Pub. 9 2021 Issue 2

12 The Community Banker mibonline.org By William J. Showalter, CRCM, CRP Senior Consultant; Young & Associates, Inc.; Kent, Ohio SAFE ACT ADECADE ON Guest Article W e have been dealing with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) since 2010. Still, questions surface or confusion exists over SAFE Act requirements. • “A loan clerk quotes loan rates from a non-public rate schedule, along with payment amounts for inquiring consumers. Should she be registered?” (Maybe, she is performing a function of a mortgage loan originator, MLO.) • “Our head of lending is our SAFE Act Officer. He also handles some mortgage loans, with his name on loan documents. However, his background is in commercial lending, and he has never registered with the NMLSR. Do we have a problem?” (Yes, if he is involved in more than five mortgage loans per year, he must be registered.) • “How often do we have to get criminal background checks for our MLOs? How about when their fingerprints expire?” (Criminal background checks are required only on initial registration. The fingerprint expiration date is only relevant for existing MLOs coming into the bank as new employees. No updating of fingerprints for ongoing MLOs is required.) These queries reveal that confusion still exists over the requirements and how they impact banks and thrifts. A little background Congress enacted the SAFE Act in July 2008 to require states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and provide for the establishment of a nationwide mortgage licensing system and registry for the residential mortgage industry. The SAFE Act required all states provide a licensing and registration regime for mortgage loan originators not employed by federal agency-regulated institutions within one year of enactment (or two years for states whose legislatures meet biennially). In addition, the SAFE Act required the federal banking agencies, through the Federal Financial Institutions Examination Council (FFIEC) and the Farm Credit Administration (FCA) develop and maintain a system for registering mortgage loan originators employed by agency-regulated institutions. The Dodd-Frank Act moved responsibility for the SAFE Act rules to the Consumer Financial Protection Bureau (CFPB), which rolled these rules into Regulation G (12 CFR 1007). Licensing vs. registration Most of the confusion at the outset seemed to center on licensing versus registration of mortgage loan originators (MLOs). The issue is deceptively simple. • MLOs that work for federally supervised banks, thrifts and credit unions (and FCA lenders) must register with the national registry (NMLSR). • MLOs employed by other mortgage lenders (mortgage companies, etc.) must navigate the state licensing and registry system, a much more time-consuming, expensive, and burdensome process that also carries a continuing education requirement. Coverage A “mortgage loan originator” is an individual who both takes residential mortgage loan applications and offers or negotiates the terms of a residential mortgage loan for compensation or gain. The term “mortgage loan originator” does not include individuals who perform purely “administrative or clerical tasks” (the receipt,