Alston & Bird Consumer Finance Blog


Majority of States Now Permit Remote Work for MLOs and Mortgage Company Employees

A&B Abstract:

On June 9, Illinois became the latest state in a growing trend to authorize remote work for mortgage loan originators and mortgage company employees. This makes five states joining the list of jurisdictions legislatively permitting MLOs to work remotely since Montana enacted similar legislation in March, with more states expected during the 2024 legislative sessions.

The Illinois amendments to The Residential Mortgage License Act of 1987, signed by Governor Pritzker on June 30, 2023, take effect on January 1, 2024 and specifies requirements that licensed MLOs must follow to allow employees to work from remote locations. These changes include:

  • Requiring the licensee to have written policies and procedures for supervising mortgage loan originators working from a remote location;
  • Restricting access to company platforms and customer information in accordance with the licensee’s comprehensive written information security plan;
  • Prohibiting in-person customer interactions at a mortgage originator’s residence unless the residence is a licensed location;
  • Prohibiting maintaining physical records at a remote location;
  • Requiring customer interactions and conversations about consumers to be in compliance with state and federal information security requirements.
  • Mandating mortgage loan originators working from a remote location to use a secure connection, either through a virtual private network (VPN) or other comparable system, to access the company’s system;
  • Ensuring the licensee maintains appropriate security updates, patches, or other alterations to devices used for remote work;
  • Requiring the licensee to be able to remotely lock, erase, or otherwise remotely limit access to company-related contents on any device; and
  • Designating the loan originator’s local licensed office as their principal place of business on the NMLS.

Nevada, Virginia, and Florida passed legislation resembling the Illinois law, mandating similar security, compliance, and surveillance requirements.

Temporary Guidance Ending

Remote work flexibility is now the majority stance for the industry. The four states mentioned above are the most recent since Montana passed similar legislation in March. Of the 53 U.S. jurisdictions tracked by the Mortgage Bankers Association (including Washington, D.C., Guam, and Puerto Rico), 30 have implemented permanent statutes or regulations allowing remote work, with 9 more jurisdictions still operating under temporary guidance permitting remote work.

Of the states still operating under temporary guidance, Oklahoma’s guidance expires December 31, 2023. The state government will need to take further action, whether legislative or regulatory, to continue to allow MLOs to work remotely. Louisiana issued temporary guidance in July 2020, which would stay active, “as long as there is a public health emergency relating to COVID-19, as declared by Governor Edwards of the State of Louisiana, or until rescinded or replaced.” Governor Edwards ended the emergency in March 2022 when he did not renew the expiring order. Remote work in Louisiana is now operating in a grey zone with regards to whether the temporary order is still in effect due to the, “until rescinded” language.

Different Methods, Similar Results

Although remote work is the new norm, states are taking different routes to allow MLOs to work remotely. Many statehouses passed legislative statutes, which allow for stable policies but can be difficult to revise through the legislative process. These statutes tend to follow similar structures and have similar requirements. Illinois, Virginia, Florida, and Nevada require MLOs to work from home so long as certain records are not maintained in remote locations, professionals do not meet with customers outside of licensed facilities, employees are properly supervised as required by the license, and the company maintains adequate cybersecurity measures to protect customer data.

Nebraska’s state legislature did not pass specific guidance regarding remote work for MLOs, but rather, passed authorization to allow the Nebraska Department of Banking and Finance to promulgate regulations allowing remote work for MLOs. The Department has not yet issued permanent guidance for local MLOs regarding remote work requirements. Although using the regulatory system to implement rules may take longer to implement, it is also more flexible to changing circumstances and generally permits regulators to revise guidance faster than it takes a state legislature to convene, draft, and pass appropriate amendments to existing legislation.


The post-COVID workforce is clinging onto the last bit of convenience that the pandemic forced upon us. Surveys show that remote work flexibility is now the primary perk that would drive people to different employers. Since the technology needed to safely conduct business remotely is now proven, states are realizing that the easiest way to retain qualified mortgage professionals is to allow remote work flexibility. The American Association of Residential Mortgage Regulators (AARMR) expressed concern over a lack of remote work options in 2022 before states started passing permanent legislation. State legislatures embraced AARMR’s concern that a lack of remote work options could cause professionals to leave the industry, further widening the access gap for already underserved communities. The remote work trend has touched other industries that were previously in-person only and is likely to grow in those other industries (e.g., remote notarization) as far as practically feasible.

