In February 2012, the Department of Treasury issued a final rule at C.F.R. parts 1010 and 1029, to now define non-bank residential mortgage lenders and originators as loan or finance companies for the purpose of requiring them to establish anti-money laundering programs and to report suspicious activities under the Bank Secrecy Act.  The Bank Secrecy Act defines “financial institution” to include, in part, a loan or finance company, but those were undefined terms in any FinCEN regulation with no legislative history on the meaning of the terms.  In 2002, FinCEN temporarily exempted loan finance companies and others from the definition of “financial institutions.”  In 2009, FinCEN issued its proposed rule soliciting comments on whether to include non-bank residential mortgage lenders and originators.  After extended review and comments, the final rule now includes non-bank residential mortgage lenders and originators (“RMLO’s) in the obligation to include reporting suspicious activities.   FinCEN defines a residential mortgage originator as “[a] person who accepts a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan,” though does not include individuals financing the sale of their own property.  The March 2012 Advisory Fin-2012-A002 would also apply to these newly included entities. [See separate article at FBT blog on March 2012 Advisory for further discussion.] RMLOs not complying with AML program and SAR filing requirements face potentially serious criminal and civil penalties.   

FinCEN has called the new rules, “the first step in an incremental approach to implementation of regulations for the broad loan or finance company category of financial institutions.” This is probably something the industry should continue to watch, as the term “loan or finance company” was undefined by the BSA,  FinCEN’s position that the term permits the addition of “other types of loan and finance related businesses and professions” may possibly suggest further broadening by future regulatory amendments. 

The final rule regarding non-bank mortgage lenders and originators will be effective 60 days after publication in the Federal Register. The compliance date for the final rule will be six months after publication in the Federal Register. The final rule: