acted as a mortgage loan originator in 
connection with 25 or fewer residential mortgage loans. Many commenters 
on this provision noted the complexity of the proposed exception. One 
commenter stated that the de minimis exception would not have any 
significant effect because its complexity would outweigh its benefits. 
Others noted that the proposed exception would be difficult for an 
institution to monitor and maintain. Still others said that the 
proposed de minimis exception would be fairer, and much easier to 
apply, if the threshold limitation applied only to the employee or to 
the institution, but not both. SBA Advocacy specifically commented that 
the proposed de minimis exception would make the rule unduly burdensome 
on small community institutions. In response to these and other 
comments and upon further analysis, the Agencies removed the 
institution threshold from this de minimis exception. As a result, the 
final rule's de minimis exception only contains the individual 
threshold, as well as a prohibition on any Agency-regulated institution 
from engaging in any act or practice to evade the limits of the de 
minimis exception. This revised exception should simplify compliance 
and therefore impose the least burden overall for institutions, 
including small entities.
    The OTS also has reviewed alternatives for small entity compliance, 
including eliminating the requirement for small savings associations to 
adopt and follow written policies and procedures addressing all of the 
elements described in the final rule. For example, under such an 
approach, a small savings association's risk based compliance program 
might include only such procedures as are necessary to enable the 
association to demonstrate compliance with the registration and renewal 
requirements of the S.A.F.E. Act and the final rule. Although such an 
approach may have reduced the compliance cost per small savings 
association, the OTS does not believe that it would best serve the 
interests of savings associations or the OTS. Appropriate policies and 
procedures provide an institution and its employees with the 
expectations of the institution's board and include the specific 
implementing guidance that is applicable to the activities of that 
institution. Furthermore, such policies and procedures are necessary to 
enable examiners to evaluate the effectiveness of institutions' 
implementation of the S.A.F.E. Act requirements that apply to them. In 
reviewing this alternative, we determined that applying the policies 
and procedures requirement in the same way to all institutions, 
regardless of size, is necessary to ensure consistency in 
implementation and enforcement of the S.A.F.E. Act and is, therefore, 
the most appropriate way to ensure that the purposes of the S.A.F.E Act 
are met.
    The OTS, and the other Agencies, also made changes to the final 
rule that reduce the impact that its requirements would have on all 
Agency-regulated financial institutions, including small entities. The 
final rule decreased the amount of information required for submission 
by a mortgage loan originator. Specifically, the final rule does not 
require submission of financial history information such as 
bankruptcies and liens; employment and terminations; pending actions; 
and felonies unrelated to crimes of dishonesty. Furthermore, the 
Agencies declined to include loan modification

[[Page 51649]]

