SAFE Act Training
The Nationwide Mortgage Licensing System (NMLS) & Registry Resource Center offers Web-based training on its registry system for both institutions and their mortgage loan originators (MLOs). The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit unions and their employees who are MLOs to register on the NMLS.
The registry launched Jan. 31. Credit unions and their MLOs have 180 days (or until July 29, 2011) to complete initial registration on the new system.
The NMLS website also has a number of registration resources to help institutions and their MLOs. These include a “Getting Started Guide” for financial institutions and a similar guide for MLOs. (Visit mortgage.nationwidelicensingsystem.org).
Some tips to get started:
* Determine if your institution is required to register with the NMLS (e.g., do you offer residential mortgage loans, including home equity loans?)
* Determine who will serve as account administrators, with the primary responsibility for managing your institution’s NMLS account.
* Determine how you’ll register your MLOs—who will control the process, and who will pay fees.
* Obtain two-factor authentications for all institution users. All account administrators and other system users associated with the credit union’s NMLS account will be required to use a second authentication factor beyond the user name and password that NMLS provides before logging into the system. Obtain this through verisign.com.
* Gather the necessary data from your MLOs to create their accounts.
* Request an institution account on the NMLS.
* Complete and submit the credit union’s Form MU1R (Form MU4R for MLOs may be submitted by the credit union or the individual).
* Register your MLOs.
Some tips for MLOs include:
* Determine if you need to be federally registered through NMLS. Do you meet the definition of an MLO, which is an individual who takes a residential mortgage loan application, and offers or negotiates the terms of a mortgage loan in exchange for compensation or gain?
* Get prepared. Review the required fields on Form MU4R, which originators must complete and submit online through the NMLS.
* Obtain an NMLS account or wait for the credit union to create your account on NMLS. Many credit unions have chosen to create NMLS accounts for their employees. When they do, a user name and password will be automatically sent to the employee to access the system at the e-mail address provided by the credit union.
* Log into NMLS and complete your Form MU4R (process will vary, depending on whether the credit union is initiating, submitting, and paying for your registration or the individual MLO will be responsible for doing so).
* Save your user name and password so you can access the system again to make any changes.
Mobile Banking Risks
Mobile banking is the fastest growing electronic banking service in credit unions, according to the January 2011 edition of “The NCUA Report,” available at ncua.gov.
Mobile banking refers to conducting financial transactions via a mobile device such as a mobile phone or personal digital assistant (PDA). NCUA recommends the following best practices for credit unions that offer or are thinking about offering mobile banking products and services:
Proper risk management. A proper risk assessment before implementing new e-banking services is essential. In addition to protecting the privacy of consumer information, credit unions must consider other operational risks, such as strategic, transaction, and reputation risks.
Compliant authentication. Most mobile banking applications should require multifactor authentication, such as using “challenge questions” in addition to the user name and password. Authentication credentials shouldn’t be predictable. For example, the application could require a combination of numbers, letters, and keyboard characters to make an acceptable password. And, the application should time out after short periods of inactivity due to the increased potential for loss of a mobile device.
Appropriate risk limits. The system should have per-transaction limits. Consider limits per day and other time periods such as multiple days or a week.
Subcontracting. Any subcontracting relationships will require additional due diligence. Does the mobile banking contract fall under an umbrella contract for Internet banking? The contract should list subcontractors and require credit union approval for significant changes. Credit unions also should consider whether a direct contract is preferable.
Member awareness. Members should be aware that both mobile devices and personal computers used to conduct home banking transactions are subject to potential compromise.
For more information, credit unions may refer to the authentication guidance in NCUA Letter to Credit Unions 05-CU-18, which applies to Internet banking and other forms of electronic banking with similar functionality. NCUA is currently developing a new e-banking work program in the form of updated examination questionnaires. Credit unions should be on the lookout for a Letter to Credit Unions this year to announce the new questionnaires.
For more information, refer to CUNA’s e-Guide to Federal Laws and Regulations at cuna.org (select “regulations & compliance”).
New Appraisal Standards
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 amended the Truth in Lending Act to establish new appraisal independence requirements. These requirements involve credit transactions secured by a consumer’s principal dwelling.
The Federal Reserve Board published an interim final rule amending Regulation Z last October to implement these provisions. Mandatory compliance with the rule is required on April 1, 2011.
The interim rule:
* Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
* Prohibits appraisers and appraisal management companies lenders hire from having interests in the properties or the credit transactions;
* Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties aren’t materially misstated;
* Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licens-ing authorities; and
* Requires the payment of reasonable and customary compensation to appraisers who aren’t employees of the creditors or of the appraisal management companies the creditors hired.
These requirements are in addition to NCUA’s regulations on appraisals (Part 722) and the Interagency Appraisal and Evaluation Guidelines that were updated last December. The interagency guidelines clarify the federal financial institution regulators’ expectations for an institution’s appraisal and evaluation program for real estate lending.