Title 808 | Chapter 001 | Regulation 170
SUPERSEDED
This document is no longer current.
PREVIOUS VERSION
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PUBLIC PROTECTION CABINET
Department of Financial Institutions
(Amendment)
808 KAR 1:170.Licensing and registration.
Section 1.
Definitions.(1)
"Audited financial statement" means a financial statement prepared by a certified public accountant in accordance with generally accepted accounting principles.(2)
"Nationwide Multistate Licensing System" is defined by KRS 286.8-010(20).(3)
"Surety bond" means a bond furnished by a surety company authorized to conduct business in Kentucky.Section 2.
Consumer Loan Company Licensure. A person applying for licensure as a consumer loan company shall submit:(1)
A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;(2)
A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org;(3)
A Form CL-4, State License Confirmation Form completed by each state or jurisdiction in which the person is licensed or registered if the person applying for licensure as a consumer loan company is licensed or registered in any other state or jurisdiction to operate a business making loans of $15,000 or less at the time of application;(4)
The nonrefundable application investigation fee established in KRS 286.4-440(1); and(5)
The annual license fee established in KRS 286.4-440(1).Section 3.
Check Cashing and Deferred Deposit Service Business Licensure.(1)
Initial Application. A person applying for an initial check cashing license shall submit:(a)
A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;(b)
A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org for each control person designated on the "direct owners and executive officers" section of the NMLS Company Form;(c)
The nonrefundable investigation fee established in KRS 286.9-060(1);(d)
Form COMB-1, State License Confirmation Form for Check Cashing License or Deferred Deposit Service Business License, incorporated by reference in 808 KAR 9:050, if the applicant has a license, registration, or claim of exemption related to the financial services industry in any other state;(e)
An audited financial statement, which includes a balance sheet, income statement, statement of cash flows, and all relevant notes, dated as of the previous year end. If the applicant is a startup company, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;(f)
Evidence that the applicant has complied or will comply with all workers' compensation and unemployment compensation laws of Kentucky; and(g)
One (1) of the following, which shall be deposited with and made payable to the commissioner:1.
An irrevocable letter of credit in an amount required by KRS 286.9-040(1)(a);2.
An Electronic Surety Bond, available online at http://mortgage.nationwidelicensingsystem.org, in an amount required by KRS 286.9-040(1)(b). The name of the principal insured on the bond shall match exactly the full legal name of the applicant; or3.
Form COMB-3, Escrow Agreement for Check Cashing License or Deferred Deposit Service Business License, incorporated by reference in 808 KAR 9:050, accompanied by:a.
Evidence that the applicant has established an account in a federally insured financial institution in Kentucky and has deposited money of the United States in an amount required by KRS 286.9-040(1)(c); orb.
A savings certificate of a federally insured financial institution in Kentucky established by the applicant that is not available for withdrawal except by direct order of the commissioner in an amount required by KRS 286.9-040(1)(d).(2)
Renewal Application. A licensee applying for renewal of a check cashing license or deferred deposit service business license pursuant to KRS 286.9-080(1) shall complete and submit the following on or before December 31 of each year:(a)
The required updates and attestation ensuring the accuracy of all information in the person's record maintained by the http://mortgage.nationwidelicensingsystem.org; and(b)
The nonrefundable license fee established in KRS 286.9-080(1).(3)
Reinstatement Application. A licensee applying for reinstatement of a check cashing license or deferred deposit service business license pursuant to KRS 286.9-080(2) shall complete and submit the following prior to January 31 of the year that the renewal application was due:(a)
The required updates and attestation ensuring the accuracy of all information in the person's record maintained by the http://mortgage.nationwidelicensingsystem.org;(b)
The nonrefundable license fee established in KRS 286.9-080(1); and(c)
The nonrefundable late fee and reinstatement fee established in KRS 286.9-080(2).Section 4.
Licensure as a Mortgage Loan Company or Mortgage Loan Broker.(1)
Initial Application. A person applying for licensure as a mortgage loan company or mortgage loan broker shall submit:(a)
A completed NMLS Company Form as available online at http://mortgage.nationwidelicensingsystem.org;(b)
A completed NMLS Individual Form as available online at http://mortgage.nationwidelicensingsystem.org for each control person designated on the "direct owners and executive officers" section of the NMLS Company Form;(c)
An audited financial statement, which includes a balance sheet, income statement, statement of cash flows, and all relevant notes, dated the previous year end to the date of submission of the NMLS Company Form. If applicant is a startup company, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;(d)
An Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org in an amount not less than the amount required by KRS 286.8-060(1). The name of the principal insured on the bond shall match exactly the full legal name of applicant;(e)
A certified copy of the following:1.
If a corporation, the Corporate Charter or Articles of Incorporation and Bylaws;2.
If a limited liability company, the Articles of Organization and Operating Agreement; or3.
If a partnership of any form, the Partnership Agreement;(f)
A Certificate of Authority or a Certificate of Good Standing issued by the Kentucky Secretary of State dated not more than sixty (60) days prior to the submission of the NMLS Company Form;(g)
If applicant will be operating in Kentucky under a name other than its legal name, a file-stamped copy of the Certificate of Assumed Business Name issued by the Kentucky Secretary of State;(h)
If required to do so by KRS 286.8-032(6), documentation that a managing principal designated by applicant has successfully completed the educational training set forth in KRS 286.8-032(6);(i)
If the principal office will be located in a residence, a completed Form ML-6, Disclosure of Location at a Residence Form; and(j)
The fees set forth in KRS 286.8-034(1).(2)
Renewal Application.(a)
A person applying for renewal of a mortgage loan company or mortgage loan broker license prior to December 1 shall submit:1.
