PA Adds Mortgage Servicer Licensing Requirements

Pennsylvania recently amended its Mortgage Licensing Act (Act) to require licensing and regulation of mortgage servicers.  On December 22, 2017, the Pennsylvania Department of Banking and Securities (Department) became required to promulgate regulations incorporating the CFPB’s mortgage servicing rules (Rules), except those relating to scope.  The remaining amendments take effect on the effective date of the Department’s regulations implementing the Rules.

The Act, as amended, will require most persons to obtain a mortgage servicer license in order to directly or indirectly service first and second lien mortgage loans.  Lenders servicing only loans they originated, negotiated, and own will not require a separate servicer license.  Others exempt from the servicer license requirement generally include, among others, employees under a servicer’s direct supervision and control who are not otherwise required to be licensed, entities such as consumer discount companies, banking institutions, and credit unions, and those servicing less than four loans per calendar year.

Servicer license applicants will need to: (i) be approved by or meet current eligibility criteria for approval as a residential mortgage loan servicer by at least one GSE, government corporation or federal agency; (ii) have and maintain a $250,000 minimum net worth; (iii) be approved for and maintain fidelity bond coverage in accordance with Fannie Mae or Freddie Mac guidelines; (iv) obtain and maintain a $500,000 surety bond; (v) submit periodic reports as required by the Department; and (vi) designate a qualifying individual.  Initial application fees will be $2,500 for the principal place of business and $1,250 per branch, and renewal fees will be $1,000 and $500, respectively.

Servicers will be permitted to collect and remit payment of principal, interest, and amounts to be placed in escrow for the payment of insurance or taxes.  Servicers generally will be required to establish, or attempt to establish, a single point of contact for borrowers to communicate with about loss mitigation and foreclosure no later than the 36th day of delinquency.  Servicers will also be required to perform post-payoff duties such as requesting that the mortgage holder release and cancel the lien of record, cancel any insurance in connection with the loan, and refund unearned premiums.

If an alteration of the Rules results in a complete lack of federal mortgage servicing regulations, the regulations effective under the Act will remain in effect for two years, during which time the Department must promulgate replacement regulations.

A copy of the amendments can be viewed here: http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=PDF&sessYr=2017&sessInd=0&billBody=S&billTyp=B&billNbr=0751&pn=0925.