MMC MME Identification Procedures

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Risk Profiling Group
Procedures for Identifying MMEs and Assigning a Risk Profile
PURPOSE
These procedures establish the criteria for identifying Multi-State Mortgage Entities
(MMEs) and assigning a Risk Profile to each MME under the Nationwide Cooperative
Protocol and Agreement for Mortgage Supervision (Protocol and Agreement). The Risk
Profiling Group (RPG), under the direction of the Multi-State Mortgage Committee
(MMC) is responsible for:



Identification of Multi-State Mortgage Entities (MMEs);
Establishing the MME Risk Profile standards and criteria; and
Assigning the MME Risk Rating Valuation based on the Risk Profile of each
MME.
The MME Risk Rating Valuation will be used by the MMC to set the MME Examination
Schedule for all multi-state examinations conducted under the Protocol and Agreement.
DEFINITIONS
Agreement State MME Risk Submission Form means the template used by each
Agreement State recommending MME identification of an entity and any additional risk
factors to be considered by the RPG in developing the Risk Rating Valuation.
Compliance Analyzer Examination Dashboard Report means the analytical software
report developed by Compliance Ease for the Agreeing States.
Multi-State Mortgage Entity or MME means the same as defined in the Agreement: Any
multi-state, non-depository mortgage business with operations in two or more states
identified by the MMC as an MME for purposes of the Protocol and Agreement. At the
discretion of the MMC, MME may also include multi-jurisdictional entities under the
supervisory authority of more than one regulatory body. For example, the MMC may
determine for the purposes of multi-jurisdiction coordination under the Agreement to
identify an institution operating under the authorities of both a State Regulator and the
Office of Housing and Urban Development, the Veterans Administration, the Federal
Trade Commission, or other agency with supervisory or law enforcement authority as an
MME.
For purposes of these procedures, an MME shall be any mortgage company registered in
the Nationwide Mortgage Licensing System (NMLS) as licensed in two or more states,
including D.C., Puerto Rico and Guam. In situations where an entity conducts business
in two or more states under the jurisdiction of agencies signed to the Agreement, where
no licensing or registration by the NMLS is required for the entity, the RPG may still
identify the entity on the MME list. For example, an entity operates in State A and State
B under the jurisdiction and authority of the banking departments of each state. State A
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requires the entity to hold a license and be registered by NMLS. State B does not license
this entity type. The RPG may identify the entity as an MME.
Further, in situations where an entity operates legally in State A and illegally in State B,
the RPG may identify the entity as an MME.
Risk Occurrence means an event or transaction carrying a perceived level of risk. For
example, a single loan origination, a type of loan, or an indication of fraud is a Risk
Occurrence.
Risk Points mean static numeric values assigned for each type and severity of risk. For a
determination of the overall risk of an MME, Risk Points are multiplied by the number or
instances of Risk Occurrence.
Risk Profile means an outline or representation of an MME’s risk to the public and itself,
based upon an analysis of certain standardized characteristics.
Risk Rating Valuation means a numeric valuation of an MME’s risk to the public and
itself in relation to all other MME’s. The Risk Rating Valuation is the total of Risk
Points multiplied by the number of Risk Occurrences.
SCHEDULE FOR IDENTIFYING MMEs
The RPG shall research and identify MMEs on a monthly basis using the following tools:


An MME report produced by the NMLS showing all states in which each
registered entity is authorized to conduct business.
Submission of information by Agreement States identifying MMEs not reported
by NMLS.
The RPG shall publish its MME list to the MMC no later than the XXth of each month.
Note that risk can be assigned or adjusted throughout the examination process based on
the institution’s efforts in addressing issues highlighted by examiners.
MME RISK PROFILE STANDARDS AND CRITERIA
Risk Profile standards and criteria shall be applied to all MMEs operating in 10 or more
states and reported to the MMC no less than once per calendar year beginning September
30, 2009. The tools for establishing MME Risk Profiles are the Compliance Analyzer
Examination Dashboard Report and the Agreement State MME Risk Submission Form.
The standards and criteria employed for risk assessment are listed in the Risk Points table
below. Other factors not listed may be employed by the RPG in assessing an MME’s risk
as approved by the MMC. Such factors may include additional information provided by
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Agreement State regulators on the Agreement State MME Risk Submission Form, or
information from credible sources such as other regulatory or law enforcement agencies.
MME RISK RATING VALUATION
Each Risk Profiled MME is assigned a Risk Rating Valuation based on accumulated Risk
Points. Risk Points themselves are static values for each type and severity of risk. For a
determination of the overall risk of an MME, Risk Points are multiplied by the number or
instances of Risk Occurrence. The purpose of the Risk Rating Valuation is to assign a
numerical value of risk to an MME in relation to other MMEs, with a higher Risk Rating
Valuation accorded greater examination urgency and focus.
The following Risk Points table will be used to assign the Risk Rating Valuation:
Risk Criteria
# of States in Which Business is conducted
Longevity of MME
Time since last examination
Examination Findings
 Significant
 Moderate
 Minor
 None
Schedule of next examination
Origination Activity
 # Loans Originated
 $ Loans Originated
 $ Loans Funded
 $ Loans held in portfolio
 # Loans serviced
Loan Purpose Distribution
 Purchase
 Refinanced
 Subordinate
Program Type Distribution
 Fixed
 ARM
 Nontraditional product
Lien Type Distribution
 First
 Second
Property Type Distribution
 Single Family 80% or less LTV
 Single Family 80% or greater LTV
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Descripter
Points assigned per state
Subtract points for each year
Add points per year
Points
XX
<X>
Add
Add
Add
Subtract
Add per month
XXX
XX
XX
<XX>
X
Add per loan
Add per $1,000
Add per $1,000
Add per $1,000
Add per loan
.0X
.0X
.0X
.0X
.0X
Add per loan
Add per loan
Add per loan
.0X
.0X
.0X
Subtract per loan
Add per loan
Add per loan
<.0X>
.0X
.0XX
Subtract per loan
Add per loan
.0X
.0X
Subtract per loan
Add per loan
<.0X>
.0X


Manufactured Housing 80% or less LTV
Manufactured Housing 80% or greater
LTV
Loan Type Distribution
 Conventional less than 80% LTV
 Conventional greater than 80% LTV
 Government Insured
 Subprime
Risk Indicator Distribution
 Critical: Fail a HOEPA test
 Significant: Fail any state or local antipredatory test
 Moderate: Fail a TILA, RESPA, or state
test
 Minimal: Pass all quantifiable tests
Fraud Indicator Distribution
Ability to Repay Indicator Distribution
Complaint History
Enforcement History
4/4
Subtract per loan
Add per loan
<.0X>
.0X
Subtract per loan
Add per loan
Subtract per loan
Add per loan
<.0X>
.0X
<.0X>
.0X
Add per failure
Add per failure
X
X
Add per failure
X
No points assigned
Add per failure
Add per failure
Add per complaint
Subjective
XX
XX
X
XXX
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