From the Desk of the Om-Bobs-man

From the Desk of the ‘Om-Bobs-man’ "Om-Bobs-Man" is the nickname Bob Niemi earned while serving as the NMLS Ombudsman in 2014 and 2015. Bob is a former Ohio state regulator and now an expert consultant on NMLS and state regulatory matters. Bob can be reached at BNiemi@Bradley.com.

The Technology of Examinations

The State Examination System is now a year old and growing. Referred to as the SES by regulators, the system is a platform for both single state and multistate examinations. Adoption of the SES and system best practices across state agencies will standardize the supervisory process and hopefully reduce the number and cost of state examinations.

While the SES is connected within the NMLS, the SES is separate from licensing and existing users are not shared. The use of the SES for examinations will allow for growth of exam data that can be used for the scoping process with licensing data and company mortgage call reports. This will enable examiners to focus more attention on higherrisk entities.

Since its introduction, significant enhancement has been made and new features have been added in the four system releases. The more recent update in mid-September provided a new workflow that allows a state examiner to accept or leverage another agency’s recent examination. This functionality supports the objective of networked supervision by giving state agencies another tool to collaborate and utilize the work of another agency. This feature will grow in importance as adoption of SES and examinations or supervisory activities are stored in the system. The current record retention is six years. This could reduce concurrent examinations or duplicate information requests as adoption by state regulators grow.

But not all information from state examinations is shared between state regulators. While exam schedules, reports of examinations, and company responses to those reports are shared, consumer specific data and company documents are not communicated. For compliant companies, this sharing will reduce workload and should lead to fewer examinations. For companies with challenges, this collaboration between regulators may lead to additional examinations and supervisory actions.

Reports put the number of ongoing examinations or investigations completed over 160 as of September 1, 2020. While the SES target is for thirtytwo state agencies to adopt by the end of 2020, currently only about twenty states are utilizing the SES. The usage of the SES by a state regulatory agency is discretionary, but with each improvement, adoption is growing. There are also a handful of states utilizing the system for complaint processing and management as that enhancement is being piloted this fall as well. The target for a nationwide release of the complaints platform is the fourth quarter.

But will increased collaboration and technology reduce the number of onsite examinations? State leaders agree that the move toward increasing data requests, securing delivery of data, and processing of loan data, including the use of automated compliance tools, has increased in recent years. The work-from-home environment has also shifted to an almost exclusive remote examination landscape in the wake of the pandemic.

But remote examinations will not become the only format for examinations. Onsite examinations will remain for follow-up exams as well as targeted examinations for highrisk licensees. Hopefully adoption will grow as a positive result of 2020 and everyone will realize the promised benefits. MBM