* We would like to thank Associate, CJ Blaney, for their contributions to this blog post.

States Continue Trend Supporting Remote Work for MLOs and Mortgage Company Employees

A&B ABstract:

Effective July 1, Montana will become the latest jurisdiction to codify authorization for mortgage loan originators and mortgage company employees to engage in remote work. That legislation follows a general trend over the past year – and, more so, since the early days of the COVID-19 pandemic – to allow remote operations.

No longer a temporary measure necessitated by pandemic lockdowns, remote work is increasingly acknowledged by regulators as an acceptable permanent option for today’s working environment. Last year, 18 jurisdictions took action to extend temporary permission for, or permanently authorize, the practice, and the trend continues in 2023.

Updates to the Montana Mortgage Act

On February 16, Montana Governor Greg Gianforte signed House Bill 30, substantively amending the Montana Mortgage Act and adding requirements relating to the conduct of mortgage business from a remote location. Specifically, the measure requires that each employee or independent contractor engaged in remote work:

  • Does not meet with the public at an unlicensed personal residence;
  • Does not maintain physical or electronic business records at the remote location;
  • Does not display any signage or advertising of the entity or the MLO at a remote location;
  • Takes reasonable precautions to protect confidential information in accordance with state and federal laws; and
  • Ensures that their NMLS records designate a properly licensed location as the MLO’s official workstation and a manager as a supervisor.

Further, the amended Act mandates that a licensed entity must:

  • Have written policies and procedures for working remotely, and supervise and enforce those policies and procedures;
  • Ensure that any device used to engage in the mortgage business has appropriate security, encryption, and device management controls to ensure the security and confidentiality of customer information;
  • Maintain its computer systems and customer information in accordance with its information technology security plan and all state and federal laws; and
  • Annually review and certify that its employees and independent contractors engaged in the mortgage business from remote locations meet specific requirements, and, upon request, provide the Department of Administration with written documentation of such review.

As discussed further below, the Montana measure follows a pattern established by other states, where remote work requirements have been established by regulatory guidance, and by temporary and then permanent legislation, since mid-2020.

Remote Work Authorization Trends 2020 to Present

The purpose of the legislative and regulatory guidance on remote work has changed since the spring of 2020. Remote work was already considered increasingly viable prior to the COVID-19 pandemic. Permissions and adaptations for remote work accelerated drastically with the onset of the pandemic in the spring of 2020. Today, guidance initially necessitated as an emergency response has become a permanent approach to regulating remote work in many states, enabling mortgage companies to take advantage of the benefits of a new mode of operations.

Throughout the evolution of the remote work trend, industry associations have stepped in to survey the regulatory choices being made across states and to recommend best practices. In July 2020, the Mortgage Bankers Association (“MBA”) issued a letter to the Conference of State Bank Supervisors addressing near- and long-term considerations for allowing remote work. Since that letter, there has been much activity across states in implementing permanent and temporary remote work authorization. In recognition of the significant changes to the mortgage business resulting from the new normal of remote work, on June 7, 2022, the American Association of Residential Mortgage Regulators (“AARMR”) issued guidance on best practices for permitting employees to work remotely.

In general, the guidance requires licensed mortgage entities to:

  1. Develop policies and procedures for adequate supervision of MLOs working remotely;
  2. Ensure that MLOs refrain from meeting with consumers in their homes (unless, if applicable, the MLO’s home is licensed as a branch);
  3. Ensure that MLOs use a VPN or similar system of authentication for access to the company’s secure origination system;
  4. Maintain and update security for devices used to access the company’s secure origination system;
  5. Ensure that MLOs refrain from storing physical business records at any location other than the company’s licensed main office; and
  6. Ensure that documents are available at a licensed location for regulators to conduct examinations.

The majority of legislation enacted, and guidance adopted, by jurisdictions reflects the framework set out by the MBA and AARMR.

