MLOC & QI FAQs

MORTGAGE LOAN ORIGINATOR COMPANY & QUALIFIED INDIVIDUALS

 FREQUENTLY ASKED QUESTIONS

These questions and answers constitute informal guidelines only and do not constitute legal advice or rules by DFI.  Any interpretations of Chapter 454F are specific to the facts and circumstances in each particular situation.  Questions and answers will be updated and supplemented as DFI develops additional guidance.  Additional answers can be found using the NMLS Resource Center.

If additional guidance is required on a unique situation in your company or for yourself, you may send your inquiry via letter or email to:

Division of Financial Institutions
Department of Commerce and Consumer Affairs
P.O. Box 2054
Honolulu, HI 96805

or

dfi-NMLS@dcca.hawaii.gov

 

MORTGAGE LOAN ORIGINATOR COMPANY

What is an MLOC?

MLOC (Mortgage Loan Originator Company) means:

(1)  An individual not exempt under HRS § 454F-2 who engages in the business of an MLO as a sole proprietorship; or

(2)  A person not exempt under HRS § 454F-2 who employs or uses the exclusive services of one or more MLOs licensed or required to be licensed under Chapter 454F.

As an individual, conducting my own mortgage broker business, what types of licenses do I need? 

An individual who plans to work as an MLO (Mortgage Loan Originator) for his or her own mortgage broker business must obtain the sole proprietor license which consists of  (1) an individual MLO license and (2) an MLOC license for the business, whether it is a sole proprietorship or some other form of organization, such as a partnership, limited liability company, or a corporation.  This is required because under the NMLS program, every individual MLO must be linked to, or “sponsored” by a company.  This requires that an individual obtain both licenses.  For purposes of NMLS, Forms MU1, MU2, and MU4 will be required.

Who needs to register with the Nationwide Mortgage Licensing System?

Every MLO, MLOC, and other person in this state that conducts mortgage loan origination activities for residential mortgage loans, unless specifically exempt, shall register with the NMLS.  Upon registration, a person creates a record with the NMLS and obtains a unique identifier.

Some persons are only required to register with the NMLS, and do not need to obtain a license under HRS Chapter 454F, even if they conduct mortgage loan origination activities.  These persons do not require a Chapter 454F license because they are already adequately regulated under another law and therefore do not require further regulation by means of licensure under Chapter 454F.  These persons are either “exempt registered mortgage loan originators” (“exempt registered MLO”) or “exempt registered mortgage loan originator companies” (“exempt registered MLOC”).

Who qualifies as an “exempt sponsoring MLOC”?

There are currently only two categories of business that qualify for this exemption:  (1) a Hawaii-licensed nondepository financial services loan company that has employees who conduct mortgage loan origination activities and who are licensed as MLOs under Chapter 454F; and (2)  holding companies of banks or savings associations.

Does a wholesale lender need to be licensed as a Hawaii MLOC?

If, as a wholesale lender, a company is engaged either directly or indirectly in underwriting, closing, and funding residential mortgage loans, those activities will trigger a licensing requirement for both the company and the individual employees of the company engaged in any of those functions.  Wholesale lenders become subject to licensing as a MLOC due to the definition of “taking a residential mortgage loan application”, which contemplates either direct or indirect involvement in the loan origination process. To the extent that any nonexempt lender is effectively deciding whether or not to extend an offer of a loan to a borrower, even if it does so indirectly, it would be taking a residential mortgage loan application in Hawaii.

 

MLOC TRADE NAMES

 Is an applicant limited in the number of trade names that it may use in Hawaii?

No.  When you complete (or amend) a company’s MU1 form to select Hawaii as a checked jurisdiction, you will also be able to indicate on the MU1 form which trade names (either new or existing) the company intends to use in Hawaii.  You are not limited as to the number of trade names you wish to register and use in Hawaii.  As long as those trade names are properly registered with the Business Registration Division of the State of Hawaii’s Department of Commerce and Consumer Affairs, they may be used by the company from any of its locations, including both its Hawaii and non-Hawaii branches.  Be aware, however, that while the company’s non-Hawaii branches will not require a Hawaii branch license (i.e. Form MU3), any individual at a non-Hawaii branch who originates a loan that is a residential mortgage loan subject to Chapter 454F will need to be licensed as a Hawaii mortgage loan originator.

