AARMR Annual Regulatory Conference

Tampa Florida

Thursday, August 4, 2016

NMLS UPDATE

• NMLS: Current and Upcoming

Functionality

• NMLS Modernization (“NMLS 2.0”)

• NMLS: State of the System

NMLS Update

KC Schaler

Supervising Examiner, Idaho Dept. of Finance

Co-Chair, NMLS 2.0 Steering Committee

NMLS: CURRENT AND

UPCOMING FUNCTIONALITY

• CBC for

Control

Persons

• Federal

Agency

Regulatory

Actions

Upload

• Individual

Document

Upload

• Electronic

Surety Bonds

• Removal of

State and

Federal Wall

• Process and

Security

Enhancemen

ts

• MCR

Examiners

Report

• Renewal

Analytics

• Expedited

Payment

Processing

• Industry

Dashboard

• Mortgage

Call Report

Analytics

• Agency Fee

Invoicing

• Uniform

Authorized

Agent

Reporting

(MSB)

• UST

Implementati

on

• Advance

Change

Notice

• Expanded

use of NMLS

for other

Financial

Services

• Company

Document

Upload

• Disclosure

Explanations

• Renewal

Workflow

Revamp

• Credit

Reports for

Control

Persons

• Federal

Registry

• Mortgage

Call Report

• State

Regulatory

Actions

• Consumer

Access

• MLO Criminal

Background

Check

Processing

• MLO Credit

Reports

Processing

• Financial

Statement

Upload

• MLO

Education

• MLO Testing

• Uniform Form

Filing

• Regulator

Worklist

• Payment

Processing

• Streamlined

Renewal

• Basic

Reports

2008 2009 2010 2011 2012 2013 2014 2015 2016

NMLS New Features and Entity Growth

*** Entity = Company/Institution, Branch, or Individual.

# of Unique

Entities

~12k

Company

~10k Branch

~51k

Individual

~30k Company

~27k Branch

~543k Individual

NMLS Current Functionality

Mortgage Call Report• Mandated by SAFE Act and launched in 2011

• Initial focus on ensuring validity of data

• MCR Analytics Tools:

• Provides peer group comparisons, trend analysis,

sortable risk factors

• In 1st Q 2016 used by 49 agencies

• Used extensively by MMC and individual states

• Examiners Report Dashboard

• 23 state agencies have adopted as primary annual

report

NMLS Current Functionality

Work Item Analytics

• Reports to Monitor Workflows and Analyze

Performance

• Renewal Analytics

• License Requests

• Amendments

• Sponsorship Requests

NMLS Current Functionality

Quarterly Manager’s Packet

• Licensing activity

• Agency performance metrics

• Trends

• Benchmarks

• Licensee demographics

• Fiscal-year-based activity measures

NMLS Current Functionality

Uniform State Test

• Launched in 2013

• Adopted by 52 agencies

• States seeing large initial increases in MLO

applications

• Illinois adopted in June 1, 2016 and applications

jumped 501% in that month (1/16 – 5/16-- 923;

6/1/16 – 6/30/16 – 925)

Alaska

Texas

Utah

Montana

California

Arizona

Idaho

Nevada

Oregon

Iowa

Colorado

Kansas

Wyoming

New Mexico

Missouri

Minnesota

Nebraska

Oklahoma

South Dakota

Washington

Arkansas

North Dakota

Louisiana

Hawaii

IllinoisOhio

Florida

GeorgiaAlabama

Wisconsin

Virginia

Indiana

Michigan

Mississippi

Kentucky

Tennessee

Pennsylvania

NorthCarolina

SouthCarolina

WestVirginia

New Jersey

Maine

New York

Vermont

Maryland

New Hampshire

Connecticut

Delaware

Massachusetts

Rhode Island

State Adoption of Uniform State

Test

State Regulatory Registry LLC, last updated 6/1/2016

Puerto Rico Virgin Islands

District of Columbia

Guam

adoptedUT DFI has

States which

have adopted

the UST

States which

have not

adopted the

UST

Impact on License Applications after UST

Adoption

-50%

0%

50%

100%

150%

200%

250%

300%

Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q3 2014 Q4 2014 Q1 2015 Q3 2015

