Legal Blog

Viewpoint: It’s Time to Take Another Look at the SAFE Act

As published in The Scotsman Guide

Extend licensing requirements to all originators and clarify other portions of the landmark legislation 

Enacted into law on July 30, 2008, during the height of the housing crisis, the Secure and Fair Enforcement for Licensing Act, otherwise known as the SAFE Act, created a national registration of all residential mortgage originators. The legislation also established a detailed set of federal licensing requirements for all loan originators not employed at a bank, thrift or credit union, effectively creating a two-tiered national licensing system.

After more than a decade of the SAFE Act, it is clear the law has accomplished a great deal when it comes to protecting consumers. The law has advanced the professionalism and education of loan originators working in the industry. The national registration requirement has eliminated many with criminal backgrounds from the profession.

As a result, consumers have benefited from better loan quality and fewer instances of fraud. Today, licensed loan originators are better educated, more experienced and better able to provide quality services to consumers.

Some aspects of the SAFE Act, however, merit review and should be clarified or changed. First, nonbank mortgage lenders need greater clarity and consistency regarding which of their employees need to be licensed. Second, the Consumer Financial Protection Bureau (CFPB) or Congress should end the broad exemptions that loan originators at banks enjoy from the law’s requirements.

Originator definition

Each state must meet the minimum licensing standards of the SAFE Act, which requires that every mortgage originator employed by a nonbank lender or as an independent broker must pass the national SAFE Act test (measuring knowledge and ethics). They must pass an independent background check and complete at least 20 hours of approved prelicensing courses. In addition, originators need to complete at least eight hours of continuing-education courses each year.


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Wayne Watkinson is an attorney whose practice, since 1996, has concentrated on representing mortgage lenders and brokers and depositories in compliance, transactional, corporate and litigation matters. In addition, he assists clients in establishing mortgage companies, in obtaining mortgage banking licenses throughout the country, in preparing for and responding to state licensing examinations, and in defending administrative enforcement actions.








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