The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) of 2008 was developed with the support all banking regulators and a final rule was issued on July 28, 2010. Designed as another step to protect consumers, the SAFE Act was specifically tailored to the activities of residential mortgage loan originators (MLOs).
The final rule requires that MLOs employed by national and state banks, savings associations, Farm Credit System (FCS) institutions, credit unions, and certain subsidiaries all register with the Nationwide Mortgage Licensing System and Registry, a database that supports the licensing of such originators. As part of this process, MLOs must furnish to the registry information and fingerprints for background checks. This criminal background check is available only to regulators. Credit unions should keep in mind that like other regulations, if they have a mortgage loan CUSO, these regulations will also apply to the CUSO.
The final rule provides other requirements for these institutions, including the adoption of policies and procedures to ensure compliance with the SAFE Act.
Each MLO must obtain a unique identifier through the registry that will remain with that MLO, regardless of changes in employment. This will enable consumers to easily access employment and other background information about MLOs from the registry. Under the final rule, registered MLOs and agency-regulated institutions must provide these unique identifiers to consumers.
The final rule became effective on October 1, 2010, although the registry database was not available to begin accepting this information until January 31, 2011. Following expiration of the 180-day initial registration period on July 29, 2011, any employee of an agency-regulated institution subject to the registration became prohibited from originating residential mortgage loans without first meeting these requirements. The rule included an exception for MLOs that originated five or fewer mortgage loans during the previous 12 months and who had never been registered. These MLOs would not be required to complete the federal registration process.
All states are also engaged in implementing the required licensing provisions for MLOs as required by the SAFE Act. Existing licensees were expected to be SAFE Compliant in order to continue conducting business. Licensees that did not meet their state’s deadline were compelled to take the necessary steps to become compliant.
Each state has its own set of requirements, but they all require the pre-licensing education, including:
Twenty Hours Of Education: This education need only be completed or certified once, regardless of the number of states in which one is licensed. Each agency (NCUA, FDIC, etc.) may require more than the designated 20 hours or require a certain number of hours with state content. There is no training requirement for people that work for covered institutions. They must show 10 years of work history.
Certification: This is the process by which state agencies certify that licensed MLOs have completed state education and/or state testing requirements in satisfaction of the SAFE Act and state test requirements.
Eight Hours Of Continuing Education: This must be completed each year by MLOs and others that do not work in the financial services industry. Each agency may require more than the designated 8 hours or require a certain number of hours with state content.
Licensees must pass both the national and state components of the MLO test. The national component, passed once, satisfies all state requirements. The State Component must be passed for each state in which the applicant seeks licensure.
The determination of whether the financial institution should register at the National or State level is driven by insurance coverage. If the NCUA has a memorandum of understanding (MOU) with a state regulator then a privately insured credit union can register in the national registry. However, if there is no MOU, then credit union personnel must register at the state level and go through the requirements.