By: Anthony Dandola, Esq., CRCM
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), which is part of the Housing and Economic Recovery Act of 2008, became federal law on July 30, 2008.
The SAFE Act encourages states to implement greater mortgage loan originator (MLO) oversight by establishing a licensing system and requiring each MLO to register with a national database. The law also authorizes the Department of Housing and Urban Development (HUD) to develop and implement a loan originator registration process for any state that does not develop an adequate system. To assist the states, the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) developed model legislative language which complies with the SAFE Act. Nearly all states have now passed such legislation. CSBS and AARMR are also designated in the SAFE Act to be the operators a registry system known as the Nationwide Mortgage Licensing System and Registry (NMLSR).
In addition to the standards imposed on the states, the SAFE Act also requires each MLO employed by a federally-regulated depository institution to register with the NMLSR. Profiles for both federal and state MLO will be combined in a single database and each person will be assigned a unique identifier to be used with MLO transactions.
Applicability
A MLO is an individual that takes a residential mortgage loan application and offers or negotiates the terms of a residential mortgage loan for compensation or gain. A residential mortgage loan is defined as financing (other than temporary) which is secured by a 1-4 family dwelling or mobile home.
There are several exceptions to the MLO definition. Activities that are excluded by the SAFE Act are those that pertain to administrative or clerical tasks; real estate brokerage activities; loan processing or underwriting under the direction and supervision of a state-licensed MLO or registered (federal) MLO; and those individuals solely involved in extensions of credit relating to timeshare plans. Under a proposed de minimis exception, an employee of a federally-regulated institution would not have to register as a MLO if that worker originated five or fewer loans in the previous 12 months.
Federal Registration
Each MLO employed by a depository institution or a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency must be registered with the NMLSR. There is no precise date set to begin this process because the NMLSR is undergoing changes to accommodate the different requirements for state and federal MLO registration. When the system is established, each MLO employed by a federal depository institution or subsidiary will be required to provide fingerprints for an FBI criminal history background check; personal history and experience; and authorization to the NMLSR to obtain information related to any administrative, civil or criminal findings by any governmental jurisdiction.
State Licensing
The SAFE Act requires, at a minimum, that each person seeking a state MLO license complete pre-licensing education; pass a national mortgage test; and meet annual continuing education requirements. To register, each MLO licensed by a state will be required to provide fingerprints for an FBI criminal history background check; personal history and experience; and authorization to NMLSR to obtain a credit report and information related to any administrative, civil or criminal findings by any governmental jurisdiction.
The earliest date for states to comply with the SAFE Act is July 31, 2010; however, the compliance date for individual states may be a year or more later. Factors such as how often the legislature meets and the transition of a state from a different licensing system can delay the process. The following link provides current information on the licensing requirements and registration for each state: http://mortgage.nationwidelicensingsystem.org/slr/Pages/default.aspx
Much of this is still unsettled. MLO licensing, registration dates and procedures will be different for each state. HUD has only recently proposed minimum standards for mortgage loan originator licensing that states must meet to comply with the SAFE Act. MLO registration for employees of federally-regulated institutions is dependent on the publication of a joint final rule by the federal banking regulators. Although the FDIC issued a “draft” of the final rule in November 2009, a version agreed upon by all of the federal regulators has yet to be published. Stay tuned!
Anthony Dandola serves as a Compliance Research Manager for ICS Compliance.
