1. Secure and Fair Enforcement for Mortgage Licensing Act effective 10-1-10 and beyond Ace In The Hole Management, LLC 2010 All Rights Reserved

2. What we will cover in this training session Important Dates Bank Management Responsibilities Who is a Mortgage Loan Originator? Mortgage Loan Originators Responsibilities. What is the Nationwide Mortgage Licensing System and Registry? What does the Dodd-Frank Act change? Ace In The Hole Management, LLC 2010 All Rights Reserved 3. 10-1-10 Approved policy Written Procedures Job descriptions for all loan department personnel. Start using new 1003 which has the identifier field in the GMI section. 1-28-11 (approximate date) Implement procedures for registration Within 180 days, register all mortgage loan originators. Ace In The Hole Management, LLC 2010 All Rights Reserved 4. By definition an MLO is an individual who: 1-Takes an application, and 2-Negotiates terms for compensation or gain, including salary, incentive or bonus. The SAFE Act is not guided by the new compensation rules related to other regulations. Ace In The Hole Management, LLC 2010 All Rights Reserved 5. Who is Loan Assistant that inputs application date during person to person interview with applicant. Loan Officer (or any employee no matter what their title) that discusses loan terms with applicant. 3rd party originator that discusses terms with applicant, if the bank direct funds the loan. Who isnt. Loan Assistant that inputs application data to system receiving customer information indirectly, with no discussion of terms with applicant. Back Officer clerk that gathers supporting documentation, with no discussion of terms with applicant. Closer, with no discussion of terms related to the approval process. Credit Administration or Underwriting , as long as they do not discuss terms with applicant or offer alternative terms. Ace In The Hole Management, LLC 2010 All Rights Reserved 6. Who isnt. It is important to understand that credit underwriting does not require registration. If the underwriter can discuss terms or negotiate rate, they must be registered. Job Description should clearly state they do not negotiate rate or discuss terms with applicant. Use caution if the credit underwriting process can propose or discuss alternatives to the original offered terms or rate. If they can, they need to register. Ace In The Hole Management, LLC 2010 All Rights Reserved 7. FEDERALLY INSURED FINANCIAL INSTITUTION Federal Registration on NMLS required for the a financial institution that has employees that originate mortgage loans. MLO Federal Registration on NMLS required for the MLO employed or compensated by a federally regulated financial institution . Ace In The Hole Management, LLC 2010 All Rights Reserved 8. STATE FINANCIAL INSTITUTION THAT IS NOT FEDERALLY REGULATED Must register their institution with the state regulatory agency, such as a mortgage company that is independent of a bank. MLO The MLO that is not employed by a federally regulated financial institution, such as a mortgage broker or lender employed or compensated by a mortgage company that is independent of a bank. Ace In The Hole Management, LLC 2010 All Rights Reserved 9. The role bank management plays in the registration process. The role the Human Resources department plays in the registration process. Ace In The Hole Management, LLC 2010 All Rights Reserved 10. The Initial Bank Registration Process Ace In The Hole Management, LLC 2010 All Rights Reserved 11. Make sure that the bank is registered as a federally regulated institution that originates mortgage loans. Approve each lender that is defined as a mortgage loan originator for the bank. Assure information provided by the originator is accurate to the best of their ability. Bank is responsible for accuracy of information on the MLO form MU4R. Track renewal requirements. Ace In The Hole Management, LLC 2010 All Rights Reserved 12. The bank must provide institution information to the registry. Bank must include contact person information. Bank must appoint registry account administrators. This is accomplished using a MU1R form. Get the form www.nationwidelicensingsystem.org Ace In The Hole Management, LLC 2010 All Rights Reserved 13. Bank will have to pay fees for initial filing, as well as an annual renewal fee. In addition, the two-factor annual fee for each administrator. Proposed fees: $100 initial fee $100 annual renewal fee $70 annual administrator fee Ace In The Hole Management, LLC 2010 All Rights Reserved 14. Once each MLO is registered: Their unique identifier must be added to each 1003 application form. Their unique identified must be disclosed along with the MLOs name on the bank website or in the bank lobby, wherever a consumer can apply for a mortgage loan. Must be provided to a consumer upon request. Ace In The Hole Management, LLC 2010 All Rights Reserved 15. If the mortgage lending entity is owned by the holding company and not the federally regulated bank, they must comply with the state licensing requirements. Those include each MLO must: Provide financial statements Successfully complete tests Ace In The Hole Management, LLC 2010 All Rights Reserved 16. The Hiring and Registration Process Ace In The Hole Management, LLC 2010 All Rights Reserved 17. The financial institution is responsible for underwriting of an MLO prior to the MLOs application or approval for registration. Establish underwriting criteria. Do not allow an MLO to register if criminal history is known. Do not allow an MLO to register if their credit does not meet bank guidelines. Do not allow an MLO to register if their information they submitted is inaccurate. Ace In The Hole Management, LLC 2010 All Rights Reserved 18. Job descriptions should state specifically that the individual in this job is not a Mortgage Loan Originator or state that they do not discuss terms or negotiate rates for mortgage loans. Describe an MLO Hiring policy should already include that criminal acts or a breach of honesty or trust is prohibited. Hiring Practices should already include: credit check and verification the