SAFE Act
From the NMLS: “Title V of P.L. 110-289, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), was passed on July 30, 2008. The new federal law gave states one year to pass legislation requiring the licensure of mortgage loan originators according to national standards and the participation of state agencies on the Nationwide Mortgage Licensing System and Registry (NMLS). The SAFE Act is designed to enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan. Mortgage loan originators who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration, are registered. All other mortgage loan originators licensed by the states.
The SAFE Act requires state-licensed MLOs to pass a written qualified test, to complete pre-licensure education courses, and to take annual continuing education courses. The SAFE Act also requires all MLOs to submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check; and state-licensed MLOs to provide authorization for NMLS to obtain an independent credit report.”
Loan originators who work under a broker or consumer loan company will be referred to as licensed mortgage loan originators. Loan officers who work at a bank (see next paragraph for how SAFE defines a bank) are exempt from testing and education but will still be registered within the Nationwide Mortgage Licensing System and will receive a unique identifier.
LOs who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration, are registered LOs. All other MLOs are to be licensed by the states.
The SAFE Act requires state-licensed MLOs to pass a written qualified test, to complete pre-licensure education courses, and to take annual continuing education courses. The SAFE Act also requires all MLOs to submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check; and state-licensed MLOs to provide authorization for NMLS to obtain an independent credit report.
Please note that while the SAFE Act requires NMLS to fulfill certain responsibilities associated with providing educational services or ensuring background checks are completed, it is individual state law that determines when a state-licensed MLO is required to pass the SAFE Mortgage Test, complete pre-licensure or continuing education training, and when state-licensed MLOs are required to complete their background checks. All state info located here.
Read the SAFE Act here.
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Questions
1) The SAFE Act was passed during the height of the 2008 meltdown. Do you believe that if this federal law was in place in 2001, that it would have prevented the current mortgage lending crisis? If yes why, if no, why not? Carefully read the SAFE Act (don’t worry, the act itself is not very long) before writing your reply.
2) Are there things inside this law that don’t belong?
3) Did the government miss anything that should have been inside this law?
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Comment by Mila Usher on 26 November 2009:
I don’t know if the act would have completely prevented the meltdown if it was in place in 2001, but it couldn’t have hurt. There was so much going on in the industry with misleading, exotic mortgages, exotic appraisals , and other issues that individuals were not the only problem. Individual people just carried out and disbursed the bad stuff out there. You can require all the licensing you want but all you’re doing is giving people an actual license to market the crap.
The law itself for what it was intended for is pretty complete in my opinion. It just doesn’t cover all lending issues.
Comment by Teresa Gallaher on 2 December 2009:
I think that if this act had been in place in 2001, it may have prevented convicted felons from entering the business, but I don’t believe it would have prevented the meltdown. I feel that the majority of the issues surrounding the meltdown were about the loan products that were on the market and available to the consumer and therfore offered by the sales staff. Having lo’s licensed and educated does not prevent them from offering to the consumer a product that is available in the marketplace. It is not the loan officers responsibility that investors/lenders provide no income no asset loans, stated products, or negative am loans. Those were the products on the market and if they didn’t provide them, the consumer would just go down the street to someone that did.
I feel the law is fairly comprehensive, but it is frustrating that we now have another layer of reporting, the NMLS, and fees to go with it in addition to our state licensing fees. Not to mention the added cost of continuing education. I do believe however that the licensing test and continuing education are necessary to ensure quality originators. I can’t believe that prior to this act anyone could sell a mortgage. Unbelievable. I do question why bank employees are exempt from the licensing and education requirements. It sounds like the banks had better lobbyist than the mortgage brokers?
Comment by Richard Martin on 4 December 2009:
No doubt about it! If the Safe Act Had been in place in 2001 (and assuming it would have been mandated and followed) we would have had a very different type of melt down it probably would have been perceptable and straight forward like a a standard economic slide we would have been spared all the crooked Morgage Magicians and their scummy entournage of greedy punks masquerading as experienced lending professionals. And millions of decent people would not be in the lousy financial position they are in today, but lets face it nothing would have stopped the greed at the top with the big cats in the big banks and their wall street buddies NO WAY.
Comment by Ken Ritter on 10 December 2009:
I dont think that this act would have 100% completely prevented the meltdown but I do believe that it would have prevented many aspects of the meltdown.
I do agree that continuing education is importand but having bank employees exempt from this and by giving them a unique identifier.. I just dont see how this helps everyone in the industry. I believe to keep things steady, that everyone doing the same work should be required to qualify to do it, the same way. Qualified test, pre-licensure education, annual continuing education, etc…
Comment by Launce Macomber on 13 December 2009:
I agree that having SAFE in place before 2001 might have helped to slow the fraud and outright greed which became pervasive as the steamroller gathered momentum, however, not ALL of the blame can be placed on the industry. Homeowners watched as their friends and neighbors took advantage of increasing property values and thought that the sky was the limit. Some of that was greed to convert home equity to cash for who know’s what purpose and some were just naive folks who wanted to get into that home and participate in the great American dream. I also think that the playing field should be leveled for ALL lo’s. Doesn’t the old adage apply here? “What’s good for the goose shold be good for the gander”.