The required updates and attestation ensuring that all information in the person's record maintained by the NMLS2.
The fee set forth in KRS 286.8-034(3).(b)
A person applying for renewal of a mortgage loan company or mortgage loan broker license through reinstatement shall submit all materials required by paragraph (a) of this subsection and the reinstatement fee required by KRS 286.8-034(c)
The fee set forth in KRS 286.8-034(3) shall be calculated based on data filed by the licensee on the Mortgage Call Report (MCR), which shall be submitted through the NMLS, for the twelve (12) month period ending September 30. The licensee shall submit the MCR no later than November 1st of each year. The department shall apply the following criteria if the licensee has not submitted four (4) quarters of data:1.
If a licensee has not held a license with the department for twelve (12) months, the fee shall be based on the volume of loans originated and closed in Kentucky during the time frame the licensee has held a license in Kentucky;2.
If a licensee does not file the third quarter MCR, which contains data as of September 30, on or before November 1, the department shall:a.
Estimate the twelve (12) month loan volume based on previously filed MCR reports by annualizing the loan volume contained in the prior three (3) quarterly MCR report;b.
Recalculate the actual renewal fee owed once the third quarter MCR is filed; andc.
Send a subsequent fee bill to the licensee for any renewal fee owed based on the actual loan volume reported on the MCR data versus the amounted estimated by the department using the annualized loan volume in 2(a).3.
Pursuant to KRS 286.8-044, tThe department may pursue an administrative action against any licensee that fails to file a timely and accurate MCR. The department may pursue administrative action against any licensee for inaccurate filings of MCR reports resulting in insufficient renewal fee payments.(3)
Change of address, name, control, or agent for service.(a)
A licensee changing its address, name, or agent for service of process shall notify the commissioner:1.
At least ten (10) days prior to the change of address or name; and2.
Five (5) days prior to the change of agent for service of process.(b)
A licensee that wants to engage in a transaction resulting in a change of control shall notify the commissioner at least thirty (30) days in advance with the information necessary for the commissioner to determine whether the requirements of KRS Chapter 286.8 will be satisfied upon the change of control. The commissioner shall notify the licensee whether the request is approved or denied within thirty (30) days of a completed submission of the notice of change of control.(c)
A licensee changing its address, name, control, or agent for service of process shall update this information in NMLSSection 5.
Registration of a Mortgage Loan Company Branch.(1)
A mortgage loan company branch shall not be approved unless it is controlled, managed, and supervised by the applicant's principal office.(2)
(a)
A person applying for registration of a branch shall submit the following:1.(a)
A completed NMLS Branch Form as available online at http://mortgage.nationwidelicensingsystem.org;2.(b)
A copy of the lease or deed for the branch;3.(c)
A completed Form ML-7, Branch Authorization Form; and4.(d)
If the branch will be located in a residence, a Form ML-6, Disclosure of Location at a Residence Form(e)
(b)
An additional fee for branch registration shall not be required by the department.(3)
A person applying for renewal of a branch registration prior to December 1 shall submit all materials required by Section 4(2)(a) of this administrative regulation.(4)
A person applying for renewal of a branch registration through reinstatement shall submit all materials required by Section 4(2)(a) of this administrative regulation and the reinstatement fee required by KRS 286.8-034(6)Section 6.
Registration of a Mortgage Loan Originator.(1)
Initial registration. A person applying for registration as a mortgage loan originator pursuant to KRS 286.8-255(2) shall submit:(a)
A completed NMLS Individual Form as available online at http://mortgage.nationwidelicensingsystem.org;(b)
A request to submit a Federal Bureau of Investigation background records check and a credit report to the department;(c)
Certification that applicant has successfully completed all education and testing required by KRS 286.8-255; and(d)
The fee set forth in KRS 286.8-255(2)(b).(2)
Renewal registration.(a)
A person applying for renewal of a mortgage loan originator registration pursuant to KRS 286.8-255(4) shall submit:1.
The required updates and attestation ensuring that all information in the person's record maintained by the NMLS2.
A request to submit a Federal Bureau of Investigation background records check and a credit report to the department;3.
Certification that applicant has successfully completed all education and testing required by KRS 286.8-255 and 286.8-260; and4.
The fee set forth in KRS 286.8-255(4).(b)
A person applying for renewal of a mortgage loan originator registration through reinstatement shall submit all materials required by paragraph (a) of this subsection and the reinstatement fee required by KRS 286.8-255(5).(3)
The cost of any Federal Bureau of Investigation background records check or credit report required by this section shall be borne by the applicant.Section 7.
Mortgage Loan Originator Bond Requirements. In addition to the requirements set forth in this administrative regulation, an applicant applying for registration, renewal, or renewal through reinstatement as a mortgage loan originator shall provide proof that the mortgage loan originator holds or is covered by a bond. If the mortgage loan originator is procuring his or her own bond, the applicant shall submit an Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org in an amount determined by annual loan origination as follows:(1)
If the annual loan volume of the applicant is less than $10,000,000, the surety bond shall be in an amount not less than $15,000; or(2)
If the annual loan volume of the applicant is $10,000,000 or more, the surety bond shall be in an amount not less than $20,000.Section 8.
