State agencies have relied on the Nationwide Multistate Licensing System (NMLS) since 2008 to manage the licensing process for state-licensed mortgage loan originators (MLOs). Federally regulated institutions that originate mortgages have also used the system since 2008 to manage registrations for MLOs they employ – currently more than 400,000 in NMLS. Both state and federal use of NMLS was mandated by the SAFE Act following the 2008 financial crisis.
In 2012, state regulators started using NMLS to manage the licensing process for individuals and companies (also referred to as entities or licensees) in the debt, money services businesses (MSB) and consumer finance industries. Today, 64 state agencies use NMLS for one or more of the industries referenced above.
NMLS is an online platform that state regulators, nonbank licensees and federally regulated institutions access on an ongoing basis as part of the licensing and federal registration process. While the system is an online platform, it requires users to depend on various manual processes, including submitting and receiving documents outside of the system. State licensees also must respond to various state-specific requirements for licensure.
NMLS, which is owned by state regulators, enables them to share information in the system, however it does not support regulators’ current or future needs for more networked and streamlined collaboration.
CSBS’ Commitment to Building a Modernized NMLS
As technology continues to advance, the need for a more sophisticated, data driven NMLS that provides a better user experience is critical. In addition, as part of Networked Supervision state agencies are moving toward a standardized approach for managing the licensing process in NMLS.
Development for the modernized NMLS started in January 2021. The new system – initially focused on the MSB industry – will be introduced in 2022.
- The standards state agencies adopt for the MSB industry will be based on the MSB Model Law and Multistate MSB Licensing Agreement.
- Currently, 49 state agencies manage MSB licenses in NMLS, with more than 2,850 companies holding over 9,000 approved MSB licenses in the system.
- The debt, consumer finance and mortgage industries will transition to the modernized NMLS in phases over a period of time, after the MSB industry transition has been completed.
Benefits of a Modernized NMLS
- Uniform standards for state agencies – The system will include a single source of standardized data that all state agencies require. This will allow state agencies to conduct interdependent reviews and rely on each other’s work, eliminating redundancies. Agencies will also follow uniform compliance thresholds to regulate specific industries.
- Integrated data analytics – The new system will use data and analytics to automate processes, identify risks, prioritize resources and provide reports and visualizations to support decision-making.
- Greater efficiencies for state licensees – Individuals and companies will have one point of contact for initiating the licensing process, regardless of the state in which they apply for a license. This will save licensees time and eliminate the need to adhere to varying, state-specific requirements.