To act as an MLO for a federally regulated financial institution an employee must
We have been dealing with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) since 2010, and yet questions surface or confusion still exists over SAFE Act requirements. Show “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 been 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 who are coming into the bank as new employees. No updating of fingerprints for ongoing MLOs is required.) These queries reveal that confusion still exists over what the requirements are and how they impact banks and thrifts. A Little BackgroundCongress 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 to provide for the establishment of a nationwide mortgage licensing system and registry for the residential mortgage industry. The SAFE Act required all states to provide for a licensing and registration regime for mortgage loan originators who are 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) to 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 its Regulation G (12 CFR 1007). Licensing vs. RegistrationMost of the confusion at the outset seemed to center on the issue of licensing versus registration of mortgage loan originators (MLOs). The issue is really deceptively simple.
CoverageA “mortgage loan originator” is an individual who both takes residential mortgage loan applications and offers or negotiates terms of a residential mortgage loan for compensation or gain. The term “mortgage loan originator” does not include individuals that perform purely “administrative or clerical tasks” (the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry) and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan. Also excluded are individuals that perform only real estate brokerage activities and are duly licensed, individuals or entities solely involved in extensions of credit related to timeshare plans, employees engaged in loan modifications or assumptions, and employees engaged in mortgage loan servicing. “Compensation or gain” includes salaries, commissions, other incentives, or any combination of these types of payments. MLO RegistrationAn MLO must be federally registered if the individual is an employee of a depository institution, an employee of any subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or an employee of an institution regulated by the FCA. The final rule, as required by the SAFE Act, prohibits an individual who is an employee of an agency-regulated institution from engaging in the business of a loan originator without registering as a loan originator with the national registry, maintaining that registration annually, and obtaining a unique identifier through the registry. Employer financial institutions must require adherence to this rule by their employee MLOs. MLOs may submit their registration information individually or their employer institution may do it for them (by a non-MLO employee). The decision of which approach to take should be made by management to ensure consistency within the institution, especially since there is prescribed institution information that also must be submitted to the registry. This MLO information must include financial services-related employment history for the 10 years before the date of registration or renewal, including the date the employee became an employee of the bank – not just the time they have worked for their current employer. MLOs and their employers need to remember that registrations have to be renewed annually for as long as an individual operates as an MLO. The renewal period opens on November 1 and ends on December 31 each year. If an MLO or bank registration lapses, it may be reinstated during a reinstatement period that opens on January 2 and closes on February 28 each year. Other RequirementsBank and thrift managers also should remember that there are specific requirements in this rule for the institution to have policies and procedures to implement SAFE Act requirements, as well as regarding the use of a unique identifier (NMLS number) by MLOs. At a minimum, the bank’s SAFE Act policies and procedures must:
The bank or thrift also must make the unique identifiers (NMLS numbers) of its registered MLOs available to consumers “in a manner and method practicable to the institution.” The bank has latitude in implementing this requirement. It may choose to make the identifiers available in one or more of the following ways:
In addition, a registered MLO must provide his or her unique identifier to a consumer:
Banks, thrifts, and their registered MLOs often also make their NMLS numbers available in other ways – such as including them in advertising or on business cards. As with any compliance rule, banks and thrifts need to make sure that they have systems in place to ensure compliance with SAFE Act requirements, including appropriate training for employees involved in the mortgage origination process. For information on how Young & Associates can assist your bank with the SAFE Act requirements, contact Dave Reno at 330.422.3455 and [email protected]. What does safe stand for in mortgage?Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act examination procedures | Consumer Financial Protection Bureau. An official website of the United States government. Resources for Yourself. Resources for Helping Others.
Which law defines the requirements roles and restrictions of a mortgage loan originator practicing in the state of California?Any person who provides services as a mortgage loan originator (MLO) in California under the California Finance Law (CFL) or the California Residential Mortgage Lending Act (CRMLA) must apply for and receive a mortgage loan originator license.
Which supervisory authority regulates mortgage licensing in the state of Washington?The mortgage licenses are regulated and supervised by the Washington State Department of Financial Institutions (DFI). The license application process for mortgage companies and individuals is handled by the Nationwide Mortgage Licensing System (NMLS).
What is the meaning of ON SAFE Act?The SAFE Act prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annual registration as a registered mortgage loan originator and a unique identifier (federal registration).
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