Recently, the California Department of Financial Protection and Innovation updated the NMLS checklists applicable to the California Financing Law license. As anticipated, the updates reflect that the DFPI now expects all companies to apply for the CFL license via NMLS. Previously, only those companies engaged in consumer-purpose residential mortgage lending or brokering were required to apply for the CFL license via NMLS; companies engaged in other activities triggering the CFL licensing requirement were required to apply for the CFL license on paper. The DFPI also updated its website to reflect these changes.
In the Queue
We understand from a senior official at the DFPI that any company that has a paper version of the CFL license application currently pending has the option to see the paper version through to approval. However, such companies will be required to transition the license to NMLS before December 31, 2021. This is consistent with an announcement published on the DFPI website earlier this week.
The current NMLS new application checklist obviously differs from the paper version of the application, but it also differs considerably from the previous NMLS new application checklist. Notably, the current NMLS new application checklist specifies that applicants must provide:
- A business plan that includes extensive details on the operating structure that will be employed
- A detailed description of any business activities that will be engaged in other than those contemplated under the authority of a CFL license
- An electronic surety bond (the DFPI will no longer accept a paper one)
- A management chart that is consistent with the Direct Owners and Executive Officers section of the NMLS Company Form, and that identifies divisions, directors, officers, and managers (including the lowest level of management), as well as compliance reporting and internal audit structure
- A designated e-mail address for communications with the DFPI, which must be registered through DOCQNET (this was always required, just not expressly stated on the checklist)
Additionally, while executive officers, control persons, qualifying individuals, and natural person 10% or greater owners are required to submit an NMLS Individual Form and fingerprints, the current NMLS new application checklist includes the following exclusion for certain natural person 10% or greater owners:
Natural persons who directly or indirectly own more than 10 percent of the applicant solely as an economic interest without the ability to elect or direct management, or otherwise exercise control of the applicant or the applicant’s lending activities in any way, are not required to submit Form MU2 or fingerprints.
This being said, we understand that the DFPI will now be focusing its up the chain investigation of CFL license applicants on such individuals and may not require as extensive of information on 10% or greater entity owners and their key individuals as they did in the past.
Upcoming Transition Requirement
The DFPI’s December 29, 2020 Fourth Modifications to Proposed Rulemaking under the CFL also contemplates that CFL licensees whose licenses aren’t currently maintained on NMLS will transition to NMLS by December 31, 2021. In line with this, the DFPI recently announced that such licensees will be able to begin the transition process in July. We are actively monitoring NMLS and the DFPI website for anticipated updates regarding NMLS transition requirements.
For assistance with preparing and submitting CFL license applications, amendments, transitions, and more, check in with APPROVED.