MLO Mentor is an ongoing series covering compliance best practices for Mortgage Loan Originators (MLOs). This article details the MLO reports under the California Residential Mortgage Law (CRMLA) — learn more in our introduction to the CRMLA.
A CRMLA licensee is required to file multiple reports with the Department of Financial Protection and Innovation (DFPI) or National Mortgage Licensing System (NMLS) on an annual basis:
- the annual report setting the amount of the annual subscription, filed with the DFPI;
- the Investigative Report on Mortgages and Non-Traditional Variable Rate Mortgages (ARMs) filed with the DFPI;
- the residential mortgage loan report, filed with the DFPI;
- the Mortgage Appeal Report, filed with the NMLS; and
- Audited financial statements.
Failure to file a report within ten days of its due date exposes the CRMLA licensee to a fine of $100 per day, up to $1,000. After ten days, failure to file reports is grounds for license suspension and revocation. [Fin C §50326]
Annual report to fix the annual evaluation
CRMLA licensees are subject to a minimum annual assessment of $1,000. The minimum annual evaluation is based on an annual report prepared by the CRMLA licensee.
An invoice for the annual fee is sent by the DFPI to the CRMLA license holder before September 30 of each calendar year. The invoice is due within 20 days of the invoice date.
Non-payment results in a penalty of 1% of the assessment for each partial month of late payment. After 30 days of non-payment, the DFPI Commissioner may suspend or revoke a license for non-payment of the annual subscription. [Fin C §50401(c)-(d)]
To set the amount of the annual assessment, each CRMLA licensee must file an annual report of mortgage activity for the calendar year by 1st of March of the following year. The annual report includes monthly totals for:
- the number of California loans processed and underwritten;
- the aggregate amount of mortgage principal of California loans processed and originated;
- the number of California loans issued;
- the aggregate principal mortgage amount of California loans issued;
- the number of California loans traded;
- the aggregate amount of mortgage principal of California loans negotiated; and
- the total amount of California loans disbursed. [Fin C §§50401, 50702]
The report also requires the CRMLA licensee to provide:
- the total number of seizures processed by the licensee during the previous calendar year; and
- disclose whether it has taken out a mortgage other than a 30-year fixed rate mortgage, called a non-traditional mortgage, during the year, and its policy for implementing guidelines to offer safely non-traditional mortgages.
Non-Traditional Lending Survey
In addition to the short questionnaire provided in the Annual Report, the Non-Traditional Lending Survey must be completed annually by March 1 by CRMLA licensees engaging in warehouse loan.
The survey requires the CRMLA licensee to provide the prior year’s loan volume and total dollar amount of residential mortgages held or sold, organized by:
- interest-only mortgages;
- ARM payment options;
- reduction of documentation loans;
- concurrent second-tier loans;
- home equity lines of credit (HELOC);
- covered loans; and
Residential Mortgage Report
The Residential Mortgage Report is a report filed by CRMLA licensees who act as lenders and do not report under federal law. Home Mortgage Disclosure Act (HMDA). [Calif. Health and Safety Code §35816(b)]
CRMLA licensees acting as lenders use this record to report their annual residential mortgage lending activity to the DFPI. Data on applications and closed residential mortgages are reported.
A residential mortgage for this report includes both consumer mortgages and commercial mortgages secured by a one to four unit residential property that finance the purchase or improvement of the secured property. This includes cash refinance which finances certain improvements to the property. [21 CCR §7117(d), 7118(b)-(c)]
A CRMLA licensee who provides mortgages as a direct lender who is exempt from HMDA reporting files the California Residential Mortgage Report with the DFPI if, during the calendar year:
- they make residential mortgages that exceed 10% of the total dollar amount of all mortgages they make [21 CCR §7121(a)];
- they take out 12 or more residential mortgages during the calendar year for a total amount of $500,000; and
- they have assets not exceeding $10 million.
If a CRMLA licensee is exempt from filing the Residential Mortgage Report, they must complete a cover sheet stating that they are exempt due to HMDA reporting or low residential mortgage volume.
The CRMLA Licensee files a Residential Mortgage Report for each Metropolitan Statistical Area (MSA) in which they have a branch. MSAs are regions defined by the United States Office of Management and Budget (OMB) and used by government agencies for statistical purposes. The MSAs represent regions with a high population density.