On the MU1 Form, when would an applicant need to check the “forced” box for a trade name?

An applicant need only check the “forced” box if the applicant has been advised by either the Commissioner of Financial Institutions or the Business Registration Division of the State of Hawaii’s Department of Commerce and Consumer Affairs that the applicant company will not be permitted to do business in Hawaii under its true legal name for any reason and that the company will therefore be required to do business in Hawaii under a “dba” or trade name.  Only in that instance should the “forced” box be checked.  In all other cases, you may leave the “forced” box unchecked when indicating which trade name(s) the company proposes to use in Hawaii.

MLOC BRANCH OFFICES

Are there limitations as to how far away a MLO can be from a main office or branch?

No.  DFI currently has no restrictions by statute, rule or otherwise as to distance limitations for an MLO, such as distance from home to the main office or a branch.  Consequently, under certain circumstances, a Hawaii-licensed MLO may reside on one island and be attached to a branch on another island in the State.

Is a branch manager required to be on-site at the branch that he or she manages whenever that branch office is open for business?

Yes.

Does DFI license out of state branches?

No.

Do MLOs need to work out of a branch? 

No.  There is no requirement in the statute that MLOs work out of a branch office, provided that the MLO does not work out of an office that holds itself out to the public as being an office of an MLOC when that is not the case.

Can a branch manager manage more than one branch?

Generally no, because a manager must be physically located in the branch during the branch’s normal business hours.

Does an MLOC need to provide notice of its intent to close a branch office?

Yes.  An MLOC shall give the Commissioner notice of its intent to close a branch office in Hawaii at least thirty days prior to the closing.  The notice shall:  (1) state the intended date of closing; and (2) specify the reasons for the closing.

 

 MLOCs WITH OUT OF STATE HEADQUARTERS

AND “PRINCIPAL PLACE OF BUSINESS BRANCHES”

 What is a “principal place of business branch”? 

Recognizing that the NMLS only allows companies to file one Form MU1, in situations where one Form MU1 is already filed for established mortgage loan originator companies with corporate offices outside of Hawaii, these companies will be required to establish a Hawaii “principal place of business branch” that will be licensed as a branch.  This allows these companies to meet the brick and mortar requirement for Hawaii, which mandates that all Hawaii MLOCs maintain a principal place of business in this state.

Which MU Forms must be filed on NMLS for MLOCs with out-of-state headquarters?

The following documents must be filed with NMLS:

a.  Form MU1 for the out of state corporate headquarters, showing Hawaii as a “checked jurisdiction” to apply for a Hawaii license;

b.  Form MU2 for designated control persons;

c.  Form MU4 application for a Hawaii mortgage loan originator license for at least one person listed as a “Qualifying Individual” with respect to the company’s Hawaii mortgage loan origination activities;

d.  Form MU3 for the “Hawaii Principal Place of Business”;

e.  Form MU2 for the on-site “Manager” of the Hawaii Principal Place of Business. (Note that the Manager of the Hawaii Principal Place of Business may, but need not be the same person listed as a “Qualifying Individual” on the Form MU1 who is licensed as a Hawaii mortgage loan originator); and

f.  Form MU4 application for a Hawaii mortgage loan originator license for the Manager listed in the Form MU3 Hawaii Principal Place of Business application.

 

QUALIFYING INDIVIDUALS

Do I need to designate a “Qualifying Individual” on my Form MU1 for company applicants?

Yes.  Each company will be required to designate on Form MU1 an individual to serve as the “Qualifying Individual” in charge of the mortgage loan origination activities or in charge of the oversight of licensed MLOs.  The “Qualifying Individual” must be licensed as a Hawaii MLO.

Can a MLO be a Qualifying Individual for more than one Hawaii MLOC?

No, even if the MLOCs are affiliated.

Is there a residency requirement for the Qualifying Individual?

No.  There is no residency requirement for the Qualifying Individual. That individual need only fulfill the requirements to be approved for a Hawaii MLO license. The Qualifying Individual may, but need not be, the manager of the company’s principal place of business in Hawaii.

PRINCIPAL PLACE OF BUSINESS LOCATIONS

Can I use my personal residence as my principal place of business?

