Office of the Commissioner of Financial Regulation

 

Eligible Employers and Approved-Inactive Licenses - Advisory

 

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November 4, 2011

TO: Maryland Mortgage Loan Originators and Mortgage Lenders
SUBJECT: Eligible Employers and Approved-Inactive Licenses

In 2011, the licensing laws governing mortgage loan originators and mortgage lenders were amended. See Chapter 944 of the Acts of 2011 (available on the General Assembly's website [PDF document, download Adobe Acrobat for free]). This Advisory (1) summarizes changes relating to employers of licensed mortgage loan originators and new provisions relating to the "approved-inactive" license and (2) provides guidance to licensees and their employers regarding the effects of these legislative changes.

Licensed Mortgage Loan Originators: Eligible Employers

A licensed mortgage loan originator may originate loans only when employed by and acting on behalf of a licensed mortgage lender or a mortgage lender that is exempt from licensing in Maryland. Some licensed mortgage loan originators are employed by out-of-state mortgage lenders. Generally, under the old law, an out-of-state mortgage lender was required to maintain a physical office and a resident agent in Maryland. The new law eliminates the physical office requirement.

Approved-Inactive Licenses

The new law authorizes the Commissioner of Financial Regulation (the "Agency") to issue an "approved-inactive" license to an individual who is otherwise eligible for a license and has taken all the steps to obtain or maintain the license but is not currently employed by an eligible employer (as described above). See Section 11-603(d) of the Financial Institutions Article of the Maryland Code Annotated.

The benefit of the approved-inactive status is that an applicant/licensee will not be required to submit a new application if:

  • as a new applicant, he or she has not yet secured employment or,
  • as a current licensee, he or she is between mortgage origination jobs.

In practice, the approved-inactive license may be issued when all the licensing requirements are complete except for employment. However, if a licensee knows, for example, that he or she will not be employed by an eligible employer for a particular period, the licensee may request the inactive status in advance by updating his or her employment history on the Nationwide Mortgage Licensing System and Registry ("NMLS") to reflect the change in employment status and also terminating the relationship with the current employer on NMLS. (See the Quick Guides on the NMLS Resource Center for assistance.)

DURING THE TIME THAT A LICENSE IS IN THE APPROVED-INACTIVE STATUS, THE LICENSEE MAY NOT ORIGINATE MORTGAGES. HOWEVER, THE LICENSEE REMAINS SUBJECT TO ALL LICENSING REQUIREMENTS SUCH AS LICENSE RENEWAL AND CONTINUING EDUCATION.

The license remains in the inactive status until the licensee obtains employment with an eligible employer and properly submits the employment information to the NMLS and the Agency.

For now, converting an approved-inactive license to an "approved" license requires an "Amendment" to the license in NMLS and submission of supplemental documents to the Agency. (See Maryland Amendment Checklist on the NMLS Resource Center.) Both the individual holding an approved-inactive license and the new employer must submit information to NMLS. The Quick Guides on the NMLS Resource Center provide assistance to licensees and their employers.

Once the amendment is submitted and the required supplemental documents are received and approved by the Agency, the license status will be updated to "approved" and the licensee will be authorized to originate mortgages.

Contact NMLS at 240-386-4444 for questions pertaining to the NMLS. Contact the Agency licensing staff by phone at 410-230-6155 or 888-784-0136 for further assistance regarding Maryland specific requirements.