applicant is not barred from banking via FDIC website. Ace In The Hole Management, LLC 2010 All Rights Reserved 19. SAFE Act requires the hiring policy stipulate general rules for credit. What score is required before an offer of employment is extended. Procedures must be written regarding the tracking of initial and annual renewals. Policies should stipulate the prohibition of originating mortgage loans without a license and identifier after (18 months after effective date) specific date. Ace In The Hole Management, LLC 2010 All Rights Reserved 20. Consider defining compensation in the HR policy to include salary, incentive, bonus or any fees paid in relationship to production. An lender must be registered if they receive compensation for originating a mortgage loan. Consider including in your HR Policy that you may conduct annual review of MLOs credit and criminal background . FI is responsible to track renewal and provide underwriting for MLO registration and renewal. Ace In The Hole Management, LLC 2010 All Rights Reserved 21. This is not designed to be the responsibility of the bank. NMLS will manage the entire fingerprint and criminal background check process. There is nothing a bank must do outside of the registration and attestation process. Ace In The Hole Management, LLC 2010 All Rights Reserved 22. The Hiring and Registration Process Ace In The Hole Management, LLC 2010 All Rights Reserved 23. Create an individual file. Upload Data Complete a MU4R form. Note: bank may complete this form for the MLO but the MLO must attest to accuracy. Authorize a criminal background check. Submit fingerprints for a national criminal background check. Ace In The Hole Management, LLC 2010 All Rights Reserved 24. MLO will have to pay for initial registration fee, annual renewal fee and criminal background check fee. Proposed Fee structure: $30 initial registration fee $30 annual renewal fee $39 criminal background check fee The initial fee will likely be doubled if the MLO registers after July 1. It is not finalized yet if the bank can pay these fees for the MLO. Ace In The Hole Management, LLC 2010 All Rights Reserved 25. Once the MLO is registered and assigned a Unique Identifier: The number will stay with them forever. Consumers can access certain public information about the MLO. The number must be on every 1003. The number must be available along with the MLOs name on the bank website or in the lobby, wherever the consumer can apply for a mortgage loan. The number must be provided to a consumer upon request. Ace In The Hole Management, LLC 2010 All Rights Reserved 26. MLO will complete their identifying information. Attest to their current residential address. Provide 10 years of financial services employment history. Provide and attest to current employer. Answer 15 disclosure questions designed to cover criminal, judicial, regulatory and arbitration topics. Ace In The Hole Management, LLC 2010 All Rights Reserved 27. After the MLO completes and submits the form, the bank will attest to the accuracy of the information. The MLO will be notified to contact a fingerprint site in their area. They will need to schedule an appointment with the site. The site will fingerprint the MLO, submit the fingerprints electronically to the FBI, the FBI will send the information back to the NMLS and the bank. Ace In The Hole Management, LLC 2010 All Rights Reserved 28. There are approximately 800 sites that provide electronic fingerprinting in the system. Electronic submission results in turn around time of less than 48 hours. Majority are turned around within 24 hours. There are thousands of sites that do paper submission. Ace In The Hole Management, LLC 2010 All Rights Reserved 29. Lots of media hype, not must impact unless you bank if over $10 billion in assets. Ace In The Hole Management, LLC 2010 All Rights Reserved The Dodd-Frank Act addressed the S.A.F.E. Act by changing the regulating agency for banks over $10 billion in assets to the new consumer bureau. Banks under $10 billion in assets remain regulated by their current federal regulator. 30. Ace In The Hole Management, LLC 2010 All Rights Reserved Federally Regulated Institution process Institution must register with NMLS. Appoint NMLS Administrators for the FI. Approve each MLO for your institution on the NMLS. Procedures should address credit and criminal qualifications. Manage the approval process for your MLO, manage renewal process. Mortgage Loan Originators must register with NMLS Must complete information in registry accurately and completely. Submit Annual Renewal. Each MLO must authorize a criminal background check and credit report. 31. Ace In The Hole Management, LLC 2010 All Rights Reserved Missouri State Licensing Process for non-federally regulated entities and bank holding companies Institution must register with NMLS Approve each MLO for your institution on the NMLS Manage the approval process for your MLO, manage renewal process. MLO must have completed 20 hours of NMLS approved pre- licensure education BEFORE submitting an application to NMLS. Must complete information in registry accurately and completely. Submit Annual Renewal. Must take 8 hours of continuing education in 2011 in order to renew for 2012 unless pre- licensure education was completed in 2011. All applicants must pass both the State and National Component of the SAFE MLO test. Each MLO must submit fingerprints and have a criminal background check at the time of application for a license. All MLOs will have to provide authorization for a credit report. MLO in the State of Illinois, critical deadlines have already passed. Consult your institution or the Department of Financial and Professional Reguation at 312-793-2284. 32. Ace In The Hole Management, LLC 2010 All Rights Reserved To receive credit for viewing this training, please click on the icon below. This training has been provided as of November 1, 2010. Pending changes are not reflected in this training. The Bank and MLOs are advised to obtain additional information after approval of all provisions of the S.A.F.E. Act in early 2011.