Mortgage Lender Agent Licensing Mandatory

By Mike Colpitts

As a result of the unethical and illegal lending practices that helped produce the mortgage meltdown and real estate collapse, Barney Frank and Frank Dodd Congress enacted the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) in 2008 as part of the Dodd-Frank financial reform. The federal law mandating mortgage agent licensing goes into effect in just one week.

The effort is part of the wide ranging federal move to improve consumer protections and reduce fraud. The SAFE Act sets national standards for licensing mortgage originators and is intended to develop integrity in the residential mortgage sales market. The act requires mortgage originators to pass a written examine, complete pre-licensing education courses, and take continuing education courses annually.

Mortgage agents are currently in the process of registering with the system and as of July 29th all mortgage originators at federally regulated institutions will be prohibited from taking mortgage applications without meeting the federal requirements.

The new law also requires licensees to submit fingerprints to the National Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check and to provide authorization for credit reports.

All 50 U.S. states have programs for licensing loan originators and now individuals engaged in offering mortgages must have a unique federal ID and be registered in the federal NMLS.

Mortgage Lender Countywide

States will not be allowed to license individuals who generally have criminal records to be a loan originator. Applicants for a license may not be convicted of or pled guilty or nolo contendere to a felony for a period of seven years prior to applying for a license or “at any time preceding such date of application, if such felony involved an act of fraud, dishonesty or a breech of trust or money laundering,” according to Section 5104 of the SAFE Act.

“The SAFE Act final rule will be in effect August 30, 2011,” said HUD spokesman Lemar Wooley. “At that time all responsibilities for managing state level compliance with the SAFE Act will rest with the Consumer Financial Protection Bureau.”

While states are required to enact licensing standards that meet the minimum requirements of the act, responsibility for implementation and compliance is being handled by the Housing and Urban Development Department. Any State that fails to have a licensing system that meets the minimum requirements may be required to be licensed under a federal program.