Update On North Dakota’s New Residential Mortgage Licensing Requirements – Charges, Mortgages, Indemnities

In our April 2023 and May 2023 editions of Licensing Link, we noted that, effective
August 1, 2023, North Dakota will establish a new
licensing requirement to engage in “residential mortgage
lending,” which includes arranging or providing residential
mortgage loans as a form of financing, or advertising or soliciting
in print, by letter, in person, or otherwise, the right to find
lenders or provide residential mortgage loans for a person. (See North Dakota Senate Bill 2090). Also
effective August 1, 2023, North Dakota will
require companies servicing residential mortgage loans to obtain a
residential mortgage loan servicer license (See North Dakota House Bill 1068).

On June 7, 2023, North Dakota posted information regarding the
new residential mortgage lending and servicing license requirements
on the Nationwide Multistate Licensing System (“NMLS”),
as well as information on how companies holding a North Dakota
Money Broker License to engage in residential mortgage brokering
and/or lending will need to transition to the new residential
mortgage lender license type to maintain compliance with the recent
changes.

The NMLS
instructions for the new residential mortgage broker/lender
license set forth the following activities as authorized under the
new license:

• First mortgage brokering/lending




• High cost home loans – broker/lender




• Home equity lending/lines of credit – broker/lender




• Lead generation – may vary based on details of activity
  and compensation




• Reverse mortgage brokering/lending




• Second mortgage brokering/lending

The NMLS
ND Residential Mortgage Lender Transition Checklist confirms
that the transition request to the Residential Mortgage Lender
License will be available in NMLS starting August 1, 2023, and that
the transition to NMLS for this license is only required for those
Money Broker licensees that engage in Residential Mortgage Lending/
Brokering. Current Money Broker license holders engaged in such
activities must transition to the new license type by December 31,
2023. As we noted in our April Licensing Link, entities that engage in
other lending activity, such as commercial or non-residential real
estate secured consumer loans, for example, may need to maintain
both the North Dakota Money Broker License and the new Residential
Mortgage Lender license. The license transition process will
include a fee that will cover the license renewal for 2023 and
licensees will not need to renew this license until the 2025
renewal period beginning Nov. 1, 2024, through Dec. 31, 2024.

With regard to the new Residential Mortgage Servicer license,
which will also be available for application on NMLS beginning on
August 1, 2023, the NMLS
instructions for new applicants set forth the following
activities as authorized under the new license:

• First mortgage servicing




• Master servicing




• Reverse mortgage servicing




• Subordinate lien mortgage servicing




• Third party first mortgage servicing




• Third party subordinate lien mortgage servicing

Based on communications with regulators, we understand that the
first license renewal period for the Residential Mortgage Loan
Servicer license will be in 2024. Thus, even if a new servicer
license is granted shortly after the August 1, 2023 application
date, the licensee will not be required to renew the license until
the license renewal period beginning on November 1, 2024.

The NMLS also includes instructions for registration of both Residential Mortgage
Lender branches and Residential Mortgage
Loan Servicer branches. The instructions make clear that
registration is required for any branch office currently licensed
as a Money Broker branch, and will be engaged in brokering and/or
originating loans in North Dakota, as well as branch offices at
which an entity is engaged in servicing North Dakota residential
mortgage loans. Finally, starting August 1, 2023, the North Dakota
Department of Financial Institutions will begin receiving new
electronic surety bonds through the NMLS for both the Residential
Mortgage Lender and Loan Servicer licenses.

While applications for the new North Dakota residential mortgage
licenses cannot be filed through NMLS until August 1, 2023,
residential mortgage lenders and servicers should begin using the
NMLS checklists to prepare for upcoming applications and
transitions, as applicable to each entity’s business
activities.

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