MBA Seeks Collaboration with CSBS on Remote Work Flexibility for State Licensees

The Mortgage Bankers Association asked the Conference of State Bank Supervisors to collaborate in addressing the real estate finance industry’s near-term issues related to work-from-home orders, and to build a longer-term framework for remote work capabilities to address future health emergencies, natural disasters and changing attitudes toward telework in today’s economy.

In the letter to CSBS CEO John Ryan, MBA President and CEO Robert Broeksmit, CMB, said with initiation of shelter-in-place orders by governors and mayors, the mortgage banking industry has had to modify its operations to facilitate remote work in order to deliver critically important financial services to the public. State financial service regulators such as CSBS and the American Association of Residential Mortgage Regulators have provided written guidance permitting mortgage industry professionals to work-from-home.

“As a result, our industry has been successful in serving consumers and especially those who have needed forbearance,” Broeksmit said. “Indeed, MBA survey data show that more than 4.3 million American families have received mortgage forbearance in the first three months of operationalizing entirely new federal programs along with a variety of additional state requirements.”

The letter identifies several near-term issues that MBA said would benefit from continued collaboration between it and CSBS, “none more compelling” compelling than the surge in recent weeks of new COVID-19 cases reported daily.

“Our reality is that the re-opening of the economy is happening unevenly among the states and sometimes among counties/regions within a state,” Broeksmit wrote. “These uncoordinated public policy decisions are creating confusion and potentially significant regulatory risk for state-regulated independent mortgage bankers that employ licensed mortgage loan originators and servicing personnel. Mortgage companies licensed in several states or nationally must face the complicated challenge of balancing their team’s needs against each state’s directives. This has made it particularly challenging when individual MLOs are licensed in states where they do not physically reside.”

Broeksmit said back-to-work considerations for state-licensed IMBs must not only address the broad public health considerations that go into decisions to extend or end these licensing flexibilities, they must also address factors unique to their workforce, their facilities and individual employees. For example, an MLO’s company/office may not be ready to open up to staff, because workspace and office architecture still needs to be modified to help reduce the risk of transmission. Or, company facilities may only accommodate return-to-work in phases and/or require staggered in-office workdays to adhere to responsible COVID-prevention density requirements.

“Even if lenders’ or servicers’ facilities are ready to reopen, companies may face the need to take precautions if individual employees become ill, thus requiring an entire site to be closed and deep cleaned and requiring all other employees who came into contact with their infected colleague to be subject to an extended quarantine,” the letter said. 

Broeksmit also noted personal or family health issues may govern an individual MLO’s needs and compel them to remain away from others in a work environment or limit their ability to commute to work if using public transportation. Other legitimate pandemic related needs could relate to individual licensees needing to look after children because of the closure of schools, daycare, or summer camps, or the need to stay quarantined to protect high-risk family members.  

“All decisions about reopening facilities and allowing individuals to return are occurring against the backdrop of new legal and regulatory requirements as well as potential new litigation risk,” the letter said. “These concerns stem from existing and any new federal, state, and even local requirements to provide safe workplaces and mitigate any potential spread of the virus to employees or customers.”

Addressing these issues requires more time, Broeksmit wrote. “Thus, to be able to continue to meet urgent consumer needs during this period of economic upheaval while protecting employees and the public, lenders and servicers need operational consistency from state regulators to navigate these evolving personnel needs as well as labor laws and regulations. Given the sharp resurgence of the virus in recent weeks, and the lack of a vaccine or treatment in the near term, MBA believes state regulators should collaborate to issue aligned guidance extending the current work-from-home permissions.”

The letter offers several specific recommendations:

–MBA suggests CSBS urge its state regulator members to issue guidance, which extends current permissions (by order, rule, or by legislation, if necessary) through the end of 2021.

–MBA recommends state policymakers establish a simple uniform method for companies to request additional extensions of an MLO’s work-from-home permission. “State regulators should develop this process through NMLS to allow these companies to specify which MLOs and branches are affected, the address from where they will be working, and the approximate duration,” MBA said. The process should also allow for companywide or branch-level requests with an ability to easily renew/extend the permission as public health considerations may dictate.

–The process should also incorporate the requirements that many states have adopted as part of their current remote work permissions for MLOs including, for example:

• Licensable activity is conducted from the home location of an individual working on behalf of a state-licensed company.

• The MLO is working from home due to a reason relating to the COVID-19 outbreak.

 • The MLO maintains all necessary licenses under state law to conduct licensable activity.

• None of the licensable activities will be conducted in person with members of the public from the home location.

• The company/employer exercises reasonable supervision of the licensable activity being performed at the remote office and ensures that appropriate safeguards and controls are established concerning consumer information and data security.

• The MLO and their employer meet specific data security provisions:

o The MLO must be able to access the company’s secure origination system (including a cloud-based system) directly from any out-of-office device the MLO uses (e.g. laptop, phone, desktop computer, tablet, etc.) using a virtual private network (VPN) or similar system that requires passwords or other forms of authentication to access;

o All security updates, patches, or other alterations to device security must be maintained; and

o The MLO must not keep any physical business records at any location other than the licensed main office.

Longer term, MBA said itwould welcome the opportunity to work with CSBS in a collaborative fashion to move away from a company and individual licensing regime that is location-based. “We believe the last four months have provided valuable lessons learned (for both the industry and the regulators) that warrant a joint effort to better understand the risks and benefits of developing a new approach to licensing in a digital world,” MBA said. Issues to be discussed could include (but not be limited to): 

• Oversight expectations and standards when licensable activity is conducted from the home location of an individual working on behalf of a state-licensed company;

• Appropriate restrictions on conducting in-person activities from remote work/home locations; 

• Establishing minimum standards for data/system security, and protection of consumer privacy; and

• Record retention and storage requirements and regulator access to such records. 

MBA also recommended now is the time to reconsider the state license renewal process. “Requiring all MLOs to renew their licenses within the same narrow time window each year has proven problematic for regulators and industry alike,” the letter said. “MBA recommends allowing states to expand the renewal time window to 120 days, rather than anchor all parties to the compressed two-month period that currently falls during the already challenging holiday season. This change would allow both licensed entities and regulators a greater window to complete, submit and review all renewal information and materials. In addition to reducing demands on all parties, it may also help state agencies budget more effectively and consistently by allowing the influx of licensing revenue from renewal fees to come in earlier and be spread across a more extended period than just two months of the year.”