On May 21, 2009, Governor Jodi Rell signed Senate Bill 948 into law, making sweeping changes to the Connecticut mortgage licensing law. 

The bill implements the 2008 federal Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act) by imposing conditions on licensing for mortgage professionals, including education and testing.  It changes definitions, confidentiality and surety bond requirements; expands the banking commissioner’s enforcement and investigative authority; and prohibits a number of actions by persons subject to the mortgage licensing laws.  The bill also expands the prohibition on influencing residential real estate appraisals to everyone, rather than just mortgage brokers.

On the mortgage licensing front, Connecticut began participating in the Nationwide Mortgage Licensing System in July 2008.  Any person licensed as a mortgage lender, mortgage correspondent lender, mortgage broker, or mortgage loan originator in the state were required to submit all licensing and license-related materials to the NMLS prior to October 1, 2008.

The new law clarifies that the banking commissioner must require these individuals to be licensed and registered through the system.  For this purpose, the commissioner was given the authority to promulgate the rules which are deemed necessary for participating in the system, including:

1. Background checks for criminal history through fingerprint or other databases, civil or administrative records, credit history, or any other information that is deemed necessary for application via the NMLS
2. Payment of fees to apply for or renew licenses through the NMLS
3. Setting or resetting of licensing renewal or reporting dates
4. Requirements for amending or surrendering a license or any other such activities as the commissioner finds necessary for participation in the system.

Effective April 1, 2010, the new law requires any individual (natural person) to obtain a mortgage loan originator license before conducting such business unless the person does not engage directly in the activities of a mortgage loan originator.  The license must be maintained annually and each licensed originator must register with, and maintain a valid unique identifier issued by, the NMLS.  Previously, the law required that a mortgage loan originator act on behalf of a lender or broker.

The law prohibits an individual from acting as an originator for more than one entite at a time.  Additionally, a mortgage loan originator license is not effective during any period when the originator is not associated with a lender or broker.  Finally, the law allows the originator or the broker or lender to file a notification of termination of employment with the NMLS.  The language specifies that the brokers and lenders serve as the originator’s sponsor.

Beginning July 31, 2010, the law prohibits loan processors or underwriters who are independent contractors from engaging in loan processor or underwriter activities unless they are licensed as mortgage loan originators.  These individuals must also have and maintain a valid unique identifier issued by the system.

The new law adds pre-licensing education and testing to the requirements necessary to obtain a broker or lender license.  It also requires the broker or lender to have a qualified individual at the main office for which the license is sought, and a branch manager at each branch.  Effective April 1, 2010, these individuals must meet the education and testing requirements. 

As far as pre-licensing is concerned, the new law requires a person to complete at least twenty-four (24) hours of approved education with at least:

·         Three hours of instruction on relevant federal law and regulations;

·         Three hours of ethics, including instruction on fraud, consumer protection, and fair lending issues; and

·         Two hours of training related to lending standards for the nontraditional mortgage product marketplace.

The courses must be reviewed and approved by the NMLS and may be offered either in a classroom, online, or by any other means approved by the system.  The law also allows for reciprocity for a person who has successfully completed the pre-licensing education requirements in another state. 

The applicant must also pass, with a score of at least 75%, a qualified written test developed by the NMLS and administered by an approved test provider.  The language allows an individual to retake the test three (3) consecutive times with each consecutive test occurring at least thirty (30) days after the preceding test.  After failing three (3) consecutive tests, the individual must wait at least six (6) months before taking the test again.

The new language requires a broker or lender license applicant, any control person of the applicant and the qualified individual or branch manager with supervisory authority at the office for which the license is sought to submit authorizations for the system and the commissioner to obtain an independent credit report from a consumer reporting agency.  Originator applicants and licensees must provide this authorization starting July 31, 2010, or 30 days after the system starts accepting the authorizations.  Applicants and licensees must furnish their fingerprints to the system starting April 1, 2010.

Regarding continuing education, the law requires a licensed originator to complete at least eight (8) hours of education annually in order to renew their license.  A licensee may only receive credit for a continuing education course in the year in which the course is taken and may not take the same approved course in the same or successive years to meet the annual requirements for continuing education.  The language also allows a licensee who is an approved instructor of a continuing education course to receive credit toward the licensee’s own annual continuing education requirement at the rate of two (2) hours credit for every one (1) hour taught.

Finally, a mortgage loan originator’s license expires when the licenses of the retaining lender or broker expire, if they are not renewed.  The date set for the expiration of all mortgage licenses in the state of Connecticut is close of business on December 31^st annually.

For additional information on the new requirements, the law may be viewed in it’s entirety at http://www.cga.ct.gov/2009/ACT/PA/2009PA-00209-R00SB-00948-PA.htm