State Response

Following the issuance of the MBA and AARMR guidance, several states have focused on effective implementation of key processes for remote operations. For example, jurisdictions including California, Kansas, Kentucky, Ohio, Pennsylvania, Rhode Island, Tennessee, and Washington require licensees to develop a written information security plan to ensure that the security goals for remote work are met.

States such as California provide specific requirements on the safeguards that must be included in the policy. In another common trend, California, the District of Columbia, Kentucky, Pennsylvania, Rhode Island, and Washington explicitly note that a remote location should not be advertised or represented to consumers as an operating location. Across states, licensees should ensure that consumer and licensee information and records remain accessible for regulatory oversight and exams.

2022 State Activity on Remote Work Authorization

In 2022, eight states (California, Kansas, Kentucky, Ohio, Pennsylvania (Amendment), Rhode Island, South Dakota, and Tennessee) enacted legislation addressing remote work. In addition to passing legislation, Pennsylvania enacted an amendatory measure and Rhode Island issued related guidance. Georgia, Oregon, and Washington adopted regulations implementing previous statutory measures. Finally, nine jurisdictions issued guidance, or extended temporary guidance, regarding remote operations: Colorado, the District of Columbia, Kansas, Maine, Oklahoma, Rhode Island, Vermont, West Virginia, and Wyoming.

As of February 2023,  there were significant developments in remote work guidance and legislation in Montana and California. Montana amended the Montana Mortgage Act to permit and establish the requirements for mortgage business employees to work remotely effective July 1, 2023. The California Department of Financial Protection and Innovation issued guidance permitting remote work by employees of a licensee under the California Residential Mortgage Lending Act.

Outliers and Special Considerations

Jurisdictions have not implemented remote work guidance uniformly. Mortgage companies and MLOs should be aware of unique requirements and restrictions in certain states.

Security and Data Privacy

Mortgage industry regulators and companies are particularly concerned with ensuring responsible handling of data and maintaining the security of company systems and consumer information in connection with remote operations. Reflecting this concern, California’s legislation requires companies to provide employees working remotely with appropriate equipment to perform the work and safeguard records and personal information. In addition to the prohibition on storing physical records at a remote location, California prohibits the receipt of business-related mail at a remote location.

Similarly, the new South Dakota and Rhode Island provisions on remote work mandate employee training on the confidentiality of conversations with, or relating to, consumers that are conducted from the remote location.

Location Requirements

Mortgage companies and MLOs should be aware of particular requirements for the location of an eligible remote work site. Pennsylvania expressly requires that the location where the remote work takes place is not owned or controlled by the licensee. Pennsylvania’s legislation would allow remote work from a location that is under the control of a subsidiary or affiliate of the licensee, if the location is only used by the licensee or on an incidental basis for consumer convenience. Note that under Pennsylvania’s provisions, in-person consumer interaction is permitted at a remote location if that location is not a personal residence.

Regulators may not apply all of these requirements as written. Rhode Island’s provisions include the requirement that the remote location be within a reasonable distance of the licensed place of business or branch location. Despite the text of the statute and regulations, the Department of Business Regulation issued regulatory guidance indicating that “MLOs are not required to live within a certain distance” of a main office or branch location. Instead, companies are required to provide proof of effective supervision of MLOs.

Supervisory Requirements

Some jurisdictions permit remote locations to be licensed as branches, even when the location is a personal residence. Georgia will consider a personal residence to be a branch and subject it to branch licensing requirements when the following conditions are met: (1) advertising the location as place of business; (2) receiving consumers; (3) maintaining physical files; or (4) arranging for the licensee to reimburse rent, utilities, or other expenses for the location. If none of the conditions are met, a personal residence that is a remote work location will not be considered a branch.

As an additional oversight measure, Kansas, Kentucky, and Tennessee require licensees to annually review and certify that employees engaged in remote work meet the applicable requirements under the relevant legislation.


As the Montana measure evidences, the trend towards authorizing and regulating remote work has not stopped in 2023. First, in January, the Nebraska and Virginia legislatures introduced bills related to allowing remote work. Second, more of the jurisdictions that in 2022 updated their remote work statutes are expected to adopt corresponding regulations or issue guidance to implement or supplement the new requirements for remote work authorization. For example, Vermont has announced that it will adopt regulations to implement the changes to its mortgage licensing statute that allow remote work in the coming months.

