In order to enhance consumer protection, the Congress passed what is known as the Secure and Fair Enforcement for Mortgage Licensing Act or what is commonly referred to as the SAFE Act. The act provides the consumer with an enhanced protection through giving incentives to states, creating minimum standards for the registration and licensing of state-licensed mortgage loan originators also known as MLOs. Basically, it allows states to create their own standards for people who loan money against residential property. It also creates a nationwide licensing system for the nation’s residential mortgage businesses. This effort helps in setting the minimum standards that will be used for licensing and registration. Additionally, the Nationwide Mortgage Licensing System Registry provides consumers access to loan officer records to confirm they are licensed, the company they work for and contact information.
The Department of Housing and Urban Development known as HUD has assumed the role of providing notice and taking comment for rulemaking for the SAFE Act. First we will discuss provisional licensing and whether a state could issue licensing to mortgage loan originators who have yet to complete the testing and education requirements of the SAFE Act. These licenses will only be issued by the state once enough proof has been established, documenting that the minimum licensing standards have been met. A state may request and seek additional information even after a license is issued, or change its approval on existing information with regard to its accuracy.
Next issue discussed is whether or not to exempt someone who has been in the business of originating loans over an extended period of time from taking tests or attaining the education requirements. The regulators agreed to this through 2010, but in 2011 all would be required to participate no matter how long they have been doing their job. These individuals who this part of the law applies to, need to comply with the requirements of the new legislation and rules to maintain compliance with HUD.
States have a tendency to use different words or terms in many of their bills and legislation. The question is what happens if a state chooses to use another word other than “license” or “licensing” in their regulation? An example of words that might be used instead of license is “permit”, “authorization”, “certify” or “certification”. The answer is that if the term used has the same functional meaning, then it meets the SAFE Act’s minimum requirements, and states will be able to meet regulation standards set by the House and Senate to ensure protection for consumers.
In closing, the goal of Safe Mortgage Licensing system was to reduce law breakers who had a criminal history in one state, from moving to another. The major benefit of this system is the transparency created on a national scale, allowing identification of deceitful individuals and eliminating this illegal activity that they practice. This is done through a couple of checks including background checks, credit checks and finger prints on all loan officers that register, all of which are requirements for licensing. States will be required to have all applicants seeking a loan originator license to provide an authorization through the NMLS, to obtain a background check and credit report. MLOs will also be scheduled for finger prints to be taken by an approved provider and which will be sent directly to the NMLS. This helps to ensure that people who are seeking these licenses are less likely to have hidden agendas and gives the consumers better protection which is the primary objective of SAFE Act.