Yes.  If a licensed mortgage loan originator proposes to designate his or her personal residence as either the principal place of business in Hawaii or a branch office of the company, it is DFI’s expectation that a licensee’s place(s) of business must be open to the public during reasonable business hours so that loan applicants and other customers of the company may visit the company’s office or otherwise contact the company to submit loan applications or inquire about the status of their pending loan applications, provide timely supplementary documentation as may be required in connection with a pending application, and conduct other business with the company without undue inconvenience.  Further, the office must be open for any examinations that may be scheduled by DFI.  Be aware that the address of any office of the company, including a personal residence, will be publicly available information.

Are there any restrictions on sharing office space or using a virtual office to conduct business?

Yes.  With regard to any proposed space-sharing office arrangements, we remind any applicant seeking to share premises with other businesses that pursuant to HRS § 454F-17(8), a licensee’s business must at all times be conducted in compliance with all applicable state and federal laws.  That includes applicable state and federal privacy laws regarding consumers’ financial information.  At a minimum therefore, we would expect that any shared space arrangements would include provisions to adequately safeguard the confidentiality of information contained in consumer loan account records.  In addition, in a shared space arrangement, we would expect there to be adequate signage and separation of office space to ensure that consumers would not likely be confused about the identity of the particular company at that location with which they are doing business.

A virtual office contemplates that a live person will not be available to meet consumers and respond to any consumer questions in a face to face meeting.  As such, a virtual office does not meet the legal requirements of a branch office.

 

MORTGAGE CALL REPORTS

Do licensees have to file mortgage call reports or “Reports of Condition”, and how frequently must the reports be filed?

At this time, only an MLOC is required to file mortgage call reports provided that the reports filed cover the activities of all the MLOs whom the MLOC sponsors.  Call reports are due quarterly within 45 days of the end of every calendar quarter.

Where do we file the mortgage call report and do we need to file this year?

Mortgage call reports are filed with NMLS.  NMLS launched this functionality in April, 2011 for licensees to report data for the first quarter of 2011.

 

SPONSORSHIP

What happens when a sponsorship withdrawal is requested?

DFI will approve the request for removal of sponsorship.  It is the MLO’s responsibility to find another sponsor.  If another sponsor is not obtained, the alternative is for that MLO to obtain a license as a sole proprietorship MLOC, which will then sponsor his or her MLO license.

Can a MLO be sponsored by more than one MLOC?

No.  DFI may allow an MLO to be sponsored by more than one MLOC is if only one of the MLOCs is a Hawaii-licensed MLOC.

 

 RELOCATION OF OFFICE

Does an MLOC need to provide notice of its intent to relocate an office and pay a fee?

Yes.  An MLOC shall not relocate any office in Hawaii without the prior written approval of the Commissioner.  An application to relocate an office shall set forth the reasons for the relocation, the street address of the proposed relocated office, and any other information that may be required by the Commissioner.  After the application has been approved, the MLOC will amend the Form MU3 in NMLS and pay the fee as required by HRS § 454F-22 and any NMLS fee.

 

EXEMPTIONS FROM LICENSING

Is a foreign lender exempt from MLOC licensure?

No.  Certain lenders previously claimed a foreign lender exemption in Hawaii prior to January 1, 2011, and as such, were not required to be licensed as a mortgage broker under the now repealed law on Mortgage Brokers and Solicitors, HRS Chapter 454.  That exemption, at HRS §454-2 (6), HRS, was available to a “Foreign lender as defined in section 207-11…”, which states, in part, “‘Foreign lender’ means…(C) a lender approved by the Secretary of the United States Department of Housing and Urban Development for participation in any mortgage insurance program under the National Housing Act…”.

HRS Chapter 454, was repealed on January 1, 2011, and with its repeal, the foreign lender exemption under that law ceased to exist. There is no comparable exemption for foreign lenders under Chapter 454F.

While HRS Chapter 207 has not itself been repealed, a review of HRS §207-12 will confirm that there is no exemption in that section from the otherwise applicable licensing requirements under Chapter 454F.  The exemption that foreign lenders previously invoked was not found in HRS Chapter 207, but was located at HRS §454-2(6) of the now repealed law on Mortgage Brokers and Solicitors.