Without Preemption, Bank Subsidiaries Have a Choice to Make

NewImage.jpgReverse mortgage lenders operating as subsidiaries of national banks have a choice to make after the Dodd-Frank reform law ends federal preemption.

American Banker is reporting that if lenders choose to continue operating as bank subsidiaries, they would be subject to state consumer protections laws.  However, if banks roll up the subsidiaries, they retain the federal preemption shield but losing the practical benefits of keeping the mortgage business in a stand-alone unit.

Industry lawyers expect most institutions to go the roll-up route, partly out of fear that sooner or later the states would try to force operating subsidiaries — and, potentially, their individual loan officers — to get state licenses. The burden of satisfying 50 state regulators would outweigh the cost in legal fees of restructuring.

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“There is a whole business model that surrounded the bank operating subsidiary and cutting the costs of the enterprise by avoiding state licensing and state regulation,” said Clinton Rockwell, a partner in the BuckleySandler LLP law firm. “That was the big sales pitch for a lot of those entities, and basically that model is dead.”

The mortgage market is volatile, and banks like to be able to get in and out of it with ease. This is the main reason financial institutions like to keep their mortgage businesses in separate operating subsidiaries — with separate management teams, human resources departments and health plans, such outfits can stand on their own and thus are easier to sell.

Stripped of Preemption, Banks Expected to Roll Up Mortgage Units

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  • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

  • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

  • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

  • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

  • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

  • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

  • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

  • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

  • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

  • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

  • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

  • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

  • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

  • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

  • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

  • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

  • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

  • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

  • Is it really so clear that the roll up will actually work? After all the preemption issue seems to apply to the operation rather than the type of legal entity.rnrnThe issue is far greater than mere licensing. If that is all it is, a simple but specific statutory exemption at the federal level could apply.rnrnNationally chartered lenders should be encouraging licensing of their employees not running away from it. Licensing seems more of an excuse than the primary reason.

    • I agree with you, TC. The issue that should concern all of the bank regulating bodies is: will banks running away from the licensing of their employees mean that while some of the best in our industry will reside under federal bank banners, the most mediocre of loan originators will hide behind the biggest names in banking? How oh how does that meet the spirit of the SAFE Act?

  • Stick to what you know, The_Critic. This subject doesn’t seem to be your speciality. The value of preemption cannot be understated. The impact of this change is huge to these companies, and fundamentally affects the very core of their business model and economics.

    • Reverse Stash,rnrnThanks for using my proper pseudonym. Now I owe you.rnrnWhat is the matter with all mortgage lenders playing by the same rules with the same cost structures in those states where it is most appropriate like NY, CA, NJ, TX, PA, IL, OH, NC, GA, MA, RI, CT, MD, VA, and other states? Why do they need this competitive advantage?rnrnOr why not just require their originators to go through the same NMLS and state licensing requirements? Is anyone reimbursing originators for these costs?rnrnLike most who put others down with a few words, you fail to bring any real information to the table. Please try. Why isnu2019t time to change?rn

    • Michael,rnrnYou are really passionate about this. Imagine how those who are going through the pain and agony of paying hundreds and even thousands of dollars in preparing for exams which have little to do with the reverse mortgage industry are feeling right now. Imagine their down time, just to prepare.rnrnIt is time to put an end to general preemption and for specific preemption alone to survive.

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