activities in the final rule's definition of mortgage loan originator. 
Under the OTS's rule, Agency-regulated institution employees engaged 
solely in bona fide cost-free loss mitigation efforts, which result in 
reduced and sustainable payments for the borrower generally would not 
meet the definition of ``mortgage loan originator.'' This reduces the 
number of savings association employees subject to the final rule's 
requirements.
    FCA: Pursuant to section 605(b) of the RFA (5 U.S.C. 601 et seq.) 
the FCA certifies that the final rule will not have a significant 
economic impact on a substantial number of small entities. Each of the 
banks in the Farm Credit System, considered together with its 
affiliated associations, has assets and annual income in excess of the 
amounts that would qualify them as small entities.
    The comment letter from the Office of Advocacy in the Small 
Business Administration (SBA) stated that the FCA did not provide any 
information about the potential impact of the rule on FCS institutions. 
The RFA requires each agency to certify that a rulemaking will not have 
a significant economic impact on a significant number of small 
entities. The FCA observes that the RFA definition of ``small entity'' 
derives from the SBA's definition of ``small business concern,'' 
including size standards. According to section 3(a)(1) of the Small 
Business Act, as amended, a small business concern is independently 
owned and operated, and it is not dominant in its field of operation. 
Whether a business concern is ``independently owned and operated'' 
depends, in part, on its affiliation with other business entities. 
Generally, an affiliate is either controlled by, or has control over 
another entity. Businesses that are economically dependent on each 
other because of their ownership, management, and contractual 
relationships may be affiliates. FCS associations own and control their 
funding banks. Additionally, FCS associations borrow exclusively from 
their funding banks, and they pledge virtually all of their loans and 
other assets to these banks to secure their loans. For these reasons, 
the FCA has determined that the interrelated ownership, control, and 
contractual relationships are sufficient to treat FCS banks and 
associations as a single entity for the purposes of the RFA.
    SBA regulations also establish size categories to determine whether 
entities that engage in ``Credit Intermediation and Related 
Activities'' are small business concerns. These regulations categorize 
``All Other Non-Depository Credit Intermediation'' institutions as 
small entities if their annual receipts are $7 million or less. As 
affiliated entities, the combined annual receipts of each Farm Credit 
bank and its affiliated associations exceed $7 million. For this 
reason, FCS institutions do not qualify as small entities under the 
RFA.
    NCUA: In accordance with the RFA, 5 U.S.C. 601-612, NCUA must 
publish a regulatory flexibility analysis with its final rule, unless 
NCUA certifies that the rule will not have a significant economic 
impact on a substantial number of small entities (defined for purposes 
of the RFA to include credit unions with less than $10 million in 
assets). Approximately 2,995 out of 7,554 Federally insured credit 
unions and 61 out of 156 non-Federally insured credit unions are small 
entities. NCUA hereby certifies that the final rule would not have a 
significant economic impact on a substantial number of these small 
entities.
    The final rule will apply to all Federally insured credit unions, 
non-Federally insured credit unions located in States where the State 
supervisory authorities enter into and maintain MOUs with NCUA, and 
employees who act as mortgage originators for these credit unions. The 
final rule imposes no requirements on credit unions not originating 
residential mortgages. This accounts for 1,923 of the 2,995 small, 
Federally insured credit unions and 45 of the 61 small, non-Federally 
insured credit unions.
    Under the final rule, all these credit unions, including small 
entities, originating any residential mortgages must have policies and 
procedures in place for mortgage loan origination registration. This 
currently includes only about 1,072 of the 2,995 small, Federally 
insured credit unions, and only about 16 of the 61 small, non-Federally 
insured credit unions. The policies and procedures must be appropriate 
to the nature, size, complexity, and scope of the credit unions' 
mortgage lending activities and will apply only to those employees 
acting within their scope of credit union employment.
    Approximately 2,716 of the 2,995 small, Federally insured credit 
unions, and 15 of the 16 small, non-Federally insured credit unions, 
would qualify for the final rule's de minimis exception to the 
registration requirements for mortgage loan originators because they 
originate fewer than five or no residential mortgage loans. Those 
credit unions not originating mortgages have no obligations under this 
final rule. Those small credit unions and their employees originating 
between one and four mortgages per year are not subject to the final 
rule's registration requirements and, thus, drafting and implementing 
the policies and procedures will not be burdensome.
    Accordingly, NCUA estimates only about 279 of the 2,995 small 
Federally insured credit unions, about 9.3% of them, and only one of 
the 61 small, non-Federally insured credit unions, about 1.6%, will be 
subject to the final rule's registration requirements and will 
establish policies and procedures for the registration.
    Therefore, for all of the above reasons, NCUA concludes the final 
rule would not have a significant economic impact on a substantial 
number of small credit unions.

B. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995, the agencies may not conduct or sponsor, and respondents are 
not required to respond to, an information collection unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number.
    The information collection requirements contained in this joint 
final rule have been submitted by the OCC, FDIC, OTS, and NCUA to, and 
pre-approved by, OMB under section 3506 of the PRA and Sec.  1320.11 of 
OMB's implementing regulations (5 CFR part 1320). The FCA collects 
information from Farm Credit System institutions, which are Federal 
instrumentalities, in the FCA's capacity as their safety and soundness 
regulator, and, therefore, OMB approval is not required for this 
collection. The Board reviewed the proposed rule under the authority 
delegated to the Board by the Office of Management and Budget. The 
final rule contains requirements subject to the PRA. The requirements 
are found in 12 CFR ----.103(a)-(b), (d)-(e), ----.104, and ----.105.
    No comments concerning PRA were received in response to the notice 
of proposed rulemaking. Therefore, the hourly burden estimates for 
respondents noted in the proposed rule have not changed. The agencies 
have an ongoing interest in your comments. They should be sent to 
[Agency] Desk Officer, [OMB Control No.], by mail to U.S. Office of 
Management and Budget, 725 17th Street, NW., 10235, Washington, DC 
20503, or by fax to (202) 395-6974. Written comments should address:
    (a) Whether the collection of information is necessary for the 
proper performance of the Federal banking agencies' functions, 
including whether the information has practical utility;

[[Page 51650]]

    (b) The accuracy of the estimates of the burden of the information 
collection, including the validity of the methodology and assumptions 
used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or start up costs and costs of operation, 
maintenance, and purchase of services to provide information.