Average Percent IncreaseLicense Applications

Adopting States

Avg of All States

Non-adopters

NMLS September Release

Electronic Surety Bond Tracking

• Creating new bond issuance and maintenance procedures

• Replacing paper-based processing

• Surety companies and producers create an account in NMLS, are

validated through NAIC

• 16 companies and 27 producers in NMLS

• 10 states adopting in September; next wave in Q1 2017

CBC for Control Persons, Owners, Qualified Individuals

• Amendment to SAFE Act –December 2015

• NMLS can act as channeling agent for non-MLO individuals

• Review of all state laws for specific authority

• 27 agencies using functionality in September

NMLS September Release

Money Services Businesses Call Report• Creates a comprehensive and uniform report

• 36 states require reporting on MSB business activities

• 34 states license MSBs thru NMLS (4 more scheduled)

• Input and support of MMET (performed 68 joint exams in 2015)

• Report includes state and national specific MSB activity

• Go live in Q1 2017; first report due May 15th

• 5 agencies planning to adopt immediately

Individual Document Upload Capability• Ability to upload licensing-related documents

MSB Call Report: Report Sections

Section Name Data Level Data Period Submission

I. Financial Condition Report Company Quarter Required

II.(a) Company-wide Transactions Detail Company Quarter Required

II.(b) State Transactions Detail State Quarter Required

III. Permissible Investments Report Company Quarter Required for licensees engaged

in money transmission,

payment instrument, stored

value, virtual currency, and other

relevant business activities.

IV.(a) Company-wide Transactions

Destination Country Detail

Company Annual Required for licensees engaged

in foreign money transmission

Activity.

IV.(b) State Transactions Destination

Country Detail

State Annual Optional requirement for

licensees engaged in foreign

money transmission activity.

John Ducrest

Commissioner, Louisiana Department of Financial

Institutions

Member, SRR Board of Managers

MODERNIZATION:

NMLS 2.0

Why Modernization?

Current NMLS:

• Application architecture is difficult to change

• Database structure is inefficient and complex to

manage and store data

• Not as intuitive as it could be for the range of

stakeholder users

• Does not meet all current business needs

• Is not well suited to serve as a solid foundation for new

functionality and capabilities going forward

NMLS Modernization Timeline

• 2014:

• Initial Analysis and Strategy Development

• SRR Board Approval to issue RFP

• 2015:

• Develop and Issue RFP

• Evaluate Responses

• 2016

• Alignment with EMTS RFP

• SRR and CSBS Board Approval to Select/Contract with Vendor

• Final Vendor Selection

• 2017 – 2019

• Continued Development of Requirements; Deploy Modernized

NMLS

• Goal is to automate where possible while balancing

regulator’s responsibilities

• Builds upon collective decisions by regulators to date

• Will not revisit every policy decision

• Will challenge SRR staff and regulators to revision processes

• Builds upon experience and input from all state

regulators and industry users

• Opportunity not to just improve the system, but to

rethink the system

NMLS 2.0

• Core System Functionality

• Examination Management Tool Suite

• Transition Services:

• Criminal Background Check System

• NMLS Consumer Access Redesign

• NMLS User Reports

Scope of NMLS 2.0

MLO License Application Timelines by Year

Number of days to approve application

YearLicenses Processed

Average

daysMedian

days 0-7 8-14 15-29 30-59 60-89 90+

2011 52,579 31.3 19 8.0% 12.4% 14.3% 9.7% 3.2% 3.3%

2012 72,704 29.3 17 15.9% 23.2% 24.0% 15.1% 4.4% 4.8%

2013 111,121 29.7 18 14.2% 23.7% 24.3% 17.5% 4.8% 4.9%

2014 101,240 27.3 16 15.6% 26.0% 25.9% 16.0% 4.5% 4.0%

2015 121,922 25.2 15 19.3% 25.7% 24.5% 16.1% 3.9% 3.4%

2.0 GOVERNANCE PROCESS AND

STAKEHOLDER ENGAGEMENT

Mick CampbellSupervisor of Mortgage LicensingMissouri Division of FinanceJefferson City, MO