Further, some states that have not yet authorized remote work for MLOs and mortgage company employees have passed legislation authorizing remote work by employees of companies holding certain non-mortgage licenses. Colorado passed legislation in 2022 to permanently allow supervised lender licensees to work remotely. Colorado is one of the states that has also opted to extend temporary authorization for regulated entities that are not covered by the new legislation, including mortgage licensees into 2023. Based on the activity we have seen so far this year, and announcements regarding anticipated rulemaking activity, MLOs and mortgage company employees should expect future developments in this area.

* We would like to thank Associate, Rachel Myers, for their contribution to this blog post.

HELOCs On the Rise: Is Your Servicing CMS Ready?

A&B ABstract:

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) has moved to clarify its regulatory authority at a time when the economic climate is ripe for a resurgence in HELOC lending. In an amicus brief filed by the CFPB on November 30, 2022 (the “Amicus Brief”), the Bureau acknowledged that its Mortgage Servicing Rules, which, in 2013, amended Regulation X, RESPA’s implementing regulation, and Regulation Z, TILA’s implementing regulation, do not apply to home equity lines of credit (“HELOCs”).  This is consistent with the Bureau’s guidance in the preamble to the CFPB Mortgage Servicing Rules under RESPA, wherein the Bureau recognized that HELOCs have a different risk profile, and are serviced differently, than first-lien mortgage loans, and that many of the rules under Regulation X would be “irrelevant to HELOCs” and “would substantially overlap” with the longstanding protections under TILA and Regulation Z that apply to HELOCs.

During this past refinance boom, consumers refinanced mortgage loans at record rates. Moreover, according to a recent report by the Federal Reserve, consumers are sitting on nearly 30 trillion dollars in home equity.  HELOCs allow consumers the opportunity to extract equity from their homes without losing the low interest rate on their first-lien loan. Generally, a HELOC is a revolving line of credit that is secured by a subordinate mortgage on the borrower’s residence that typically has a draw period of 5 or 10 years.  At the end of the draw period, the outstanding loan payment converts to a repayment period of 5 to 25 years with interest and principal payments required that fully amortize the balance.

Issues to Consider in Servicing HELOCs

Servicing HELOCs raise unique issues given the open-end nature of the loan, the typical second lien position, and the different regulatory requirements.  HELOC servicers will need to ensure their compliance management systems (“CMS”) are robust enough to account for a potential uptick in HELOC lending. Among many other issues, servicers will want to ensure their operations comply with several regulatory requirements, including:

Offsets: In the Amicus Brief, the CFPB argues that HELOCs accessible by a credit card are subject to the provisions of TILA and Regulation Z that prohibit card issuers from using deposit account funds to offset indebtedness arising out of a credit card transaction.

Disclosures: Long before the CFPB Mortgage Servicing Rules, TILA and Regulation Z contained disclosures applicable to HELOCs. As a result, the provisions of the CFPB Mortgage Servicing Rules under Regulation Z governing periodic billing statements, adjustable-rate mortgage (ARM) interest rate adjustment notices, and payment crediting provisions do not apply to HELOCs as these provisions are specifically limited to closed-end consumer credit transactions. However, the payoff statement requirements under Regulation Z are applicable both to HELOCs and closed-end consumer credit transactions secured by a dwelling. In addition to certain account-opening disclosures, a HELOC creditor (or its servicer) must make certain subsequent disclosures to the borrower, either annually (e.g., an annual statement) or upon the occurrence of a specific trigger event, such as the addition of a credit access device, a change in terms or change in billing cycle, or a notice to restrict credit. It is also worth noting that Regulation Z’s mortgage transfer notice (commonly referred to as the Section 404 notice) applicable when a loan is transferred, sold or assigned to a third party, applies to HELOCs. In contrast, RESPA’s servicing transfer notice does not apply to HELOCs.

