The minimum standards for state compliance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) were published today by the Department of Housing and Urban Development and are now available via the Federal Register for public display.
“The SAFE Act sets nationwide standards for licensing of mortgage loan originators and is an important step in returning integrity and accountability to the residential mortgage loan market,” said Acting FHA Commissioner Robert Ryan. “All 50 states, the District of Columbia, Puerto Rico, Guam and the Virgin Islands have enacted legislation to support this law and our final rule provides clarification of the minimum standards against which each state’s laws and regulations will be evaluated.”
The final rule specifies the criteria under which a state complies with the SAFE Act by putting into place a system for licensing and registering mortgage loan originators. HUD also provides clarification for the terms “engaging in the business of a loan originator,” which fall under the SAFE Act.
“Engaging in the business of a loan originator,” includes those who act as residential mortgage loan originators with respect to financing that is provided in a commercial context and with some degree of habitualness or repetition, according to HUD. Further, the SAFE Act defines “loan originator” to mean “an individual who takes a residential mortgage loan application and offers or negotiates the terms of a residential mortgage loan for compensation or gain,” HUD says in its explanation.
Under the rule, “loan originator” and “business of a mortgage loan originator” do not include those who only engage in loan modifications or are third-party loan modification specialists. For those cases, HUD defers to the Consumer Financial Protection Bureau’s authority.
The SAFE Act, which was enacted into law in July 2008, requires that applicants for state licenses must pass a written test on loan origination practices and ethics, and that once licensed, originators must continue to meet licensing standards, complete continuing education courses and submit reports on loans originated.
View the final rule setting standards for state compliance with the SAFE Act.
Written by Elizabeth Ecker