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Better S.A.F.E. Than Sorry

Better S.A.F.E. Than Sorry

Recent mortgage licensing activity

March 16, 2009


photo of Patrick Crowley
S.A.F.E. Act news

U.S. mortgage bankers are worried servicers may be subject to new state licensing requirements, and Florida mortgage brokers are concerned changes in that state could make them less competitive. Meanwhile, several other states are on track to meet a federal licensing requirement.

The requirement comes under Title V of the Housing and Economic Recovery Act of 2008, the Secure and Fair Enforcement Mortgage Licensing Act, or S.A.F..E. Act, that was enacted on July 30, 2008. The far-reaching legislation required a Nationwide Mortgage Licensing System and Registry to be created and encourages states to be on board by July 30.

Florida legislators are using the S.A.F.E. Act to toughen the state’s mortgage regulations.

Under FS 494 outlined in SB2226, which the Florida legislature is expected to begin taking up this month, mortgage brokers would be required to undergo criminal background checks.

“The opening of our statutes is inevitable this year in order to begin the process of the incorporation of the federally mandated S.A.F.E. Act into Florida law,” Valerie Saunders, president of the Florida Association of Mortgage Brokers, said in a statement posted on the association’s Web site. “It is important to stress that a level playing field must be maintained between the state-governed and regulated mortgage entities and the large exempt depository institutions that are not governed by the same state laws and rules under which we operate.”

The mortgage industry faces new regulations in Michigan under a law that went into effect in January.

According to the Michigan office of Financial and Insurance Regulation, House Bills 6562 and 6618 and Senate Bills 1552-1555 — which were signed into law last year — require state and FBI background checks on loan officers. The legislation triples criminal penalties to $15,000 for people who engage in the originating, brokering, making, or servicing of secondary mortgage loans without a license, registration, or loan officer registration. It also mandates continuing education for loan officers and sets out requirements that make it more difficult to work for convicted felons to work in the mortgage loan industry.

The Department of Financial Institutions in Kentucky, which joined the NMLS in January 2008, reported that applications from 553 companies and 3,142 individuals were processed through the system last year. The NMLS allows the state to quickly identify and halt illegal mortgage lending activities.

“The system’s thorough tracking and licensing ensures that a company hires only registered loan officers and that loan officers are working for licensed companies,” the department said.

A total of 20 regulatory agencies were anticipated to participate in the system during 2008, the State Regulatory Registry LLC — which owns the NMLS — reported at a conference last year. All states will be required to pass legislation so that their state laws comply with the minimum requirements of the S.A.F.E. act.

New Mexico state Senator Phil Griego, a San Jose Democrat, has filed a sweeping bill — Senate Bill 342 — that is designed to bring the state into compliance with the S.A.F.E. Act.

In Texas, mortgage brokers, loan officers, bankers, servicers and others can find out information about the S.A.F.E. Act and how it is being applied there by logging on to the Web site of the Texas Department of Savings and Mortgage Lending.

Washington, D.C.’s, Department of Insurance, Securities and Banking announced in January it would participate in the NMLS and convert to the online automated processing of license applications by September.

The Tennessee Department of Financial Institutions went live on the NMLS by Feb. 1, 2009, a press release last month said. The system is expected to enhance the state’s supervision of the mortgage industry by linking with other states.

“In fact, the department implemented fingerprint-based background checks on Jan. 1, 2009, for all new applicants for a mortgage loan originator registration certificate as well as for the managing principals of the companies for which the originator works,” the department’s Commissioner Greg Gonzales said in the statement. “This is the first time the department has been authorized by law to conduct such background checks. Thousands of originators will be fingerprinted over the coming months and reviewed by the department.”

Over in Massachusetts, Thomas V. Brennan Jr. became the chief director of mortgage licensing for the state Division of Banks, the Worcester Telegram reported. Brennan was required to close Brennan & Associates — a local mortgage company he owned and operated for 18 years.

As states enact laws to comply with provisions of the S.A.F.E. Act, they can rely on model legislation drafted by The Conference of State Bank Supervisors and approved by the U.S. Department of Housing and Urban Development, or HUD, an announcement form Lenders Compliance Group Inc. said. HUD reviewed the model bill and found that it meets the minimum requirements of the S.A.F.E. Act.

But as states comply with the S.A.F.E. Act, the Mortgage Bankers Association is asking federal regulators for indulgence.

In a Feb. 23 letter to Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan the MBA, pointed out that the S.A.F.E. Act was not designed or intended to cover mortgage servicers. But states are moving in that direction.

MBA said HUD should clarify the role the servicers under the law to avoid confusion and delays as borrowers seek to modify loans.

“A new patchwork of state laws governing servicing may be enacted relatively quickly,” MBA wrote.

In addition, MBA was among seven trade groups to issue a joint letter to both Geithner and HUD Secretary Shaun Donovan also asking that mortgage servicers be exempt from the S.A.F.E. requirements. The letter noted that the groups “do not believe the S.A.F.E. licensing and registry system is the appropriate vehicle to address any servicer-related concerns.”

Fannie Mae and Freddie Mac will be required to identify loan-level data for loan originators, their employers and real estate appraisers on loans they purchase or guarantee, according to an announcement from the Federal Housing Finance Agency — which regulates the two secondary lenders as well as the Federal Home Loan Banks.

“This represents a major industry change,” FHFA Director James B. Lockhart said in the statement. “If originators or appraisers have contributed to the incidences of mortgage fraud, these identifiers allow the enterprises to get to the root of the problem and address the issues.”

AllRegs, an online training company and advertiser, announced its Essentials of Mortgage Lending course meets loan originator continuing education requirements in Illinois and Oklahoma.

The self-study online course “reviews the basics of the mortgage loan cycle, including essential mortgage milestone and processes fro the lender and borrower perspectives,” the company said in its statement.


Patrick Crowley is a feature journalist for He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at:


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