Valerie Carbone

CounselMassachusetts Division of BanksBoston, MA

Felicia Faison-HolmesDirector, Non-Depository Financial InstitutionsGeorgia Department of Banking and FinanceAtlanta, GA

Bob MednikovAssistant Deputy Commissioner

Virginia Bureau of Financial Institutions

Richmond, VA

Chris RomanoNon-Depository Bureau ChiefMontana Division of Banking & Financial InstitutionsHelena, MT

NMLS 2.0 Steering Committee

• Elements of the System have been categorized into 5 groups

• Determined by complexity, available resources

• Working Groups will be active in waves

• e.g. Group 1:

• Application Submission and Maintenance

• Entity Affiliation

• Authority Management

• Accounting & Invoicing

• Advance Change Notice

NMLS 2.0 Breakdown by Function

Stakeholder Input

Communication tools

• Website (dedicated pages on NMLS Resource Center)

• Surveys

• News and Alerts

• Webinars

• Conferences

• Dedicated email box

EXAMINATION MANAGEMENT

TOOL SUITE

Exam Management Tool Suite

• In an initial 2014 survey, 64% of state agencies

did not utilize an exam management application

• In response to a 2015 survey, 41 agencies were

interested in using EMTS. Those agencies

conducted 19,370 exams in 2015 and had 577

examiners

• States have been working in tandem with CFPB

to ensure seamless exchange of information

during exams.

State Agency Survey:

Given the proposed functional features to be offered please

identify three to five features that will add the most value to

your agency’s examination process.

