Illinois Leads MBA Push for Uniform Mortgage Ad Licensing Disclosure Protocols

Mike Sorohan msorohan@mba.org

September 06, 2018

You've heard them on the radio or seen them on TV or print--those seemingly endless "disclaimers" issued at blinding speed by some John Moschitta wannabe at the end of an advertisement (or sometimes at the beginning) pushing important, often-unintelligible legal mumbo-jumbo out of the way:

"This-is-not-a-commitment-to-make-a-loan-which-is-subject-to-borrower-qualifications-including-income-property-evaluation-sufficient-equity-in-the-home-to-meet-LTV-requirements-and-final-credit-approval-subject-to-change-without-notice-based-on-applicant-eligibility-and-market-conditions-terms-of-the-loan-may-be-subject-to-payment-of-points-and-fees-by-the-applicant."

The problem with these disclosures, says William Kooper, Vice President of State Government Affairs and Industry Relations with the Mortgage Bankers Association, is that they're often meaningless to the very people they are intended to protect--the consumer.

"Currently required state licensing disclosures for print and electronic advertising are not achieving their intended objective of informing and protecting consumers because they convey little useful information," Kooper said. "When print, radio or television ads are circulated in multiple states, the preponderance of licensing disclosures render them collectively invisible to consumers. Worse, in radio ads these disclosures require speed reading that is unintelligible and serves no practical purpose."

Most states have now adopted the Conference of State Bank Supervisors/American Association of Residential Mortgage Regulators model law provision (http://www.nmlsconsumeraccess.org/) requiring state-licensed mortgage companies and professionals to exhibit their Nationwide Mortgage Licensing System Unique Identifier in their origination-focused consumer solicitations and advertisements. However, in implementing this standard, numerous state legislatures/regulators have adopted additional disclosure requirements (or retained older disclosure requirements) for their particular licensing information, such as requirement of an in-state business address and/or a statement that the licensee is regulated by a particular state agency and requirement of state-specific license numbers.

"If you are a lender that operates and advertises regionally or nationally, advertisement disclosures can become exceedingly lengthy when accounting for--in aggregate--these state-specific licensing requirements," Kooper said. "Moreover, these disclosures absorb significant portions of costly radio/television airtime and print space. But most importantly, the cumulative effect becomes a laundry list of statements--crammed into a few seconds of airplay or into the 'fine print'--and disclosures that are rendered invisible and likely meaningless to the consumer. In a worst case scenario, these disclosures appear disingenuous."

To alleviate this confusion--and to assure simplicity and uniformity nationwide--MBA has called for states to adopt, through regulatory rulemaking or by legislative action, a uniform advertisement disclosure protocol. Such a protocol, MBA said, would accomplish the following:

--Provide consumers with necessary clarity regarding the state licensing of mortgage companies and professionals; --Streamline the industry's representation of its state licensing statuses; and

--Remove state-specific license disclosure requirements for mortgage company, mortgage loan originator and mortgage broker advertisements.

The MBA proposal can be viewed at http://mba-pc.informz.net/mba-pc/data/images/PolicyDocuments/MBA%20Proposal%20--%20Licensing%20Ad%20Disclosure.pdf.

The MBA proposal says consumers should be directed through a uniform disclosure to NMLS Consumer Access--a comprehensive, state regulator-developed database for verifying the credentials and licensing status of mortgage companies and loan originators with whom they seek to do business. NMLS Unique Identifiers would remain a necessity in all origination-focused consumer solicitations and advertisements from state-licensed mortgage companies and professionals. Depending on the particular advertisement medium or use, lenders would be required to incorporate one of the following phrases:

1) "For licensing information, go to: www.nmlsconsumeraccess.org;" or

2) "www.nmlsconsumeraccess.org."

States would remove their specific licensing disclosure requirements in favor of this uniform protocol.

Last month, Illinois Gov. Bruce Rauner (R) signed SB. 2615 (http://ilga.gov/legislation/BillStatus.asp?DocNum=2615&GAID=14&DocTypeID=SB&LegId=109684&SessionID=91&GA=100), supported by MBA, the Mortgage Action Alliance and the Illinois MBA, to streamline advertising disclosures in the state.

The law was approved unanimously by the state legislature earlier this year, and embraced the MBA initiative to create uniform requirements among states that features the consumer-facing pages of www.NMLSConsumerAccess.org.

Bryan Schneider, Secretary with the Illinois Department of Financial and Professional Regulation, said the language in the MBA proposal was helpful in crafting SB 2615. "We are always looking for ways in which regulations can be more meaningful for consumers," he said. "The 'fast talk' or 'fine print' in these disclosures struck me as ridiculous, and meaningless to consumers."

Schneider said discussions with MBA, as well as "organic" discussions with his staff, led to a Department proposal that became SB 2615. "We introduced this as one of our department initiatives in the latest state assembly," he said. "It enjoyed unanimous support in the State Assembly. And our Attorney General's office, which is often involved in consumer affairs, supported the bill as well. It was gratifying to have so much support from so many parts of the government."

The law is now in effect; Schneider said its benefits are immediate. "Over time, it makes advertising more meaningful," he said. "NMLS is the recognized standard; it will ultimately make information more accessible. The most important information is the NMLS number, which enables any consumer to look up information about the lender and decide if they want to work with them. The law takes a mumbo-jumbo of legal disclaimer that no one pays attention to and creates a system that's less cluttered and more impactful for consumers. It makes sense for consumers; it makes sense for industry, and it make sense for government."

For MBA, the Illinois law now represents a new 50-state effort to adopt uniform standards in mortgage regulation. Earlier this year, MBA closed the book on a nationwide effort to for adoption of the Uniform State Test for mortgage loan originators when Minnesota became the last jurisdiction to adopt the UST; currently, MBA is engaged in a new effort with the American Land Title Association to promote uniform adoption of Remote Online Notarization standards (https://www.mba.org/audience/state-legislative-and-regulatory-resource-center/remote-online-notarization).

Kooper said he is encouraged by the Illinois adoption of ad licensing protocols and hopes to build momentum elsewhere. "The Illinois approach has the potential to be a model for other states to emulate," he said.

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