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Ohio Consolidates its Mortgage Finance Licensing Laws into a new Residential Mortgage Lending Act


The term “residential mortgage loan” will mean “a loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent security interest on a dwelling or on residential real estate located in Ohio ...


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The term “residential mortgage loan” will mean “a loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent security interest on a dwelling or on residential real estate located in Ohio,” and will apply to first- and subordinate-lien residential mortgage loans. The term “mortgage lender” will mean “an entity that consummates a residential mortgage loan, advances funds, offers to advance funds, or commits to advancing funds for a residential mortgage loan applicant.” The ORMLA will continue to provide for the licensing of individual mortgage loan originators, largely retaining the prior definitionNotably, the Ohio definition of “mortgage loan originator” goes beyond the typical two-prong definition found in most other statesNonetheless, by having a single definition of “mortgage loan originator” under the new ORMLA, individuals will be relieved of the dual obligation of having to obtain approval as a loan originator under the OMBA and as a mortgage loan originator under the OMLA. Therefore, under the new ORMLA, the registration requirement will apply to a business organization or a sole proprietor making or brokering first-or subordinate-lien mortgage loans; whereas an individual conducting mortgage loan origination activities will obtain a license as a mortgage loan originator. The new ORMLA provides the Ohio Superintendent of Financial Institutions with certain broad rulemaking authority to amend those definitions if the superintendent finds it necessary to remain consistent with the purposes of the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE Act)Predictably, we have not seen anything issued publicly by the Superintendent of Financial Institutions on the manner in which the ORMLA will be applied. The new ORMLA also reconciles other distinctions between Ohio’s prior regulatory regimesThe OMLA does not require that an office be maintained in Ohio for purposes of registration, while the OMBA requires a registrant to maintain an office in the state for the transaction of mortgage broker businessThe new ORMLA will provide that a registrant must “maintain an office location for the transaction of business as a mortgage lender or mortgage broker in this state.” That provision is somewhat ambiguous as to whether it requires an in-state office, or whether it merely provides that for the purpose of transacting mortgage lender or mortgage broker business in the, the mortgage lender or broker must have an office location, which may be within or outside the stateWe believe the better reading is the new ORMLA will not require a registrant to maintain an office in OhioNevertheless, due to the ambiguity, we have asked Ohio regulators for confirmation. The new ORMLA will otherwise retain many, but not all, of the exemptions found in the OMBA, including for, among others, a national bank, federal savings bank, or bank chartered by Ohio or another state, and for a subsidiary of such banks that is regulated by a federal banking agency and owned and controlled by the bankThe ORMLA does not define the term “owned and controlled,” or clarify the extent to which a subsidiary must be regulated by a federal banking agency for purposes of the exemptionIf you have any questions about the exemption, please call to discuss. The ORMLA, however, repeals the exemption from registration under the OMBA that was available to a “mortgage banker,” which reached certain HUD-, Fannie Mae-, Freddie Mac-, or VA-approved entities under certain conditionsMany lenders relied on that mortgage banker exemption in Ohio when making mortgage loansThose companies will accordingly need to register under the ORMLA, as would other companies making or brokering first- or subordinate-lien mortgage loans, unless the company qualifies for another exemption under the ORMLA. The ORMLA is unclear if separate registration as a mortgage lender and as a mortgage broker will be needed if an entity performs both activitiesThe ORMLA also is unclear if an entity that is registered under the OMBA will need to do anything further to be approved as a registrant under the ORMLA to make or broker mortgage loansWe understand from informal conversations with regulators of the ORMLA that they see the wisdom in not requiring a mortgage broker registrant to apply for separate registration as a mortgage lenderMoreover, we understand that they intend to provide for a smooth transition for those that currently registered as mortgage brokers under the OMBA, with additional guidance in the next few weeks. Mayer Brown LLP - Costas “Gus” Avrakotos and Kristie DKully Back Forward View original Forward Print Save ShareFacebookTwitterGoogle PlusLinked In Follow Please login to follow content. 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