Periodic Statements: TILA and Regulation Z contain a different set of periodic statement requirements, predating the CFPB Mortgage Servicing Rules, which are applicable to HELOCs. Under TILA, a servicer must comply with the open-end periodic statement requirements. That is true even if the HELOC has an open-end draw period followed by a closed-end repayment period, during which no further draws are permitted. Such statements can be complex given that principal repayment and interest accrual vary based on draws; there will be a conversion to scheduled amortization after the draw period ends; and balloon payments may be required at maturity, resulting in the need for servicing system adjustments.

Billing Error Resolution: Instead of having to comply with the Regulation X requirements for notices of error, HELOCs are subject to Regulation Z’s billing error resolution requirements.

Crediting of Payments: A creditor may credit a payment to the consumer’s account, including a HELOC, as of the date of receipt, except when a delay in crediting does not result in a finance or other charge, or except as otherwise provided in 12 C.F.R. § 1026.10(a).

Restrictions on Servicing Fees: Regulation Z restricts certain new servicing fees that may be imposed, where such fees are not provided for in the contract, because the credit may not, by contract or otherwise, change any term except as provided in 12 C.F.R § 1026.40.  With the CFPB’s increased focus on fees, this provision may be an area of focus for the Bureau and state regulators.

Restriction on Changing the APR: The creditor may not, by contract or otherwise, change the APR of a HELOC unless such change is based on an index that is not under the creditor’s control and such index is available to the general public.  However, this requirement does not prohibit rate changes which are specifically set forth in the agreement, such as stepped-rate plans or preferred-rate provisions.

Terminating, Suspending or Reducing a Line of Credit: TILA and Regulation Z restrict the ability of the creditor to prohibit additional extensions of credit or reduce the credit limit applicable to an agreement under those circumstances set forth in 12 C.F.R § 1026.40.  Similarly, TILA and Regulation Z impose restrictions on when the creditor may terminate and accelerate the loan balance.

Rescission: Similar to closed-end loans, the consumer will have a right of rescission on a HELOC; however, the right extends beyond just the initial account opening. During the servicing of a HELOC, the consumer has a right of rescission whenever (i) credit is extended under the plan, or (ii) the credit limit is increased. But there is no right of rescission when credit extensions are made in accordance with the existing credit limit under the plan. If rescission applies, the notice and procedural requirements set forth in TILA and Regulation Z must be followed.

Default: Loss mitigation and default recovery actions may be limited by the firstien loan. That’s because default or acceleration of the first-lien loan immediately triggers loss mitigation and default recovery to protect the second-lien loan.  The protection of the second-lien loan may involve advancing monthly payments on the first-lien loan.  Foreclosure pursued against the first-lien loan will trigger second lien to participate and monitor for protection and recovery. Even though not applicable to HELOCs, some servicers may consider complying with loss mitigation provisions as guidelines or best practices.

ECOA and FCRA: Terminating, suspending, or reducing the credit limit on a HELOC based on declining property values could raise redlining risk, which is a form of illegal disparate treatment in which a lender provides unequal access to credit or unequal terms of credit because of a prohibited characteristic of the residents of the area in which the credit seeker resides or will reside or in which the residential property to be mortgaged is located. Thus, lenders and servicers should have policies and procedures in place to ensure that actions to reduce, terminate or suspend HELOCs are carried out in a non-discriminatory manner.  Relatedly, the CFPB’s authority under the Dodd-Frank Act to prohibit unfair, deceptive or abusive acts or practices will similarly prohibit certain conduct in connection with the servicing of HELOCs that the CFPB may consider to be harmful to consumers.  It is also important to remember that ECOA requires that a creditor notify an applicant of action taken within 30 days after taking adverse action on an existing account, where the adverse action includes a termination of an account, an unfavorable change in the terms of an account, or a refusal to increase the amount of credit available to an applicant who has made an application for an increase.  Similar to ECOA, FCRA also requires the servicer to provide the consumer with an adverse action notice in certain circumstances.

State Law Considerations: And let’s not forget state law issues. While most of the CFPB’s Mortgage Servicing Rules do not apply to HELOCs, many state provisions may cover HELOCs.  As most HELOCs are subordinate-lien loans, second lien licensing law obligations arise. Also, sourcing, processing and funding draw requests could implicate loan originator and/or money transmitter licensing obligations. Also, at least one state prohibits a licensee from servicing a usurious loan.  For HELOCs, the issue is not only the initial rate but also the adjusted rate (assuming it is an ARM).  There may also be state-specific disclosure obligations, as well as restrictions on product terms (such as balloon payments or lien releases), fees, or credit line access devices, to name a few.


