MLO SAFE Act And UST Content Update Flashcards
The SAFE ACT
HERA - Housing and Economic Recovery Act
- Parent act to the SAFE Act
Secure And Fair Enforcement for Mortgage Licensing Act (SAFE Act) is also known as as Title V (5) of HERA
- Requires states to implement an MLO licensing process that meets certain standards through the Nationwide Mortgage licensing System & Registry (NMLS or NMLSR)
Conference of State Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) work with HUD to:
- “Establish the NMLS system”
- Establish “minimum” standards for licensing or registration of all MLOs
Loan Originator
An individual who:
- “Takes” a residential mortgage loan application
- “Offers or negotiates” terms of a residential mortgage loan for compensation or gain
Does NOT include:
- Any individual who performs “administrative or clerical” tasks for licensee
- Extended credit on “timeshare” plans
- Individuals who negotiate a mortgage loan for “themselves or immediate family members”
- A “loan processor or underwriter” who does NOT represent to the public, thru advertising (business cards, brochures, etc), that he or she is a loan originator.
- Attorneys who negotiate loan terms as an ancillary service and who aren’t compensated by the loan originator or lender.
Unique NMLS Identifier
SAFE Act requires all MLO’s to be identified by a unique NMLS identifier number either as:
- “Registered loan originator” - loan originator who is an employee of a depository institution (a bank) regulated by a Federal banking agency, or an institution regulated by the Farm Credit Administration
- “State-licensed loan originator” - loan originator who is licensed by his or her state, registered with the NMLSR and isn’t employed by a depository institution. (If your in this class, you are likely planning to become a state-licenses loan originator)
License Qualifications
- Never had an MLO license revoked in any government jurisdiction
- Not convicted of pled guilty or nolo contendere to a felony
-No Felony in the past “7 years (unless it was pardoned)
- Any felony involved an act of fraud, dishonesty, or a breach of trust, money laundering (ever) NOGO
Licensing Qualifications (cont.)
Pre licensing Education
Complete at least “twenty (20) hours” of NMLS approved pre licensing education, including:
- Federal law and regulation (3 hours)
- Ethics, including fraud, consumer protection, and fair lending (3 hours)
- Lending standards for non traditional mortgage products (2 hours)
- Electives (12 hours)
Continuing Education
Complete “eight (8) hours” of CE every year, including:
- Federal law and regulation (3 hours)
- Ethics, including fraud, consumer protection, and fair lending (2 hours)
- Lending standards for non traditional mortgage products (2 hours)
- Electives (1 hours)
*A Licensed MLO may only receive credit for CE course in the year in which the course is taken. This is known as the “Successive Year Rule”
State Regulatory Authority Responsibilities
Minimum requirements include:
- Providing “effective supervision” and enforcement of the law, (suspension, termination, etc) for a violation of state of federal law.
- Ensuring all state-licensed MLOs operating in the state are “registered with NMLS
- “Regulatory report violations”, as well an enforcement actions to the NMLS
- A state licensing agency has the authority to “conduct investigations” and deal with violations or complaints arising under the SAFE Act
- The state regulatory authority has “access to such records” and may interview the MLOs and related persons concerning their business
- “Issues licenses” to conduct business, including the authority to write rule and regulations or adopt procedures necessary for licensing
- “Deny, suspend”, condition or “revoke” licenses issued under the Act
-Have in place on of the three protection options: “Minimum Net worth, Surety Bonding or State Recovery Fund.
- State and federal regulating authorities “do not” have authority to impose a “prison sentence”
- Penalties - The maximum penalty for each act or omission shall be “$25,000)
Prohibited Conduct and Practices
- Employ any scheme to defraud borrowers or lenders or any person
- Engage in any unfair or deceptive practice toward any person
- Obtain property by fraud or misrepresentation
- Solicit a contract where a borrower earns a fee through “best efforts”
- Solicit a contract with specific terms, unless the terms are available
- Conduct or assist in any business without holding a valid license
- Fail to make disclosures as required by the SAFE Act
- Fail to comply with SAFE Act rules and regulations
- Make any false or deceptive statement or representation with regards to the rates, points, or other financing terms for a residential mortgage loan or engage in bait and switch advertising
Prohibited Conduct and Practices (cont.)
- Negligently make any false statement or knowingly and willfully make any omission of material fact in connection with information or reports filed with a government agency r the NMLS or with any investigation. Make any payment, threat or promise, to a person (or appraiser) for purposes of influencing the judgment of the person (or appraiser) in connection with a residential mortgage loan (or with respect to the property’s value.
- Actually or attempt to collect, charge, purpose, or use any agreement to collect/charge any fee prohibited by the Act
- Cause a borrower to obtain property insurance coverage exceeding the improvement replacement costs.
- Fail to account for monies to a party to a residential mortgage loan transaction.
