Trade Associations Concerned About HUD’s Proposed SAFE Act Rule

The US Department of Housing and Urban Development (HUD) recently proposed a rule which would give it the authority under the The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) to establish a backup system and to determine whether individual state laws meet the SAFE Act’s minimum requirements.

If HUD determines that a State’s mortgage loan origination licensing standards do not meet the minimum requirements of the statute, HUD is charged with establishing and implementing a system for mortgage loan originators in that State. Additionally, if at any time HUD determines that the NMLSR is failing to meet the SAFE Act’s requirements, HUD is charged with establishing and maintaining a licensing and tracking system for mortgage loan originators.

A group of trade associations including the Mortgage Bankers Association are voicing strong opposition to the proposed rule which it says, “may require states to treat servicer employees engaged in loan modifications as originators for the purposes of the Act. If the regulation is finalized as proposed, HUD risks significantly curtailing the ability of servicers to complete loan modifications until their employees are registered or licensed.”

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Whether or not the proposed rule would impact reverse mortgages was unclear so RMD reached out to the National Reverse Mortgage Lenders Association for comment.

“We determined that the roles and responsibilities of administrators of reverse mortgages were not included under the proposed rule, and reverse mortgage servicers would not be licensable under the HUD SAFE Act rules,” said Steve Irwin, Executive VP of Operations at NRMLA in an email to RMD.

“We remain concerned and watchful, however, for the possibility that individual States may enact their own versions of the proposed language and not make the differentiation between forward and reverse mortgage servicing functions and therefore require all servicers to become licensed.”

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