Factors Used to Determine Approval or Disapproval of an Application.(1)
A mortgage loan originator applicant seeking registration, renewal, or renewal through reinstatement under KRS 286.8-255 shall demonstrate the financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly, lawfully, and efficiently within the purposes of the subtitle.(2)
An applicant shall authorize the commissioner to obtain a credit report containing a credit score to aid in making this determination.(3)
The applicant shall have met the requirement of financial responsibility if he or she possessed a credit score of 600 or higher at the time of application. If the applicant possesses a credit score of less than 600, the commissioner may review the applicant's credit report for the following information to make this determination:(a)
Any outstanding judgments, excluding judgments arising solely from medical expenses for the applicant or an immediate family member;(b)
Any outstanding tax liens or other governmental liens;(c)
Any foreclosures occurring within five (5) years of the date of application or renewal;(d)
Any bankruptcies occurring within five (5) years of the date of application or renewal; and(e)
Any delinquent accounts occurring within five (5) years of the date of application or renewal.(4)
The factors of character and general fitness shall be determined by the commissioner after review of all relevant information, including information shown on the applicant's credit report, the applicant's criminal history, and any administrative or civil actions taken against the applicant.Section 9.
Electronic Submission of Filings and Fees through the NMLS(1)
A person applying for licensure, registration, renewal, or renewal through reinstatement pursuant to Sections 2, 3, 4, 5, 6, and 7 of this administrative regulation shall electronically submit the following with the State Regulatory Registry, LLC, at http://www.stateregulatoryregistry.org/NMLS, as part of the NMLS(a)
All forms, updates, attestations, and requests required by Sections 2, 3, 4, 5, 6, and 7 of this administrative regulation, as applicable;(b)
Fingerprints and any other information or authorizations necessary to obtain the background records checks and credit reports referenced in Section 6 of this administrative regulation; and(c)
All fees referenced in this administrative regulation.(2)
All forms, documentation, fees, or information that are not available for electronic submission directly through the nationwide multistate(3)
Any fees assessed by the State Regulatory Registry, LLC, to process the electronic submissions referenced in subsection (1) of this section shall be borne by the applicant.Section 10.
Abandoned Applications. If an applicant fails to provide or respond to a request for additional information from the department within ninety (90) daysSection 11.
Inactive Status for Members of the Armed Forces.(1)
A member of the Armed Forces who holds a license or registration in good standing under this administrative regulation may request that the commissioner place the license or registration in inactive status during the period of time that the member is mobilized or deployed, and for a period of six (6) months following termination of the mobilization or deployment.(2)
To request inactive status for a license or registration, a person shall complete Form ML-8, Request for Inactive Status Due to Military Service, and submit it along with proof of mobilization or deployment to the commissioner for approval.(3)
A person whose license or registration has been placed in inactive status shall not engage in the activity requiring the license or registration under KRS Chapter 286.8.(4)
The fee set forth in KRS 286.8-255(4) shall not accrue against a person whose license or registration is in inactive status.(5)
A person may reactivate an inactive license or registration by submitting a written request to the commissioner and attaching proof of compliance with KRS 286.8-255(10) and 286.8-260, if applicable. Upon receipt of a written request and confirmation of compliance with KRS 286.8-255(10) and 286.8-260, the commissioner shall issue an approval for reactivation.Section 12.
Incorporation by Reference.(1)
The following material is incorporated by reference:(a)
Form CL-4, "State License Confirmation Form", updated December(b)
Form ML-6, "Disclosure of Location at a Residence Form", updated December(c)
Form ML-7, "Branch Authorization Form", updated December(d)
Form ML-8, "Request for Inactive Status Due to Military Service", updated December(2)
This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 5 p.m. This material may also be obtained from the department's Web site at http://www.kfi.ky.gov.CHARLES VICE; Commissioner
RAY PERRY, Secretary
APPROVED BY AGENCY: October 14, 2022
FILED WITH LRC: October 14, 2022 at 10:30 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on December 29, 2022, at 10:00 a.m., at 500 Mero Street 2SW19, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing was received by that date, the hearing may be cancelled. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through December 31, 2022. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.
CONTACT PERSON: Gary Stephens, Asst. General Counsel, 500 Mero Street, 2 SW 19, Frankfort, Kentucky 40601, 502-782-9046, fax 502-573-8787; Gary.Stephens@ky.gov.
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
Gary Stephens
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation establishes licensing and registration requirements for consumer loan companies, check cashing and deferred deposit service businesses, mortgage loan companies, mortgage loan brokers, mortgage loan branches, and mortgage loan originators, and procedures for using the Nationwide Multistate Licensing System, (NMLS).
(b) The necessity of this administrative regulation:
This regulation authorizes the commissioner to promulgate administrative regulations for proper conduct and to prescribe the form and requirements for the application for a licensure and registration of the check cashing and deferred deposit service businesses, mortgage loan companies, mortgage loan brokers, mortgage loan branches, and mortgage loan originators in the State of Kentucky.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
The authorizing statutes require participant’s in the above referenced financial industries to apply for licensure with the commissioner. This regulation prescribes the procedures and forms to be filed, along with required supporting documentation, for registration and renewal off applicable licenses.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
By proscribing specific forms, documents and procedures, along with coordinating with a nationwide database, participants in the applicable industries will
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
The amendment will qualify the specific documentation required to be submitted by a licensee for renewal or reinstatement of a mortgage license.
