What is the S.A.F.E. Act?

Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act)

In the spring of 2008, the meltdown of the subprime mortgage market led to the introduction of many bills in Congress to address the market conditions that led to the crisis. The combined result of many of these legislative proposals appeared in the Housing and Economic Recovery Act of 2008 (HERA), which was signed July 30, 2008. The goals of HERA include:

· Strengthening regulation of the government sponsored entities

· Providing additional Federal Housing Administration programs to assist homeowners

· Addressing problems caused by the foreclosure crisis

· Establishing a nationwide licensing database and education standards for the mortgage industry

The S.A.F.E. Act is Title V of HERA and had had the most immediate impact on mortgage professionals such as loan originators and brokers. Provisions of the S.A.F.E. Act establish application and reporting requirements for state-regulated loan originators and mortgage brokers. The Act requires each state to participate in the Nationwide Mortgage Licensing System (NMLS) created by the Conference of State Bank Supervisors (CSBS), and the American Association of Residential Mortgage regulators (AARMR).

What our Loan Officers will be going through…

Requirements of the S.A.F.E. Act

Licensing/Registration: The Act requires federally regulated loan originators to register with the NMLS and state-regulated loan originators to become licensed through the NMLS. Licensing and registration creates a unique identifying number for each loan originator, enabling regulators to track the activities of registrants/licensees.

Background Checks: Loan originators must submit to a comprehensive background check including submission of fingerprints, civil and criminal history and a credit report as part of their application for licensure. Individuals who have been convicted of a felony in the seven years prior to application are not eligible for licensing. Felony convictions involving charges such as fraud, dishonesty and money laundering may render an individual permanently ineligible for licensure.

Education/Testing: Prior to licensing, loan originators are required to obtain 20 hours of NMLS approved education which covers specific topics relevant to the mortgage profession (three hours of federal laws and regulations, three hours of ethics, fraud, consumer protection and fair lending, and two hours of training in the nontraditional mortgage marketplace. License candidates must also pass a written exam administered through the NMLS with a passing score of 75%. Following licensure, loan originators are required to obtain eight hours (three hours of federal mortgage laws and regulations, two hours of ethics fraud, consumer protection and fair lending: states could add law to the requirement) of NMLS approved education annually.

Demonstration of Financial Responsibility: Individual states will set the guidelines for how loan originators will demonstrate financial responsibility and general fitness. However, examples include net worth requirements, surety bond requirements, payment into a state fund and minimum credit score requirements.

What it means for you, as a consumer…       

Consumer Protection Under the S.A.F.E. Act

The S.A.F.E. Act created a number of consumer protection provisions. In addition to encouraging responsible behavior within the industry by mandating licensing/ registration and education requirements, the Act also:

· Provides consumers with access to information about registrants/licensees; such as enforcement actions, etc.

· Facilitates collection and distribution of consumer complaints between state regulators.