The servicing of HELOCs involve many of the same aspects as servicing first-lien residential mortgage loans.  However, because of the open-end credit line features and the typical second-lien position, there are several unique aspects to servicing HELOCs.  And, because there are no industry standard HELOC agreements, the terms of the HELOC (e.g., the length of draw and amortization periods, interest-only payment features, balloon, credit access, etc.) can vary greatly.  The economic climate is poised for a resurgence in home equity lending.  Now is the time to ensure your CMS is up to the task.


Alston & Bird Adds Consumer Finance Partner Aldys London in Washington, D.C.

Alston & Bird has strengthened and expanded its capabilities for advising companies on state and federal consumer finance regulatory compliance issues with the addition of partner Aldys London in the firm’s Washington, D.C. office. Her clients include mortgage companies, consumer finance and FinTech companies, secondary market investors, real estate companies, home builders, insurance companies, banks, and other financial institutions and settlement service providers.

“It’s a pleasure to welcome Aldys, who brings deep experience and a sterling reputation for counseling consumer financial service entities as they navigate complex regulatory issues, including licensing, the intersection of state and federal regulatory compliance, and key approvals for transactions,” said Nanci Weissgold, Alston & Bird partner and co-chair of the firm’s Financial Services & Products Group. “With our shared emphasis on collaboration and excellent service, we are confident that she will successfully draw on our firm’s vast resources and expertise to benefit her clients.”

London provides advice on state licensing for mortgage lenders and related service providers, mortgage brokers, FinTech companies, lead generators, servicers, debt collectors, and investors. She is well versed in federal registration and licensing requirements imposed by the SAFE Act, as well as state laws and regulations concerning fees, disclosures, loan documentation, interest rates, privacy, advertising, data breach, and telemarketing.  Her practice also covers seeking and maintaining approvals from state and federal agencies and GSEs.  She is adept at federal laws governing real estate mortgage transactions, including preemption, privacy, fair lending and consumer protection.

In addition, London assists a variety of consumer financial services companies in obtaining regulatory approvals for complex acquisitions, mergers, and asset transfer transactions. She performs due diligence reviews for proposed acquisitions and IPOs, reviews and prepares policies and procedures, conducts regulatory compliance audits of financial institutions, and assists with structuring and developing compliance and training programs. She also assists clients with responses to regulatory audits and investigations by state and federal regulators.

“Clients rely on Aldys’ sound counsel because of her technical rigor and thorough understanding of the consumer finance market,” said Stephen Ornstein, Alston & Bird partner and co-leader of the firm’s Consumer Financial Services Team. “Her legal skills, combined with her excellent business sense and ability to develop strong relationships, make her a valuable asset to our firm and our clients.”

Alston & Bird’s Consumer Financial Services Team focuses on the regulation of consumer credit and real estate, with a broad emphasis on origination, servicing, and secondary mortgage market transactions. This team addresses the compliance challenges of major Wall Street financial institutions, federal- and state-chartered depository institutions, hedge funds, private equity funds, national mortgage lenders and servicers, mortgage insurers, due diligence companies, ancillary service providers, and others.

NMLS Seeks Comments on Proposed Revisions to Company and Individual Disclosure Questions

A&B Abstract:

The Nationwide Multistate Licensing System & Registry (NMLS) Policy Committee is inviting comments on the NMLS Disclosure Questions Proposal. The comment period is now open and runs until August 22. Among other revisions, the proposal details suggested revisions to the disclosure questions on the Company (MU1) and Individual (MU2) forms.