(b) The necessity of the amendment to this administrative regulation:
The applicable mortgage statute was amended, therefore, the regulation will clarify the document requirements that correlate to the amended language in the mortgage statute related to renewal and reinstatements of mortgage licenses.
(c) How the amendment conforms to the content of the authorizing statutes:
The amendment specifies the exact documents required to be submitted to the Department and the relative times frames for the required financial information to make a determination on the renewal or reinstatement fees.
(d) How the amendment will assist in the effective administration of the statutes:
The regulation language clearly indicates the specific documents required for submission and allows for the Department to access documents relevant for renewal or reinstatement review in an orderly and efficient manner.
(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
The mortgage industry participants required to be licensed by the mortgage statute and the Department of Financial Institutions.
(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment:
The mortgage licenses will be required to provide relevant documents to the Department, through the NMLS system, specific to the time frame indicated in the amended language, for review and renewal or reinstatement of licensure
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3):
The required documents and access to the NMLS system are current requirements of the mortgage licensees. Costs to comply with submission requirements will be minimal.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (3):
The Department will benefit from having access to timely and relevant mortgage company financial information in a centralized database system, NMLS, that allows of efficient use of Department resources for renewal of licenses.
(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
The costs to the Department will be minimal.
(b) On a continuing basis:
These costs will be determined, based on document review, complexity of document submissions and Department resources. The ongoing costs are anticipated to be minimal.
(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation:
Current Department budget allocations for the Non Depository Division of the Department.
(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
An assessment cannot be determined at this time.
(8) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
This administrative regulation does not directly increase fees. The amended language is in support of a statutory change in fee calculation for mortgage license renewals and reinstatement.
(9) TIERING: Is tiering applied?
Tiering was not applied in this regulation. The amended language did not require tiering be applied.
FISCAL NOTE
(1) What units, parts, or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation?
The Department of Financial Institutions.
(2) Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation.
KRS 286.4-420, 286.4-425, 286.4-430, 286.4-440, 286.4-450(1)(b), 286.4-480, 286.4-610(1), 286.8-032, 286.8-034, 286.8-100, 286.8-140(1), (4), 286.8-255, 286.8-285, 286.9-050, 286.9-060, 286.9-070, 286.9-090(1), 286.9-107.
(3) Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect.
The specific regulatory language does not address expenditures or revenues for the Department, nor does it require a significant allocation of resources. Therefore, the costs for the Department in the first year will be minimal.
(a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year?
The specific regulatory amendment language does not impose additional fees. Therefore, there will be no change in revenue for the Department.
(b) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for subsequent years?
The Department does not anticipate additional revenue in subsequent years.
(c) How much will it cost to administer this program for the first year?
The Department will utilize existing resources to implement this change, therefore the costs will be minimal.
(d) How much will it cost to administer this program for subsequent years?
The Department does not anticipate additional costs in subsequent years.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Revenues (+/-):
Expenditures (+/-):
Other Explanation:
There will be a minimal fiscal impact on the Department as a result of this regulatory change. This regulation clarifies the specific documents that are to be submitted to the Department, the relevant time frame for the documents and the manner of submission in order to be compliant with renewal or reinstatement requirements.
(4) Estimate the effect of this administrative regulation on the expenditures and cost savings of regulated entities for the first full year the administrative regulation is to be in effect.
Regulated entities will be able to submit required documents through a database that is currently utilized by the industry. Compliance with the procedures for document submission will provide efficiencies for the regulated entities and streamline the renewal or reinstatement process.
(a) How much cost savings will this administrative regulation generate for the regulated entities for the first year?
Cost savings for the industry cannot be adequately determined at this time.
(b) How much cost savings will this administrative regulation generate for the regulated entities for subsequent years?
Cost savings in subsequent years cannot be adequately determined at this time. The requirements for document submission through an established database is anticipated to provide a long term benefit to the industry.
(c) How much will it cost the regulated entities for the first year?
These costs cannot be determined at this time.
(d) How much will it cost the regulated entities for subsequent years?
Long term costs in subsequent years cannot be determined at this time.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Cost Savings (+/-):
Expenditures (+/-):
Other Explanation:
The Department does not anticipate a significant cost to either the industry or the Department to implement these procedural changes. Utilization of the national database system, NMLS, is a regular practice of industry participants.
(5) Explain whether this administrative regulation will have a major economic impact, as defined below.
"Major economic impact" means an overall negative or adverse economic impact from an administrative regulation of five hundred thousand dollars ($500,000) or more on state or local government or regulated entities, in aggregate, as determined by the promulgating administrative bodies. [KRS 13A.010(13)] These regulatory changes will not have a major economic impact.
PUBLIC PROTECTION CABINET
Department of Financial Institutions
(Amendment)
808 KAR 1:170.Licensing and registration.
Section 1.
Definitions.(1)
"Audited financial statement" means a financial statement prepared by a certified public accountant in accordance with generally accepted accounting principles.(2)
"Nationwide Multistate Licensing System" is defined by KRS 286.8-010(20).(3)
"Surety bond" means a bond furnished by a surety company authorized to conduct business in Kentucky.Section 2.