C. OCC Executive Order 12866 Determination

    Executive Order 12866 requires each Federal agency to provide to 
the Administrator of OMB's Office of Information and Regulatory Affairs 
(OIRA) a Regulatory Impact Analysis for agency actions that are found 
to be ``significant regulatory actions.'' ``Significant regulatory 
actions'' include, among other things, rulemakings that ``have an 
annual effect on the economy of $100 million or more or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities.'' \65\ 
Regulatory actions that satisfy one or more of these criteria are 
referred to as ``economically significant regulatory actions.'' In 
conducting this Regulatory Impact Analysis, Executive Order 12866 
requires each Federal agency to provide to OIRA:
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    \65\ Executive Order 12866 (September 30, 1993), 58 FR 51735 
(October 4, 1993). For the complete text of the definition of 
``significant regulatory action,'' see E.O. 12866 at Sec.  3(f). A 
``regulatory action'' is ``any substantive action by an agency 
(normally published in the Federal Register) that promulgates or is 
expected to lead to the promulgation of a final rule or regulation, 
including notices of inquiry, advance notices of proposed 
rulemaking, and notices of proposed rulemaking.'' E.O. 12866 at 
Sec.  3(e).
---------------------------------------------------------------------------

     The text of the draft regulatory action, together with a 
reasonably detailed description of the need for the regulatory action 
and an explanation of how the regulatory action will meet that need;
     An assessment of the potential costs and benefits of the 
regulatory action, including an explanation of the manner in which the 
regulatory action is consistent with a statutory mandate and, to the 
extent permitted by law, promotes the President's priorities and avoids 
undue interference with State, local, and Tribal governments in the 
exercise of their governmental functions;
     An assessment, including the underlying analysis, of 
benefits anticipated from the regulatory action (such as, but not 
limited to, the promotion of the efficient functioning of the economy 
and private markets, the enhancement of health and safety, the 
protection of the natural environment, and the elimination or reduction 
of discrimination or bias) together with, to the extent feasible, a 
quantification of those benefits;
     An assessment, including the underlying analysis, of costs 
anticipated from the regulatory action (such as, but not limited to, 
the direct cost both to the government in administering the regulation 
and to businesses and others in complying with the regulation, and any 
adverse effects on the efficient functioning of the economy, private 
markets (including productivity, employment, and competitiveness), 
health, safety, and the natural environment), together with, to the 
extent feasible, a quantification of those costs; and
     An assessment, including the underlying analysis, of costs 
and benefits of potentially effective and reasonably feasible 
alternatives to the planned regulation, identified by the agencies or 
the public (including improving the current regulation and reasonably 
viable nonregulatory actions), and an explanation why the planned 
regulatory action is preferable to the identified potential 
alternatives.
    The OCC has concluded that the final rule exceeds the $100 million 
criterion and therefore is an economically significant regulatory 
action. As required by Executive Order 12866, the OCC prepared a 
Regulatory Impact Analysis, which was submitted to OIRA on January 8, 
2010. The OCC's final set of revisions responding to OIRA comments was 
submitted on July 1, 2010. As discussed in more detail in the 
Regulatory Impact Analysis, the OCC determined that given the 
constraints imposed on the OCC by the S.A.F.E. Act, and based on the 
estimated mean cost, the rule was the least cost option available to 
the OCC. The OCC's Regulatory Impact Analysis in its entirety is 
available at http://www.regulations.gov, docket ID OCC-2010-0007.

D. OTS Executive Order 12866 Determination

    Executive Order 12866 requires each Federal agency to provide the 
Administrator of OMB's OIRA a Regulatory Impact Analysis for agency 
actions that are found to be ``significant regulatory actions.'' 
Significant regulatory actions include, among other things, rulemakings 
that ``have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities.'' \66\ Regulatory actions that satisfy one or more of 
these criteria are referred to as ``economically significant regulatory 
actions.'' In conducting this Regulatory Impact Analysis, Executive 
Order 12866 requires each Federal agency to provide to OIRA:
---------------------------------------------------------------------------

    \66\ Executive Order 12866 (September 30, 1993), 58 FR 51735 
(October 4, 1993). For the complete text of the definition of 
``significant regulatory action,'' see E.O. 12866 at Sec.  3(f). A 
``regulatory action'' is ``any substantive action by an agency 
(normally published in the Federal Register) that promulgates or is 
expected to lead to the promulgation of a final rule or regulation, 
including notices of inquiry, advance notices of proposed 
rulemaking, and notices of proposed rulemaking.'' E.O. 12866 at 
Sec.  3(e).
---------------------------------------------------------------------------