Select

Examinee

Schedule

Examination

Scope

Examination

Information

Requests

Conduct

Examination

Manage

Exit Meetings

Report of

Examination

Post-Exam

Activities

Survey

Examinees

Recover

Exam Costs

Archive &

Retrieve

Exams

Examinee

Portal

CORE EXAMINATION MANAGEMENT FUNCTIONS

System

Integration

Security/Access

Control

Workflow

Management

Document

Management

Alerting &

Notification

Communication

Management

NMLSReporting &

Analysis

Performance

Evaluation

Administration

Functions

Inter-Agency

Coordination

Accounting

Functions

SUPPORTING FUNCTIONS & SYSTEMS

EXAMINATION MANAGEMENT TOOL SUITE

SYSTEM FUNCTIONAL COMPONENTS

Track

Examiner

Training

General

System

Requirements

Data

Presentation

Version 1.1 02/12/2015

Bob Entringer

Commissioner, North Dakota Department of

Financial Institutions

Chair, SRR Board of Managers

NMLS: STATE OF THE

SYSTEM

NMLS State Participation

• 62 state agencies manage 600 license authorities

through NMLS

• 11 state agencies planning on managing 27

additional license authorities in the next year

• State manage 2,373 checklists (license transition,

license application, amendments, and license

surrender requirements) housed on the NMLS

Resource Center

Licensing, Registration, and Professional

Standards ActivityState Licensing Activities 2014 2015 % Change

New Application Request 133,765 157,798 18%

Renewal Request 365,998 431,681 18%

Change of Sponsorship Request 57,003 57,532 1%

Federal Registration Activities 2014 2015

New Registration Request 78,707 80,300 2%

Renewal Request 374,512 386,635 3%

Change of Employment Request 38,158 37,431 -2%

Professional Standards 2014 2015

Credit Report 110,006 110,533 0%

Background Check 230,685 236,452 2%

Test 102,861 83,228 -19%

Education Hours 1,764,436 2,091,024 19%

Count of State Entities and Licenses in

NMLS

2013 2014 2015 2013-2015

State licensed Entities Licenses Entities Licenses Entities Licenses% Change

Licenses

Companies 18,993 39,903 19,882 44,020 20,440 47,688

20%

Branches 23,467 43,066 25,583 49,904 26,655 56,402

31%

MLOs 130,311 331,351 131,725 359,992 135,016 408,542

23%

Trends in the Mortgage Industry

• Non-depository

• Fewer companies, more territory

• Call centers

• MLOs on the rise

• Home purchase growth

• Depository

• Steady registrations

Home purchase growth

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

2012 2013 2014 2015

Bill

ions

Loans Originated by Purpose by Year

Home Purchase Refinancing Home Improvement

Fewer companies, more territory

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2011 2012 2013 2014 2015

Companies

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2011 2012 2013 2014 2015

Company Licenses

Call Center Business Model

0

20

40

60

80

100

120

140

160

2012 2013 2014 2015

Companies in NMLS with MLOs who hold 5+ licenses

MLOs on the rise

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2011 2012 2013 2014 2015

MLOs

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2011 2012 2013 2014 2015

MLO Licenses

Steady Federal Registrations

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2012 2013 2014 2015

Federally Registered MLOs

MLO Test Enrollments

Test Enrollment2015 Total 2016 YTD 2016 Projected

National w UST 42,761 24,317 48,634

State Tests 40,973 12,238 24,476

Stand-alone UST* N/A NA NA

TOTAL 83,734 36,555 73,110

*retired from enrollment as of 3-31-14

First-time Pass Rate

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

National with UST First-Attempt Pass Ratefor the Trailing 24 Months

MLO Test Pass Rates

National with Uniform State Content Pass Rates

July 1, 2014 through June 30, 2016

Tests Taken Tests Passed Pass Rate

First Time 54,070 34,189 63%

Subsequent Attempts 18,810 8,465 45%

Overall 72,880 42,654 59%

CandidatesCandidates

Passed Pass Rate by

Individual

All Attempts 56,228 42,636 76%

NMLS expansion

0

500

1,000

1,500

2,000

2,500

3,000

2011 2012 2013 2014 2015

Companies in NMLS by Industry by Year

Consumer Finance

Money Services Business

Debt Related

Consumer Finance, Debt, MSB on NMLS

930

679

342 336 329282

61

886

390

1,597

633559

0

300

600

900

1,200

1,500

1,800

Consumerloan lending

Paydaylending -storefront

Consumerloan

servicing

Salesfinance

companyactivities -

motorvehicles

Consumerloan

brokering

Title lending Paydaylending -

online

Third partydebt

collection

First partydebt

collection

Checkcashing

Sellingmoneyorders

Electronicmoney

transmitting

Consumer Finance Debt Money Services

MSB Licenses in NMLS

• 34 state agencies manage MSB licenses on NMLS

• 1,843 companies in NMLS holding 4,134 MSB licenses

MSB Activities Include

Money transmission Check cashing

Issue/sell travelers checks Issue/sell money order

Bill paying Transporting currency

Issue/sell prepaid

access/stored value

MSB Licenses in NMLS

• Money Transmitters in NMLS:

• Companies: 284

• Total state licenses held: 2,474

• 62% of the companies are licensed in more than one state

• 81 companies are licensed in more than 10 states

• 166 companies are currently reporting 206,824 Active Authorized

Agent relationships in NMLS, and 90 companies are reporting no

agents used

• NMLS contains 142,250 Active Agent Locations, with 35,995 used

by multiple principals

• Nine companies have uploaded over 5,000 agents

Consumer Finance Licenses in NMLS

• 20 “Consumer Finance” business activity definitions in

NMLS

• 25 agencies manage a consumer finance license on

NMLS

• 12 state agencies license payday lenders in NMLS

CFPB Request for Information

• In late July, CFPB released a RFI:

• “Non-Bank Financial Registration System for CFBP”

• Gathering information on existing systems

• Next step for CFPB: Proposed Rule on Registration of Non-Bank

Entities under CFPB supervisory purview

NMLS Resources

• Call Center

• Training Guides on Resource Center

• Ombudsman

• Consumer Access

• Annual Report

• Quarterly Report