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Reporting criminal and civil actions to NMLS under Safe Act Reg G

Feb 9th, 2015 | By | Category: Real Estate Broker Law

Safe Act Reg G – Disclosing the past and risks to your mortgage lending future.

Safe Act lawyer MLO


One question we deal with from MLO (mortgage loan originators) in California is DO I HAVE TO DISCLOSE MY PRIOR DISCIPLINARY ACTION, CRIMINAL CONVICTIONS OR “DESIST AND REFRAIN” to the NMLSR?   This blog will provide a general legal overview of the 2008 SAFE ACT “Reg. G” and other important questions and answers for California mortgage loan originators (MLO).

Do I have to disclose criminal convictions on my NMLS annual renewal?

Yes.  I think this is fairly clear to most MLO’s (must disclose criminal convictions relating to dishonesty, breach of trust or money laundering).  If in doubt DISCLOSE, just like the saying goes in general real estate transactions.

Should I disclose a prior “desist and refrain” order issue by the Department of Corporations, Department of Real Estate (now Bureau of Real Estate)?

Yes.  Some people are not sure if this needs to be disclosed, and the general response is the same as above.  Disclose and explain is normally considered the best policy when dealing with the NMLS, BRE and other licensing agencies when seeking to get licensed.

Do you have to report lawsuits related to financial services activities?

Again, the answer is yes.  You can generally maintain the confidentiality of your civil settlement, but the fact that you were sued or named as a Defendant should be disclosed.

Safe Act Reg “G”

The Safe Act was passed in 2008 and under Regulation “G”, a covered financial institution must submit to the NMLS Registry (on behalf of each MLO) or have the MLO submit information pertaining to:

Criminal convictions involving dishonesty, breach of trust, or money laundering against the MLO, or organizations controlled by the MLO, or agreements to enter into a pretrial diversion or similar program in connection with the prosecution of such offense(s);

Civil judicial actions against the MLO in connection with financial services-related activities, dismissals with settlements, or judicial findings that the employee violated financial services-related statutes or regulations, except for actions dismissed without a settlement agreement; and

NMLS Safe Act lawyers

a.  Are entered against the MLO in connection with a financial services-related activity (the definition of Financial service related includes real estate);

 disclosure definitions under NMLS

b.  Denied, suspended, or revoked the MLO’s registration or license to engage in a financial services-related activity; disciplined the MLO or otherwise by order prevented the MLO from associating with a financial services-related business or restricted the MLO’s activities; or

c.  Barred the MLO from association with an entity or its officers regulated by the agency or authority or from engaging in a financial services-related business;

• Final orders issued by a State or Federal regulatory authority or foreign financial regulatory authority with respect to an MLO based on violations of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct;

• Revocation or suspension of the MLO’s authorization to act as an attorney, accountant, or State or Federal contractor; and

• Customer-initiated financial services-related arbitration or civil action against the MLO that required action, including settlements, or which resulted in a judgment.

What is an “Action or Order” that must be disclosed to the NMLS by the MLO?

Action or Order includes any permanent or temporary cease and desist Order (whether challenged or not by the MLO applicant).

NMLS disclosure of cease and desist orders

“Temporary Orders” would include one that requires to you immediately desist and refrain (such as D&R’s we have seen from the DRE regarding unlicensed activity, illegal acceptance of advance fee for loan modification, etc.) that are sent to brokers, agents, property managers, and others in the real estate business.  The requirement to disclose would not appear to depend on whether the regulatory agency was challenged or not, or whether the allegation that a violation of statute, real estate law or commissioners regulation was admitted or denied.

MLO must disclose desist and refrain order from BRE or DRE

These are the general disclosure requirements.  The NMLS forms and requirements can be updated from time to time, so if in doubt have a California mortgage lawyer help you construe your legal obligations.

Important take-aways for real estate licensees and MLO’s

Read the NMLS forms carefully when renewing or applying for your MLO lending license.  If in doubt, disclose and explain.  Failure to disclose things that you are aware of (for example prior Desist and refrain orders that you never challenged, or were never properly served with), can come back to haunt you.  Our real estate and civil litigation law firm has helped numerous real estate licensees in a wide variety of real estate, arbitration and regulatory matters.  If you need a mortgage loan law firm, contact us using the form below.  If you are served with a desist and refrain order, it is wise to obtain legal counsel to help you challenge the D&R or take other actions to protect yourself.  If you are facing current disclosure obligations, or an employer is forcing you to disclose items to the NMLSR, we can help you in submitting your statement, and dealing with administrative licensing agencies.  You have a legal right to set an administrative hearing to challenge a desist and refrain order.

Safe Act NMLS disclosure Resources

1. MU-4 Filing requirements

2.  Attorney Steve Desist and Refrain Order Video

3.  Consumer Financial Protection Bureau Safe Act Guide

4. CFPB disciplinary action guidelines

5.  NMLS federal disciplinary action guidelines

6.  NMLS Policy Guidebook for Licensees

Contact a California Mortgage Lending & Real Estate law firm

Our law firm is a leader in the real estate law field.  The principle Attorney, Steve Vondran, is a former mortgage loan broker, and has earned real estate and law licenses in both California and Arizona. We have helped real estate licensees from real estate brokers, to salespersons, unlicensed employees and many real estate brokerages in a wide variety of real estate issues relating to both real estate broker law and general real estate litigation.  Whatever your issue, contact us to discuss our flexible fee arrangements, which will depend on the type of assignment and nature of your case.  We can be reached at (877) 276-5084 or fill out the contact form below to have one of our mortgage lawyers call you, usually within the hour.











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