MSAs are not defined strictly by county or city lines, but rather by larger regions linked by common economic ties (e.g. Riverside-San Bernardino-Ontario).
At the top of the Residential Mortgage Report, the CRMLA Licensee provides:
- their name;
- their CRMLA license number;
- his address and telephone number;
- the executing agency;
- the address of the executing agency;
- the census map on which the MSA is based;
- year of reported data; and
- the MSA covered by the report.
Section 1 contains information on origins and applications, sorted by census tract. [21 CCR §7118(b)]
For each census tract within the MSA, the report provides:
- the total number of requests taken;
- the total number of mortgages granted; and
- the total dollar amount of mortgages issued, expressed in thousands;
for each of the following situations:
- the total of FHA-insured mortgages, FHA mortgages, and VA-backed mortgages used to purchase borrower-occupied property;
- conventional mortgages used to purchase real estate occupied by the borrower;
- home improvement mortgages on residential properties of one to four units occupied by the borrower; and
- all home improvement loans on one to four unit residential properties not occupied by the borrower. [21 CCR §7118(b)(2)]
In Section 2, the CRMLA licensee provides the same totals for mortgages secured by one to four residential properties outside of the MSA for their branch. Data is not broken down by census tract for financed properties in MSAs other than those where the CRMLA licensee has a branch office. [21 CCR §7118(b)(1)(B)]
Mortgage call report
the Mortgage call report is administered by the NMLS. Data collected through Mortgage Call Reports is used to track and improve regulatory oversight.
The mortgage call report contains:
- a residential mortgage lending activity (RMLA) report; and
- a financial situation (FC)
The RMLA for a Standard Mortgage Call Report contains:
- a company-level report; and
- a report at the state level.
The company-level report provides information about the CRMLA licensee’s domestic mortgage activity, including:
- identification of credit line providers available to the CRMLA licensee, total credit limit and current amount available at the end of the reporting period;
- total national management activity by total dollar amount, number of mortgages, and average mortgage size; and
- delinquency data on managed mortgages.
The state level report is completed for each state in which the CRMLA license holder operates. For each state, reported mortgage activity includes the dollar amount, count, and average dollar amount of:
- mortgage applications;
- closed mortgages, by channel (intermediary, retail or wholesale), organized by:
- type of mortgage (conventional, FHA insured, etc.);
- Type of property;
- object of the mortgage; and
- position of privilege;
- the amount of royalties collected;
- reverse mortgages;
- qualified versus unqualified mortgages;
- information on the repurchase of mortgages;
- total income from mortgage transactions;
- maintenance data; and
- mortgages issued by each employed MLO, including the name and NMLS ID of each employed MLO.
The state-level report in an extended Mortgage Calls report further includes reports on dollar amount, count, and average dollar amount of mortgages by characteristics such as:
- whether the mortgage has a fixed or adjustable interest rate;
- whether the mortgage is classified as jumbo or non-jumbo;
- the borrower’s Fair Isaac Corporation (FICO) score;
- the loan-to-value (LTV) ratio;
- the storage period; and
- additional maintenance detail.
The report on the financial situation
The Financial Status Report contains information about CRMLA licensees:
- liabilities and equity;
- cash flow; and
- non-interest expense and net income.
Filing of mortgage appeal report
Both parts of the Mortgage Call Report are filed online through the CRMLA Licensee’s NMLS account. The RMLA is filed within 45 days of the end of each calendar quarter. The Financial Condition Report is filed within 90 days of the end of the CRMLA Licensee’s fiscal year.
A CRMLA Licensee files both parts of the Mortgage Call Report even if their business has no mortgage activity to report. On the RMLA, the CRMLA license holder simply checks the “No activity to report” button. A complete report on the financial situation is always required.
A CRMLA license holder must undergo an annual financial audit by an independent public accountant (CPA). The annual audit report is filed with the DFPI Commissioner within 105 days of the end of the CRMLA licensee’s fiscal year. [Fin C §50200]
A CRMLA Licensee must maintain records regarding a Residential Mortgage made or administered for at least 36 months from the date of the CRMLA Licensee’s final action on the Residential Mortgage. [Fin C §50124(a)(2)]
And that concludes our discussion of California residential mortgage law. Next week we will be discussing licensing, practices and reporting under a California Finance Act License (CFL).