     The text of the draft regulatory action, together with a 
reasonably detailed description of the need for the regulatory action 
and an explanation of how the regulatory action will meet that need;
     An assessment of the potential costs and benefits of the 
regulatory action, including an explanation of the manner in which the 
regulatory action is consistent with a statutory mandate and, to the 
extent permitted by law, promotes the President's priorities and avoids 
undue interference with State, local, and Tribal governments in the 
exercise of their governmental functions;
     An assessment, including the underlying analysis, of 
benefits anticipated from the regulatory action (such as, but not 
limited to, the promotion of the efficient functioning of the economy 
and private markets, the enhancement of health and safety, the 
protection of the natural environment, and the elimination or reduction 
of discrimination or bias) together with, to the extent feasible, a 
quantification of those benefits;
     An assessment, including the underlying analysis, of costs 
anticipated from the regulatory action (such as, but not limited to, 
the direct cost both to the government in administering the regulation 
and to businesses and others in complying with the regulation, and any 
adverse effects on the efficient functioning of the economy, private 
markets (including productivity, employment, and competitiveness), 
health, safety, and the natural environment), together with, to the 
extent feasible, a quantification of those costs; and

[[Page 51651]]

     An assessment, including the underlying analysis, of costs 
and benefits of potentially effective and reasonably feasible 
alternatives to the planned regulation, identified by the agencies or 
the public (including improving the current regulation and reasonably 
viable nonregulatory actions), and an explanation why the planned 
regulatory action is preferable to the identified potential 
alternatives.
    The OTS has determined that this final rule is not a significant 
regulatory action under Executive Order 12866. We have concluded that 
the changes made by this final rule will not have an annual effect on 
the economy of $100 million or more. The OTS further concludes that 
this final rule does not meet any of the other standards for a 
significant regulatory action set forth in Executive Order 12866. As 
required by Executive Order 12866, the OTS prepared a Regulatory Impact 
Analysis, which was submitted to OIRA on March 9, 2010. The OTS's final 
revisions were submitted to OIRA on July 12, 2010. As discussed in more 
detail in the Regulatory Impact Analysis, the OTS determined that given 
the constraints imposed on the OTS by the S.A.F.E. Act, and based on 
the estimated cost, the rule was the least cost option available to the 
OTS. The OTS's Regulatory Impact Analysis in its entirety is available 
at http://www.regulations.gov, Docket No. OTS-2010-0021.

E. OCC and OTS Unfunded Mandates Reform Act of 1995 Determination

    Section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1532), requires the OCC and OTS to prepare a budgetary impact statement 
before promulgating a rule that includes a Federal mandate that may 
result in the expenditure by State, local, and Tribal governments, in 
the aggregate, or by the private sector, of $133 million or more in any 
one year. However, this requirement does not apply to regulations that 
incorporate requirements specifically set forth in law. Because this 
proposed rule implements the S.A.F.E. Act, the OTS and OCC have not 
conducted an Unfunded Mandates Analysis for this rulemaking.\67\
---------------------------------------------------------------------------

    \67\ See 2 U.S.C. 1531.
---------------------------------------------------------------------------

F. OCC and OTS Executive Order 13132 Determination

    E.O. 13132 sets forth certain ``Fundamental Federalism Principles'' 
and ``Federalism Policymaking Criteria'' that must be followed by the 
OCC and OTS in developing any regulation that has Federalism 
implications. A regulation has Federalism implications if it has 
``substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.'' If a 
rule meets the test for Federalism implications, the executive order 
requires the agency, among other things, to prepare a Federalism 
summary impact statement for inclusion in the rule's SUPPLEMENTARY 
INFORMATION section and must consult with State and local officials 
about the rule. The OCC and OTS have determined that their respective 
portions of the final rule do not have a substantial direct effect on 
the States, on the connection between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, the final rule does not have 
any Federalism implications for purposes of Executive Order 13132.

G. NCUA Executive Order 13132 Determination

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on State and local interests. In 
adherence to fundamental Federalism principles, the NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5) 
voluntarily complies with the Executive Order. The final rule applies 
to credit unions and would not have substantial direct effects on the 
States, on the connection between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. The NCUA has determined that the final 
rule does not constitute a policy that has Federalism implications for 
purposes of the Executive Order.

H. NCUA: The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this final rule would not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

I. NCUA: Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) provides generally for congressional review 
of agency rules. A reporting requirement is triggered in instances 
where NCUA issues a final rule as defined by section 551 of the 
Administrative Procedure Act. 5 U.S.C. 551. NCUA does not believe this 
final rule is a ``major rule'' within the meaning of the relevant 
sections of SBREFA. NCUA has submitted the rule to the Office of 
Management and Budget (OMB) for its determination and OMB concurred 
that the rule is not a major rule.

[FR Doc. C1-2010-18148 Filed 8-20-10; 8:45 am]
BILLING CODE 1301-00-D