Consumer Loan Company Licensure. A person applying for licensure as a consumer loan company shall submit:(1)
A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;(2)
A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org;(3)
A Form CL-4, State License Confirmation Form completed by each state or jurisdiction in which the person is licensed or registered if the person applying for licensure as a consumer loan company is licensed or registered in any other state or jurisdiction to operate a business making loans of $15,000 or less at the time of application;(4)
The nonrefundable application investigation fee established in KRS 286.4-440(1); and(5)
The annual license fee established in KRS 286.4-440(1).Section 3.
Check Cashing and Deferred Deposit Service Business Licensure.(1)
Initial Application. A person applying for an initial check cashing license shall submit:(a)
A completed NMLS Company Form available online at http://mortgage.nationwidelicensingsystem.org;(b)
A completed NMLS Individual Form available online at http://mortgage.nationwidelicensingsystem.org for each control person designated on the "direct owners and executive officers" section of the NMLS Company Form;(c)
The nonrefundable investigation fee established in KRS 286.9-060(1);(d)
Form COMB-1, State License Confirmation Form for Check Cashing License or Deferred Deposit Service Business License, incorporated by reference in 808 KAR 9:050, if the applicant has a license, registration, or claim of exemption related to the financial services industry in any other state;(e)
An audited financial statement, which includes a balance sheet, income statement, statement of cash flows, and all relevant notes, dated as of the previous year end. If the applicant is a startup company, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;(f)
Evidence that the applicant has complied or will comply with all workers' compensation and unemployment compensation laws of Kentucky; and(g)
One (1) of the following, which shall be deposited with and made payable to the commissioner:1.
An irrevocable letter of credit in an amount required by KRS 286.9-040(1)(a);2.
An Electronic Surety Bond, available online at http://mortgage.nationwidelicensingsystem.org, in an amount required by KRS 286.9-040(1)(b). The name of the principal insured on the bond shall match exactly the full legal name of the applicant; or3.
Form COMB-3, Escrow Agreement for Check Cashing License or Deferred Deposit Service Business License, incorporated by reference in 808 KAR 9:050, accompanied by:a.
Evidence that the applicant has established an account in a federally insured financial institution in Kentucky and has deposited money of the United States in an amount required by KRS 286.9-040(1)(c); orb.
A savings certificate of a federally insured financial institution in Kentucky established by the applicant that is not available for withdrawal except by direct order of the commissioner in an amount required by KRS 286.9-040(1)(d).(2)
Renewal Application. A licensee applying for renewal of a check cashing license or deferred deposit service business license pursuant to KRS 286.9-080(1) shall complete and submit the following on or before December 31 of each year:(a)
The required updates and attestation ensuring the accuracy of all information in the person's record maintained by the http://mortgage.nationwidelicensingsystem.org; and(b)
The nonrefundable license fee established in KRS 286.9-080(1).(3)
Reinstatement Application. A licensee applying for reinstatement of a check cashing license or deferred deposit service business license pursuant to KRS 286.9-080(2) shall complete and submit the following prior to January 31 of the year that the renewal application was due:(a)
The required updates and attestation ensuring the accuracy of all information in the person's record maintained by the http://mortgage.nationwidelicensingsystem.org;(b)
The nonrefundable license fee established in KRS 286.9-080(1); and(c)
The nonrefundable late fee and reinstatement fee established in KRS 286.9-080(2).Section 4.
Licensure as a Mortgage Loan Company or Mortgage Loan Broker.(1)
Initial Application. A person applying for licensure as a mortgage loan company or mortgage loan broker shall submit:(a)
A completed NMLS Company Form as available online at http://mortgage.nationwidelicensingsystem.org;(b)
A completed NMLS Individual Form as available online at http://mortgage.nationwidelicensingsystem.org for each control person designated on the "direct owners and executive officers" section of the NMLS Company Form;(c)
An audited financial statement, which includes a balance sheet, income statement, statement of cash flows, and all relevant notes, dated the previous year end to the date of submission of the NMLS Company Form. If applicant is a startup company, an initial statement of condition and a proforma income statement shall be submitted instead of the income statement and statement of cash flows;(d)
An Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org in an amount not less than the amount required by KRS 286.8-060(1). The name of the principal insured on the bond shall match exactly the full legal name of applicant;(e)
A certified copy of the following:1.
If a corporation, the Corporate Charter or Articles of Incorporation and Bylaws;2.
If a limited liability company, the Articles of Organization and Operating Agreement; or3.
If a partnership of any form, the Partnership Agreement;(f)
A Certificate of Authority or a Certificate of Good Standing issued by the Kentucky Secretary of State dated not more than sixty (60) days prior to the submission of the NMLS Company Form;(g)
If applicant will be operating in Kentucky under a name other than its legal name, a file-stamped copy of the Certificate of Assumed Business Name issued by the Kentucky Secretary of State;(h)
If required to do so by KRS 286.8-032(6), documentation that a managing principal designated by applicant has successfully completed the educational training set forth in KRS 286.8-032(6);(i)
If the principal office will be located in a residence, a completed Form ML-6, Disclosure of Location at a Residence Form; and(j)
The fees set forth in KRS 286.8-034(1).(2)
Renewal Application.(a)
A person applying for renewal of a mortgage loan company or mortgage loan broker license prior to December 1 shall submit:1.
