BLOG VIEW: Beginning Jan. 1, 2018, mortgage servicers in Oregon will need to be licensed and bonded in order to conduct business in the state.
This requirement was introduced after Senate Bill 98 was passed in August.
As part of the licensing process, mortgage servicers in the state will also need to obtain an Oregon mortgage servicer bond.
The Oregon Mortgage Loan Servicer Practices Act, also known as the “Servicer Act,” was passed and entered into force earlier this year. While the general regulatory framework of the act came into force immediately, the licensing requirement for mortgage servicers goes into effect Jan. 1.
To provide for the effective implementation of the licensing rules, the Oregon Division of Financial Regulation (DFR) began issuing licenses on Nov. 1. Anyone who wishes to act as a mortgage servicer in Oregon after Jan. 1 must be licensed by that date.
At the time of this writing, the licensing rules are still temporary, since certain details must yet be sorted out by the DFR. However, the current temporary rules allow for a clear and straightforward licensing process, and final licensing and non-licensing rules are expected to be adopted by the end of 2017 or in early 2018.
Meanwhile, any organization in Oregon that falls within the definition of mortgage servicer, as defined within the Servicer Act, must make sure to get licensed in order to avoid any penalties that may result from acting as a servicer without a license.
The application process
The entire application process for a mortgage servicer license occurs through the Nationwide Mortgage Licensing System (NMLS). Applicants for a license will need to complete one part of the application through the system itself and, in addition to that, upload a series of required documents and forms.
The information needed during the application process includes the following:
- Company and individual application forms;
- Information about employees and resident agents;
- Credit reports and criminal background checks;
- Responses to disclosure questions;
- A detailed business plan and financial statement;
- A management and organizational chart;
- A certificate of authority and company formation documents; and
- A $50,000 Oregon mortgage servicer bond.
To finalize an application, one must pay a $960 licensing fee and $100 processing fee to the NMLS.
There are also additional fees for the credit reports and background checks, which will vary according to the number of people for which reports and checks are issued.
Once the application process is complete, the DFR will contact the applicant about a license.
The surety bond requirement
The mortgage servicer bond is a central licensing requirement. The purpose of the surety bond is to guarantee servicers’ compliance with the provisions of the Servicer Act. It functions as a financial security that guarantees compensation if servicers violate any provisions and cause damages or losses to their clients or the state of Oregon.
The initial bonding amount for servicers is $50,000. That amount may change over time, as it is based on “the total unpaid principal balance of residential mortgage loans in Oregon as of the last day of the second quarter of the year.” For new applicants, the amount is based on the most recent completed quarter. Based on this amount, servicers may be required to obtain bonds that are in higher amounts, as high as $200,000.
To obtain a bond, one needs to pay a fraction of the total required bond amount. This fraction is determined by the surety when one applies for a bond and is primarily based on one’s credit score – the higher the score, the lower the rate.
What do you think of the Servicer Act and the licensing requirements? Will the industry benefit, or will it only make business more difficult? Let us know in the comments.
Todd Bryant is president and founder of Bryant Surety Bonds.