If you are a mortgage loan originator, at some point you have probably questioned the reasoning behind passage of the SAFE Act. ProSchools estimates that several hundred-thousand mortgage brokers and loan originators could be impacted. In case you are still wondering about the “why”, here is a little background on the federal legislation, also known as the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.
First of all, the SAFE Act mandates that states get on board and come up with a plan to meet federal requirements for licensing and registering loan originators. What happens if they don’t?
HUD (Housing and Urban Development) will take responsibility to license and register loan originators for them. The federal law has a one-year deadline for states to implement SAFE, with some exceptions. This doesn’t answer the “why” but it does explain the urgency for states to at least respond.
Here are some of the objectives behind the federal legislation:
- Increases uniformity in licensing and reporting requirements for state-licensed loan originators
- Improve how information flows among regulators
- Increase accountability and tracking of loan originators
- Reduce regulatory burden
- Enhance consumer protection and reduce fraud
- Improve access for consumers on the professional history of loan originators
- Requires residential mortgage originators act in the best interests of the consumer
- Standardize education and exam requirements
- Facilitate gathering consumer complaints
In summary, passage of the SAFE Act is meant to protect the public and set minimum requirements and standards within the mortgage industry. As Martha would say, “It’s a good thing.”