The required updates and attestation ensuring that all information in the person's record maintained by the NMLS operated by the State Regulatory Registry, LLC is correct as available online at http://mortgage.nationwidelicensingsystem.org; and2.
The fee set forth in KRS 286.8-034(3).(b)
A person applying for renewal of a mortgage loan company or mortgage loan broker license through reinstatement shall submit all materials required by paragraph (a) of this subsection and the reinstatement fee required by KRS 286.8-034(6).(c)
The fee set forth in KRS 286.8-034(3) shall be calculated based on data filed by the licensee on the Mortgage Call Report (MCR), which shall be submitted through the NMLS, for the twelve (12) month period ending September 30. The licensee shall submit the MCR no later than November 1st of each year. The department shall apply the following criteria if the licensee has not submitted four (4) quarters of data:1.
If a licensee has not held a license with the department for twelve (12) months, the fee shall be based on the volume of loans originated and closed in Kentucky during the time frame the licensee has held a license in Kentucky;2.
If a licensee does not file the third quarter MCR, which contains data as of September 30, on or before November 1, the department shall:a.
Estimate the twelve (12) month loan volume based on previously filed MCR reports by annualizing the loan volume contained in the prior three (3) quarterly MCR report;b.
Recalculate the actual renewal fee owed once the third quarter MCR is filed; andc.
Send a subsequent fee bill to the licensee for any renewal fee owed based on the actual loan volume reported on the MCR data versus the amounted estimated by the department using the annualized loan volume in 2(a).3.
Pursuant to KRS 286.8-044, tThe department may pursue an administrative action against any licensee that fails to file a timely and accurate MCR. The department may pursue administrative action against any licensee for inaccurate filings of MCR reports resulting in insufficient renewal fee payments.(3)
Change of address, name, control, or agent for service.(a)
A licensee changing its address, name, or agent for service of process shall notify the commissioner:1.
At least ten (10) days prior to the change of address or name; and2.
Five (5) days prior to the change of agent for service of process.(b)
A licensee that wants to engage in a transaction resulting in a change of control shall notify the commissioner at least thirty (30) days in advance with the information necessary for the commissioner to determine whether the requirements of KRS Chapter 286.8 will be satisfied upon the change of control. The commissioner shall notify the licensee whether the request is approved or denied within thirty (30) days of a completed submission of the notice of change of control.(c)
A licensee changing its address, name, control, or agent for service of process shall update this information in NMLS within the same time periods set forth in this section.Section 5.
Registration of a Mortgage Loan Company Branch.(1)
A mortgage loan company branch shall not be approved unless it is controlled, managed, and supervised by the applicant's principal office.(2)
(a)
A person applying for registration of a branch shall submit the following:1.
A completed NMLS Branch Form as available online at http://mortgage.nationwidelicensingsystem.org;2.
A copy of the lease or deed for the branch;3.
A completed Form ML-7, Branch Authorization Form; and4.
If the branch will be located in a residence, a Form ML-6, Disclosure of Location at a Residence Form.(b)
An additional fee for branch registration shall not be required by the department.(3)
A person applying for renewal of a branch registration prior to December 1 shall submit all materials required by Section 4(2)(a) of this administrative regulation.(4)
A person applying for renewal of a branch registration through reinstatement shall submit all materials required by Section 4(2)(a) of this administrative regulation and the reinstatement fee required by KRS 286.8-034(6).Section 6.
Registration of a Mortgage Loan Originator.(1)
Initial registration. A person applying for registration as a mortgage loan originator pursuant to KRS 286.8-255(2) shall submit:(a)
A completed NMLS Individual Form as available online at http://mortgage.nationwidelicensingsystem.org;(b)
A request to submit a Federal Bureau of Investigation background records check and a credit report to the department;(c)
Certification that applicant has successfully completed all education and testing required by KRS 286.8-255; and(d)
The fee set forth in KRS 286.8-255(2)(b).(2)
Renewal registration.(a)
A person applying for renewal of a mortgage loan originator registration pursuant to KRS 286.8-255(4) shall submit:1.
The required updates and attestation ensuring that all information in the person's record maintained by the NMLS operated by the State Regulatory Registry, LLC is correct as available online at http://mortgage.nationwidelicensingsystem.org;2.
A request to submit a Federal Bureau of Investigation background records check and a credit report to the department;3.
Certification that applicant has successfully completed all education and testing required by KRS 286.8-255 and 286.8-260; and4.
The fee set forth in KRS 286.8-255(4).(b)
A person applying for renewal of a mortgage loan originator registration through reinstatement shall submit all materials required by paragraph (a) of this subsection and the reinstatement fee required by KRS 286.8-255(5).(3)
The cost of any Federal Bureau of Investigation background records check or credit report required by this section shall be borne by the applicant.Section 7.
Mortgage Loan Originator Bond Requirements. In addition to the requirements set forth in this administrative regulation, an applicant applying for registration, renewal, or renewal through reinstatement as a mortgage loan originator shall provide proof that the mortgage loan originator holds or is covered by a bond. If the mortgage loan originator is procuring his or her own bond, the applicant shall submit an Electronic Surety Bond available online at http://mortgage.nationwidelicensingsystem.org in an amount determined by annual loan origination as follows:(1)
If the annual loan volume of the applicant is less than $10,000,000, the surety bond shall be in an amount not less than $15,000; or(2)
If the annual loan volume of the applicant is $10,000,000 or more, the surety bond shall be in an amount not less than $20,000.Section 8.