Comment by Jan Mundt (Henriksen) on 15 December 2009:
Regardless of the Safe Act date, the Mortgage Crisis would have occured. The crisis did not evolve just around the Mortgage Loan Originator(S). The blame should involve all parties to the transaction(s) as nothing appeared to be regulated at that time. Mortgage Brokers went wild, allowed anyone to originate a loan without being educated on required disclosures etc. It’s no wonder why the State of Washington had an abundance of Loan Originators. Unrelated business professionals were quiting their long term professions to reap the monthly rewards as a Loan Originator. Brokers and Loan Originators were only looking at paying for their current lifestyle or the companies “bottom line” without taking the Consumers “best interest” into consideration. Investors became blinded by its competition; whether it was a good product or not, it was made available and Originators were required to sell the product. If the SAFE ACT was enacted in 2001, I feel at least the Consumer would have been better prepared for homeownership with greater knowledge on the program selected for repayment.
I don’t feel it is necessary to obtain a credit report on the MLO’s. With all the tools available, certainly, NMLS should be able to determine the credibility of the MLO without running their credit. The manner in which I pay my obligations should have no effect on how I disclose a program, rate/fees etc. Bank employees should have to comply with the Mortgage Licensing Act as well. What prevents an unlicensed broker to become a banker because of past issues that may have prevented them from obtaining their license?
Comment by yvette Hobzek on 22 December 2009:
Do I believe their should be background checks on MLO’s; yes. I had to get fingerprinted when I became an LPO. Do I think the meltdown would not have occured if this was in place. I think some form of the meltdown still would have occured. How could it not have with the Pay Option Arms, NINA loans, SISA loans, those were disasters waiting to happen. I can say proudly that I did not do those loans, I am not tooting my own horn, but I never thought they were good loans for anyone. I never would put a borrower into a loan that I would not take for myself.
What I disagree about the SAFE act is that MLO’s that work for banks do not have to be licensed. I think they need just as much regulation if not more than we do and especially the comment in the definitions regarding that the processor and underwriters are subject to the supervision and instruction of State Licensed Loan Originators or a Registered Loan Originator. We are suppose to be protecting the consumer from fraud. How can an underwriter or processor do their job effectively if they are supervised by an LO. Even with continuing education some LO’s that are just getting into the industry are not experienced enough to do more than take a loan application how are they going to supervise anyone.
If that part of the SAFE act is upheld we will be in a world of hurt. I
Comment by Jerrod Goode on 28 December 2009:
Having more regulation in this industry in 2001 would not have hurt anything. Would it have stopped the meltdown, maybe not. Asking LO’s to have some basic training in the career they have chosen is a no brainer to me. If you are serious about your career as a LO then taking a test to prove you have learned some of the basic skills should be welcomed.
All LO’s should have to be licensed no matter where they work.
Comment by Jason Brock on 29 December 2009:
SAFE Act:
2001, that was quite a year in our history… the SAFE Act was passed for good reasons unfortunately it was too late. There were slim ball LO’s and bankers who should not have been allowed in the industry in the first place. I do believe that the SAFE act would have curbed the demise of the lending industry. I believe that everything that I have read within the SAFE act is appropriate considering the nature of the industry we are in. There should be no exemption for bankers… they are not above reproach.
Comment by James Haechler on 30 December 2009:
I can’t tell you weather the Safe Act would of helped if inacted in 2001. This was a melt down and a train wreck at full speed. Everyone got caught up in the frenzy. Banks, investors, LO’s, and Brokers. We are all to blame. Now its time to make this business better, by taking steps to make people better. I do see the time when all LO’s encluding bank LO’s will need to be licensed. The goal will be only the best will originate loans.
Comment by Karen Tuff on 31 December 2009:
It would have kept the crooks and felons out of the business for sure. Some of the individuals were beyond reproach and inappropriate for most business environments let alone handling sensitive financial information to commit fraud and large scale scams. However, I strongly believe there is plenty of accountability to go around and if mortgage backed securities, CDO’s and other “creative” and unregulated financial services were not being feed/ pushed into the system, the level of the temptation would not have been planted in the first place. I do not agree that bankers and those working for the banks should be exempt from the same degree of testing and compliance checks that we have to undergo.
Comment by Kimberly Petersn on 31 December 2009:
I do not believe that if the SAFE act was in force in 2001 that it would have prevented the mortgage meltdown. I believe that was simply due to the products that were available and loans being given to anyone and everyone. It would have kept the criminals from selling the products but that simply is not enough to keep the meltdown from happening. I do not understand why the people working at banks are exempt from the same testing we are.
Comment by Jillayne Schlicke on 31 December 2009:
Hi Kimberly,
the LOs at a bank were given the exemption in the final update of the bill.
The banking lobbyists were able to get LOs exempted from testing and education but they are NOT exempt from registering within the NMLS including fingerprints and a background check. They will be given a unique NMLS ID number and will be referrred to as “registered loan originators” whereas you will be a “licensed loan originator.”
Comment by Elisa Wu on 1 March 2010:
Well, it would sure help if they did these earlier; however, I don’t think it would change a great deal though. I also think the bank LO should not be given special exemption from continuing education; the education should be given all LO since it will updating their knowledge avoiding WAMU meltdown, also, protecting consumers and maketing.