The Kentucky Department of Financial Institutions (“Department”) recently published guidance addressing the Department’s regulatory approach relating to licensing requirements for master servicers and sub servicers (“Guidance”). The Guidance clarifies that master servicers and sub servicers must be licensed as a mortgage loan company with the Department by March 1, 2017.
The Department interpreted the applicability of the Kentucky statute requiring a license for any person prior to transacting business in Kentucky, either directly or indirectly, as a mortgage loan company or mortgage loan broker. The Department stated that, in its view, a master servicer is a mortgage loan company because it both holds itself out as being able to service loans and it indirectly services loans through a sub servicer. The Department stated that it also views a sub servicer as a mortgage loan company because sub servicers actually perform the servicing of the loan. Finally, the Department stated, in light of its interpretation of the aforementioned licensing requirements, master servicers and sub servicers with loans secured by residential real property located in Kentucky must be licensed with the Department unless the master servicer or sub servicer can document to the Department, in writing, that they are specifically exempt from licensure.