Factors Used to Determine Approval or Disapproval of an Application.(1)
A mortgage loan originator applicant seeking registration, renewal, or renewal through reinstatement under KRS 286.8-255 shall demonstrate the financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly, lawfully, and efficiently within the purposes of the subtitle.(2)
An applicant shall authorize the commissioner to obtain a credit report containing a credit score to aid in making this determination.(3)
The applicant shall have met the requirement of financial responsibility if he or she possessed a credit score of 600 or higher at the time of application. If the applicant possesses a credit score of less than 600, the commissioner may review the applicant's credit report for the following information to make this determination:(a)
Any outstanding judgments, excluding judgments arising solely from medical expenses for the applicant or an immediate family member;(b)
Any outstanding tax liens or other governmental liens;(c)
Any foreclosures occurring within five (5) years of the date of application or renewal;(d)
Any bankruptcies occurring within five (5) years of the date of application or renewal; and(e)
Any delinquent accounts occurring within five (5) years of the date of application or renewal.(4)
The factors of character and general fitness shall be determined by the commissioner after review of all relevant information, including information shown on the applicant's credit report, the applicant's criminal history, and any administrative or civil actions taken against the applicant.Section 9.
Electronic Submission of Filings and Fees through the NMLS Operated by the State Regulatory Registry, LLC.(1)
A person applying for licensure, registration, renewal, or renewal through reinstatement pursuant to Sections 2, 3, 4, 5, 6, and 7 of this administrative regulation shall electronically submit the following with the State Regulatory Registry, LLC, at http://www.stateregulatoryregistry.org/NMLS, as part of the NMLS:(a)
All forms, updates, attestations, and requests required by Sections 2, 3, 4, 5, 6, and 7 of this administrative regulation, as applicable;(b)
Fingerprints and any other information or authorizations necessary to obtain the background records checks and credit reports referenced in Section 6 of this administrative regulation; and(c)
All fees referenced in this administrative regulation.(2)
All forms, documentation, fees, or information that are not available for electronic submission directly through the nationwide multistate licensing system operated by the State Regulatory Registry, LLC shall be submitted directly to the department.(3)
Any fees assessed by the State Regulatory Registry, LLC, to process the electronic submissions referenced in subsection (1) of this section shall be borne by the applicant.Section 10.
Abandoned Applications. If an applicant fails to provide or respond to a request for additional information from the department within ninety (90) days , the application shall be deemed incomplete and abandoned. An applicant seeking licensing or registration after its application has been abandoned shall reapply and resubmit all required information.Section 11.
Inactive Status for Members of the Armed Forces.(1)
A member of the Armed Forces who holds a license or registration in good standing under this administrative regulation may request that the commissioner place the license or registration in inactive status during the period of time that the member is mobilized or deployed, and for a period of six (6) months following termination of the mobilization or deployment.(2)
To request inactive status for a license or registration, a person shall complete Form ML-8, Request for Inactive Status Due to Military Service, and submit it along with proof of mobilization or deployment to the commissioner for approval.(3)
A person whose license or registration has been placed in inactive status shall not engage in the activity requiring the license or registration under KRS Chapter 286.8.(4)
The fee set forth in KRS 286.8-255(4) shall not accrue against a person whose license or registration is in inactive status.(5)
A person may reactivate an inactive license or registration by submitting a written request to the commissioner and attaching proof of compliance with KRS 286.8-255(10) and 286.8-260, if applicable. Upon receipt of a written request and confirmation of compliance with KRS 286.8-255(10) and 286.8-260, the commissioner shall issue an approval for reactivation.Section 12.
Incorporation by Reference.(1)
The following material is incorporated by reference:(a)
Form CL-4, "State License Confirmation Form", updated December 2019;(b)
Form ML-6, "Disclosure of Location at a Residence Form", updated December 2019;(c)
Form ML-7, "Branch Authorization Form", updated December 2019; and(d)
Form ML-8, "Request for Inactive Status Due to Military Service", updated December 2019.(2)
This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 5 p.m. This material may also be obtained from the department's Web site at http://www.kfi.ky.gov.CHARLES VICE; Commissioner
RAY PERRY, Secretary
APPROVED BY AGENCY: October 14, 2022
FILED WITH LRC: October 14, 2022 at 10:30 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on December 29, 2022, at 10:00 a.m., at 500 Mero Street 2SW19, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing was received by that date, the hearing may be cancelled. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through December 31, 2022. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.
CONTACT PERSON: Gary Stephens, Asst. General Counsel, 500 Mero Street, 2 SW 19, Frankfort, Kentucky 40601, 502-782-9046, fax 502-573-8787; Gary.Stephens@ky.gov.
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
Gary Stephens
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation establishes licensing and registration requirements for consumer loan companies, check cashing and deferred deposit service businesses, mortgage loan companies, mortgage loan brokers, mortgage loan branches, and mortgage loan originators, and procedures for using the Nationwide Multistate Licensing System, (NMLS).
