MLO FAQs

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.

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

[email protected]

MORTGAGE LOAN ORIGINATOR

 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

[email protected]

 

Who is an MLO?

MLO (Mortgage Loan Originator) means an individual who for compensation or gain or in the expectation of compensation or gain:

(1) Takes a residential mortgage loan application; or

(2) Offers or negotiates terms of a residential mortgage loan.

What does “taking a residential mortgage loan application” mean?

“Taking a residential mortgage loan application” means receipt of a request or of a response to a solicitation of an offer from a borrower, either directly or indirectly, for the purpose of deciding whether or not to extend an offer of a loan to the borrower.  Taking a residential mortgage loan application does not include mere physical handling or transmission of a form.”

Do loan origination activities for manufactured homes trigger the need to be licensed as a MLO? 

Yes.  Chapter 454F requires that persons who take, offer, or negotiate terms of a residential mortgage loan be licensed.  A residential mortgage loan is defined as:

[A]ny loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling as defined in Section 103(v) of the Truth in Lending Act, 15 United States Code Section 1602 or residential real estate.

Regulation Z, which implements the Truth in Lending Act, defines “dwelling” to mean “a residential structure that contains one to four units, whether or not that structure is attached to real property.  The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.”  The Department of Housing and Urban Development has interpreted “mobile home” to include a manufactured home, as defined in the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. § 5402(6)).

 

SPONSORSHIP

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 for his or her own mortgage broker business must obtain the sole proprietor license which includes (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.

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.  The only situation in which DFI may allow an MLO to be sponsored by more than one Mortgage Loan Originator Company (“MLOC”) is if only one of the MLOCs is a Hawaii-licensed MLOC.

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”).

 

EXEMPTIONS FROM LICENSING

 Who is exempt from licensure?

(1)        An exempt registered mortgage loan originator when acting for an insured depository institution or an institution regulated by the Farm Credit Administration, except as otherwise provided by this chapter;

(2)        A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client unless the attorney is compensated by a lender, a mortgage loan originator company, or other mortgage loan originator or by an agent of a lender, mortgage loan originator company, or other mortgage loan originator;

(3)        A person or entity that only performs real estate brokerage activities and is licensed or registered by the State unless the person or entity is compensated by a lender, a mortgage loan originator company, or other mortgage loan originator or by an agent of the lender, mortgage loan originator company, or other mortgage loan originator;

(4)        A person or entity solely involved in extensions of credit relating to timeshare plans, as the term is defined in title 11 United States Code section 101(53D);

(5)        An exempt sponsoring mortgage loan originator company as defined by this chapter except as otherwise provided by this chapter;

(6)        An insured depository institution;

(7)        An institution regulated by the Farm Credit Administration;

(8)        Employees of government agencies or of housing finance agencies who act as mortgage loan originators; or

(9)        A seller of real property who offers or negotiates terms of a residential mortgage loan that is financed by the seller and secured by the seller’s own real property; provided that:

(A)       The seller is a person, estate, or trust that transacts three or fewer residential mortgage loans in one calendar year;

(B)       The seller is not a loan originator for purposes of the loan originator qualification requirements in 12 C.F.R. section 1026.36(f) and (g);

(C)       The seller has not constructed or acted as the construction contractor for the residence on the property in the ordinary course of the seller’s business;

(D)       The interest rate for the loan does not exceed the State’s usury limit; provided that the exemptions from usury specified in section 478-8 shall not apply to transactions subject to this paragraph;

(E)       The seller shall provide to the buyer the terms of the financing including:

(i)      A current title search including any liens against the property;

(ii)      The interest rate;

(iii)      Monthly principal and interest payments;

(iv)      Any prepayment penalty;

(v)      Any late payment charges;

(vi)      The payment schedule;

(vii)      The total amount of interest that the mortgagor will pay over the term of the loan expressed as a percentage of the loan amount;

(viii)      A calculation of projected aggregate monthly payments including principal and interest;

(ix)      Estimated closing costs if closing costs are included in loan costs and estimated cash to close if closing costs are not included in loan costs.  For purposes of this paragraph, closing costs shall include recording fees, transfer taxes, prepaid costs such as homeowner’s insurance premiums or property taxes, and appraisal costs charged to the mortgagor;

(x)      The seller’s contact information including name, address, phone number, electronic mail address, and alternate contact information to the extent available; and

(xi)      A statement that the seller will acquire a security interest in the buyer’s dwelling and that the buyer may lose the dwelling in the event of a loan default;

(F)       The seller shall provide a disclaimer, to be initialed by the buyer, which states, “BUYER ACKNOWLEDGES RECEIVING FINANCING FROM THE SELLER IN THIS TRANSACTION AND GRANTING THE SELLER A MORTGAGE.  THIS CAN HAVE SERIOUS CONSEQUENCES SHOULD BUYER FAIL TO MAKE ANY PAYMENTS INCLUDING BUT NOT LIMITED TO FORECLOSURE AND THE LOSS OF BUYER’S PROPERTY.  THEREFORE, IT IS IMPORTANT THAT BUYER UNDERSTANDS ALL FINANCING TERMS AND OBLIGATIONS AND OBTAINS PROFESSIONAL EXPERT ADVICE TO THE EXTENT NECESSARY TO ENSURE BUYER IS FULLY ADVISED IN THIS MATTER.”; and

(G)       A residential mortgage loan shall be recorded with the land court or bureau of conveyances as applicable.