13Mar2012
Rob Chrisman
Author
Rob Chrisman
Filed Under
Mortgage News

Mortgage Regulation Acronyms : RMLO, BSA, FinCen, AML

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The government has always been known for acronyms, and in the current environment, it seems more and more are popping up. The latest batch revolves around mortgage origination.

Residential mortgage lenders and originators (RMLOs) -- known as "mortgage companies" and "mortgage brokers" but not individual loan originators -- now are subject to the Bank Secrecy Acts (BSA), an anti-money laundering regime pursuant to a long expected new regulation backed by "FinCEN."

FinCen is a part of the Treasury that implements the U.S.'s anti-money laundering regime.

Under the new rules, RMLOs are required to develop and implement an anti-money laundering (AML) program. Financial institutions such as banks and broker-dealers have been required to maintain AML programs for some time, but by requiring RMLOs to implement AML Programs, FinCEN is attempting to "fill a regulatory gap that can be exploited by criminals, particularly in the conduct of mortgage fraud."

The new regulations do not apply to banks, persons registered with, and functionally regulated or examined by, the SEC or Commodity Futures Trading Commission because many of the foregoing types of companies are already covered by separate sets of anti-money laundering requirements. Nor does AML apply to any government-sponsored enterprise regulated by the Federal Housing Finance Agency and any federal or state agency or authority administering mortgage or housing assistance, fraud prevention, or foreclosure prevention programs.

Under a risk-based approach to implementation of the new regulations, FinCEN expects fraud prevention, as well as money laundering prevention, to be key goals underlying the various policies and procedures in an effective AML program for an RMLO. And in the long run, this will help the mortgage industry's reputation, and borrowers and investors' comfort levels with safety and soundness.

About the Author

Rob has a 27-year history in the mortgage banking industry. He publishes a widely-read daily mortgage market and economic commentary at http://www.robchrisman.com. Rob lectures, consults for mortgage companies, and is a member of the California Mortgage Bankers Association and the Mortgage Bankers Association of the Carolinas. Rob holds a BS from Cal Poly, San Luis Obispo, and an MBA from UC Berkeley.
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