The New York Department of Financial Services (DFS) has announced significant changes to its state mortgage loan originator (MLO) licensing process in an attempt to shorten and improve the approval process.

The changes include the creation of an MLO transitional licensing initiative. Under the new regime, MLOs working in another state or for a bank can now apply for an MLO license before being hired by a New York licensed entity. DFS will process the application and will send a letter to the applicant once it is satisfied that the applicant has met all of the requirements necessary to become an MLO other than affiliation with a New York licensed entity. The applicant may then take the letter to potential employers and get hired. Once the new employer is disclosed to DFS within 30 days of receipt of the letter, DFS will license the MLO.

In addition, DFS announced that New York will become the 42^nd state to adopt the National SAFE Mortgage Loan Originator Test with the Uniform State Test (UST). The UST will replace the separate, state-specific test currently required for individuals applying for a New York MLO license. Effective September 2, 2014, passing the UST will satisfy the testing requirement for MLOs in New York, regardless of whether the individual took the UST before or after September 2.

Note that New York's MLO educational requirements will remain the same despite the adoption of the UST. Individuals applying for a license are required to complete three hours of state-specific pre-licensure education. Moreover, licensed MLOs must annually complete at least 11 hours of continuing education, including three hours of state-specific education.

Finally, DFS has proposed regulations to eliminate certain application requirements and to clarify other requirements. Among these changes are the requirements that Mortgage Broker and Mortgage Banker applicants submit a business plan with specific information and a compliance program summary for review. The revised regulations also set forth the process for determining licensing applications to be incomplete. Comments will be due 45 days from publication of the proposed regulations in the New York State Register.

We will continue to update you on these developments as additional information becomes available.