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The Conference of State Bank Supervisors (CSBS) recently announced at the February 2020 NMLS Conference held in San Francisco, CA that it will be launching the State Examination System (SES) nationwide in March 2020.  SES is a newly developed web-based system, which state regulators may utilize when performing examinations of licensees, such as mortgage lenders and brokers.  Although it is not a requirement for each state agency to adopt the SES, to date, approximately thirty-five (35) states have provided SES commitments. 

The goal of the SES is to standardize supervision and foster collaboration among state regulators, while also relieving some of the industry’s burden related to juggling multiple state examinations with multiple information requests.  By utilizing SES, multiple state regulators may opt to examine a licensee simultaneously as part of a single exam that includes one uniform information request.  Further, the SES contains a standardized list of questions and document requests, which examiners will use to formulate the examination information request.  Examiners may also add state-specific requests as deemed necessary to the examination information request. 

Although the SES launches nationwide this month, it is already in use by a number of states.  Particularly, the CSBS deployed the SES through a pilot program during the fourth quarter of 2019.  As part of this pilot program, a number of states performed examinations of licensees from start to finish through the system.  Representatives of some of these states indicated they will continue to utilize the SES to perform examinations and are in the process of exposing their examiners to the system.  Licensees should expect to begin to receive examination notices shortly through the SES.

The SES is a stand-alone system separate and distinct from the Nationwide Mortgage Licensing System and Registry (NMLS). As such, users must maintain separate credentials for accessing the SES.  In order to create a SES account, a state regulator(s) must select to examine the licensee through the system.  Once a state regulator chooses to examine a licensee through the SES, the SES will generate email notifications to the licensee’s examination contact: (i) notifying the licensee that it has been on-boarded into the SES, and (ii) requiring the licensee to establish a SES account.

The SES may be used by state regulators to facilitate both limited and full-scope reviews, both onsite and offsite.  In the event multiple states are involved in a single exam, the states will appoint an Examiner in Charge to manage the exam.  There are also various role assignments in the SES for licensees.  Specifically, licensees must maintain at least one Account Administrator who is responsible for managing users in the system.  Licensees must also assign one Leader for each examination through the SES.  The Leader is responsible for assigning other roles on the examination (if any), as well as submitting all information and documents related to the exam to the state regulator(s) through the system.  Leaders may then also assign Contributor and Third Party roles for each exam to assist the Leader in formulating and uploading exam responses.

Licensees are encouraged to maintain a copy of the information and documents provided through the SES on their own systems as a licensee will not be able to access an exam file once the state regulator(s) closes the examination.  Further, it is important to note that all of the licensee’s state regulators utilizing the SES will have access to view a snapshot of activity in the system.  This snapshot provides information on licensees being examined.  Further, state regulators may share information through the SES – even if one of the state regulators is not involved in a particular exam.

In addition to examination management, the SES will also serve as a complaint management portal for state regulators that elect to utilize the system.  This function is currently in development, but the CSBS indicated it intends to deploy a pilot program for complaint management by the end of 2020. 

CSBS has published multiple resources in relation to the SES which may be located on its website.