OMBA joins MBA in SAFE ACT Proposal
The Mortgage Bankers Association, 11 state mortgage lenders associations and other industry trade groups sent a letter to HUD Friday expressing some support but also "serious concerns" about proposed regulations under the SAFE Act.
The letter said while it supported some provisions of HUD’s proposal, such as oversight of a Nationwide Mortgage Licensing System and Registry, it said HUD exceeds its authority under SAFE to establish a backup system and determine whether state laws meet SAFE’s minimum requirements for purposes of determining whether imposition of a HUD-developed backup licensing system is required.
“While [we] appreciate HUD’s work in implementing this important law, it is particularly concerned about the undue expansion of SAFE’s requirements through this rulemaking,” the letter said. “[We are] also concerned that the process of serving troubled borrowers could be hampered by ill-founded registration and licensing requirements.”
Under the proposal, HUD would augment and redefine statutory terms and extend the statute’s reach. Although HUD indicated it is continuing to consider the matter of whether to require the states to treat servicer employees engaged in loan modifications as originators, MBA and the trade groups asserted that the groundwork is laid by the proposed definitions for just such an outcome.
“We…have consistently taken the position that there is no basis under SAFE or its history to require that mortgage servicer employees be licensed and/or registered,” the letter said.
In addition to concerns about the potential for undue coverage of servicing personnel, the letter expressed concern about the “fractured nature” of a 50-state approach to licensing and registering loan originators.
“SAFE was intended to establish a system that would not unduly burden well-qualified originators from being employed by either state or federally regulated mortgage lenders,” the letter said. “Because the states have not implemented uniform licensing requirements and state and federal qualifications are inconsistent, well-qualified mortgage originators confront difficulties in moving among states and between state and federal institutions by virtue of divergent qualifications including those for credit scores, education and testing to name a few. Likewise, state-regulated companies, including smaller enterprises, face a competitive disadvantage in attracting qualified originators. As a result, consumers ultimately suffer from decreased choices and increased costs for sustainable housing finance.”
The letter expressed support for the following:
• Provisions of the proposal that would require financial oversight of the NMLSR and provide that HUD collect and make public audited financial statements concerning the NMLSR’s operations;
• Provisions that exclude a loan processor or underwriter who only performs clerical or support duties from SAFE’s licensing and registration requirements; and
• Provisions that make clear that HUD’s proposed SAFE rule will not apply to employees of institutions regulated by federal banking agencies.
On the other hand, MBA and the other trade groups said the following changes should take place:
• The final rule should be revised so it is consistent with HUD’s backup role under SAFE of determining whether a state or the NMLSR meets the minimum requirements under the law.
• If definitions are necessary, they should conform to the statutory definitions, avoid being overly broad, and be consistent with the federal banking agencies’ definitions.
• The final rule should explicitly exclude employees and contractors involved in servicing, including loss mitigation functions, from the definition of “loan originator.” SAFE’s rules should only require that true loan originators of state-licensed lenders and mortgage brokers be licensed and registered as intended by Congress.
• The final rule should explicitly exclude from the term “loan originator” individuals who engage in loan assumptions.
• The final rule should also exclude HUD-approved housing counselors from the term “loan originator.”
• The final rule should be revised to permit states discretion to determine an individual is eligible for an originator license where the record of a felony conviction has been expunged.
• The final rule should make clear that, while information on the employment history and disciplinary actions of loan originators should be released, the release of personal information of loan originators is not required and raises significant privacy concerns.
• In the final rule and otherwise, HUD should work to achieve uniform licensure and registration standards for loan originators across the nation taking into account the separate federal registration system. The use of credit scores by states is a particular problem.
Joining MBA in the letter: the American Bankers Association; the American Financial Services Association; the California Mortgage Bankers Association; the Colorado Mortgage Lenders Association; the Indiana Mortgage Bankers Association; the Michigan Mortgage Lenders Association; the Missouri Mortgage Bankers Association; the Mortgage Bankers Association of Carolinas; the Mortgage Bankers Association of Florida; the Mortgage Bankers Association of Metropolitan Washington; the Ohio Mortgage Bankers Association; the Texas Mortgage Bankers Association; and the Virginia Mortgage Lenders Association.