Proposed Revisions to NMLS Disclosure Questions

In key part, the proposed revisions include:

Company Disclosure Questions:

  • Adding a new question to incorporate a requirement of the Money Transmission Modernization Act, g., companies disclosing “material litigation” (which would be a newly defined term) in the past 10 years;
  • Expanding the civil judicial disclosures to include whether companies have been found in the past 10 years: (1) to have made a false statement or omission or been dishonest, unfair, or unethical, or (2) to have been a cause of another financial services business having its license or authorization denied, suspended, revoked, or restricted;
  • Amending the civil judicial disclosure question to include whether there are any pending financial services civil actions alleging that a company has made a false statement or omission, or had been dishonest, unfair, or unethical;
  • Requiring the criminal disclosure of any pending felony charges against companies, instead of any past felony charges;
  • Broadening the bankruptcy disclosure to include whether a company or control affiliate filed a bankruptcy petition in the past 10 years (in addition to being the subject of a bankruptcy petition) and clarifying that disclosure of either voluntary or involuntary petitions is required;
  • Adding a question whether companies have ever been denied issuance of a bond;
  • Introducing a new question asking whether a third-party service provider has notified a company of its intent to modify or cancel an arrangement that would materially alter the company’s ability to conduct business activities, and relatedly, defining “third-party service provider” to include lines of credit, whether warehouse or operation, technology solutions, etc.; and
  • Separating out into two sections under the existing regulatory action disclosures for: (1) companies that hold or have ever held an authorization to act as a contractor for a federal, state, or local government entity, (2) companies who have “key individuals” (which would be a newly defined term) or control individuals who are or have been licensed as attorneys or accountants or who hold or have been licensed as financial services professionals, and (3) added that dismissal of an action pursuant to a settlement agreement requires disclosure.
    • Regarding the last point in (3), this proposed revision is added in Question 14.e. which, according to the NMLS Policy Committee, is intended to broaden the question to account for how regulatory actions may be brought, including dismissal of an action pursuant to a settlement agreement. However, by including the term “settlement agreement”, which is not separately defined in the NMLS Policy Guidebook, Question 14.e. may potentially require the disclosure of nonpublic settlement agreements, which would be a significant change and perhaps an unintended result. The original questions are limited by the terms “found” (in Question 14.a-c.) and “order” (in Question 14.e.), both of which are defined terms indicating that only public settlement agreements and orders are required to be disclosed. Thus, we recommend that industry members consider whether to submit comments on this question to seek clarification.

Individual Disclosure Questions:

  • Making conforming proposed revisions relating to civil judicial and financial disclosures as described above in the Company Disclosure Questions;
  • Limiting the time period for the disclosure of misdemeanors to the past 10 years;
  • Making clarifications to require disclosure of judicial and non-judicial foreclosures on either commercial or residential property;
  • Adding new questions relating to pending regulatory actions against a holder of a financial services license or other professional license that could result in the restriction, revocation, debarment, or suspension of the license; and
  • Adding new questions regarding any pending financial services civil actions alleging a violation of a financial services statute or regulation for a company over which an individual exercised control, or a prior finding of the same.

Additional Proposed Revisions

In addition to proposed revisions to Company (MU1) and Individual (MU2) disclosure questions, the proposed revisions include amendments to the NMLS Policy Guidebook Glossary Terms.  Significantly, definitions for nine new terms are proposed: (1) Consumer Protection; (2) Court; (3) Efforts to Foreclose; (4) Governmental Entity; (5) Key Individual; (6) Lien; (7) Material Litigation; (8) Third Party Service Provider; and (9) Unsatisfied.  Amendments to existing terms include revising “financial services” to include consumer protection laws or regulations that pertain to enumerated financial services items, and clarifying the term “found” to cover agreements or settlements that are a matter of public record including those in which the findings are neither admitted or denied. The existing term “order” would be amended to add language to cover orders agreed to by the parties such as consent orders and stipulated orders, and to clarify that agreements relating to payments, limitations on activity, or other restrictions are excluded from the definition unless they are in a written directive that otherwise qualifies as an order.


We recommend that industry members, both licensees and applicants on NMLS, review the proposed revisions to the disclosure questions and consider whether to submit comments.  In particular, and as highlighted above, the proposed changes to Question 14.e. would appear to potentially require the disclosure of nonpublic settlement agreements, which would be a significant change from Question 14.e as currently worded.  If so, this may require companies to update their responses to the disclosure questions and submit additional information to NMLS regarding nonpublic settlement agreements.  Comments may be submitted via e-mail to by August 22.