(b) The necessity of this administrative regulation:
This regulation authorizes the commissioner to promulgate administrative regulations for proper conduct and to prescribe the form and requirements for the application for a licensure and registration of the check cashing and deferred deposit service businesses, mortgage loan companies, mortgage loan brokers, mortgage loan branches, and mortgage loan originators in the State of Kentucky.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
The authorizing statutes require participant’s in the above referenced financial industries to apply for licensure with the commissioner. This regulation prescribes the procedures and forms to be filed, along with required supporting documentation, for registration and renewal off applicable licenses.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
By proscribing specific forms, documents and procedures, along with coordinating with a nationwide database, participants in the applicable industries will
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
The amendment will qualify the specific documentation required to be submitted by a licensee for renewal or reinstatement of a mortgage license.
(b) The necessity of the amendment to this administrative regulation:
The applicable mortgage statute was amended, therefore, the regulation will clarify the document requirements that correlate to the amended language in the mortgage statute related to renewal and reinstatements of mortgage licenses.
(c) How the amendment conforms to the content of the authorizing statutes:
The amendment specifies the exact documents required to be submitted to the Department and the relative times frames for the required financial information to make a determination on the renewal or reinstatement fees.
(d) How the amendment will assist in the effective administration of the statutes:
The regulation language clearly indicates the specific documents required for submission and allows for the Department to access documents relevant for renewal or reinstatement review in an orderly and efficient manner.
(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
The mortgage industry participants required to be licensed by the mortgage statute and the Department of Financial Institutions.
(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment:
The mortgage licenses will be required to provide relevant documents to the Department, through the NMLS system, specific to the time frame indicated in the amended language, for review and renewal or reinstatement of licensure
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3):
The required documents and access to the NMLS system are current requirements of the mortgage licensees. Costs to comply with submission requirements will be minimal.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (3):
The Department will benefit from having access to timely and relevant mortgage company financial information in a centralized database system, NMLS, that allows of efficient use of Department resources for renewal of licenses.
(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
The costs to the Department will be minimal.
(b) On a continuing basis:
These costs will be determined, based on document review, complexity of document submissions and Department resources. The ongoing costs are anticipated to be minimal.
(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation:
Current Department budget allocations for the Non Depository Division of the Department.
(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
An assessment cannot be determined at this time.
(8) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
This administrative regulation does not directly increase fees. The amended language is in support of a statutory change in fee calculation for mortgage license renewals and reinstatement.
(9) TIERING: Is tiering applied?
Tiering was not applied in this regulation. The amended language did not require tiering be applied.
FISCAL NOTE
(1) What units, parts, or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation?
The Department of Financial Institutions.
(2) Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation.
KRS 286.4-420, 286.4-425, 286.4-430, 286.4-440, 286.4-450(1)(b), 286.4-480, 286.4-610(1), 286.8-032, 286.8-034, 286.8-100, 286.8-140(1), (4), 286.8-255, 286.8-285, 286.9-050, 286.9-060, 286.9-070, 286.9-090(1), 286.9-107.
(3) Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect.
The specific regulatory language does not address expenditures or revenues for the Department, nor does it require a significant allocation of resources. Therefore, the costs for the Department in the first year will be minimal.
(a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year?
The specific regulatory amendment language does not impose additional fees. Therefore, there will be no change in revenue for the Department.
(b) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for subsequent years?
The Department does not anticipate additional revenue in subsequent years.
(c) How much will it cost to administer this program for the first year?
The Department will utilize existing resources to implement this change, therefore the costs will be minimal.
(d) How much will it cost to administer this program for subsequent years?
The Department does not anticipate additional costs in subsequent years.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Revenues (+/-):
Expenditures (+/-):
Other Explanation:
There will be a minimal fiscal impact on the Department as a result of this regulatory change. This regulation clarifies the specific documents that are to be submitted to the Department, the relevant time frame for the documents and the manner of submission in order to be compliant with renewal or reinstatement requirements.
(4) Estimate the effect of this administrative regulation on the expenditures and cost savings of regulated entities for the first full year the administrative regulation is to be in effect.
Regulated entities will be able to submit required documents through a database that is currently utilized by the industry. Compliance with the procedures for document submission will provide efficiencies for the regulated entities and streamline the renewal or reinstatement process.
(a) How much cost savings will this administrative regulation generate for the regulated entities for the first year?
Cost savings for the industry cannot be adequately determined at this time.
(b) How much cost savings will this administrative regulation generate for the regulated entities for subsequent years?
Cost savings in subsequent years cannot be adequately determined at this time. The requirements for document submission through an established database is anticipated to provide a long term benefit to the industry.
(c) How much will it cost the regulated entities for the first year?
These costs cannot be determined at this time.
(d) How much will it cost the regulated entities for subsequent years?
Long term costs in subsequent years cannot be determined at this time.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Cost Savings (+/-):
Expenditures (+/-):
Other Explanation:
The Department does not anticipate a significant cost to either the industry or the Department to implement these procedural changes. Utilization of the national database system, NMLS, is a regular practice of industry participants.
(5) Explain whether this administrative regulation will have a major economic impact, as defined below.
"Major economic impact" means an overall negative or adverse economic impact from an administrative regulation of five hundred thousand dollars ($500,000) or more on state or local government or regulated entities, in aggregate, as determined by the promulgating administrative bodies. [KRS 13A.010(13)] These regulatory changes will not have a major economic impact.