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The SAFE Act

The SAFE Act. Chapter 6. Chapter Objectives. Identify licensing requirements and procedures for mortgage loan professionals. Recognize education requirements for MLOs. Refer to page 121. The SAFE Act. HERA

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The SAFE Act

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  1. Chapter 6: The SAFE Act The SAFE Act Chapter 6

  2. Chapter 6: The SAFE Act Chapter Objectives • Identify licensing requirements and procedures for mortgage loan professionals. • Recognize education requirements for MLOs. Refer to page 121

  3. Chapter 6: The SAFE Act The SAFE Act • HERA • Modernized Federal Housing Administration, foreclosure prevention, and enhancement of consumer protections • Title V, Secure and Fair Enforcement for Mortgage Licensing Act or SAFE Act • Requires states to implement an MLO licensing process that meets certain standards through the Nationwide Mortgage Licensing System & Registry (NMLS) Refer to page 122

  4. Chapter 6: The SAFE Act Objectives of The SAFE Act • Provide uniform license applications and reporting requirements for state-licensed MLOs. • Provide comprehensive licensing and supervisory database. • Aggregate and improve flow of information to and between regulators. • Provide increased accountability and tracking of MLOs. • Streamline licensing process and reduce regulatory burden. • Enhance consumer protections and support anti-fraud measures. • Provide consumers with free, easy-to-access information about an MLO’s employment history and public disciplinary /enforcement actions. Refer to page 122

  5. Chapter 6: The SAFE Act Objectives of The SAFE Act (cont.) • Establish means for residential MLOs to act in the best interests of the consumer. • Facilitate responsible behavior in the subprime mortgage marketplace. • Provide comprehensive training and examination requirements related to nontraditional mortgage products. • Facilitate collection and disbursement of consumer complaints on behalf of state mortgage regulators. Refer to page 122

  6. Chapter 6: The SAFE Act SAFE Act Mandates for States • Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) work with HUD to: • Establish minimum standards for licensing or registration of all MLOs • Develop model state law that meets minimum standards in the SAFE Act, including definitions, education, testing requirements, financial responsibility, and background standards for MLOs Refer to page 122

  7. Chapter 6: The SAFE Act Loan Originator An individual who: • Takes a residential mortgage loan application. • Offers or negotiates terms of a residential mortgage loan for compensation or gain. • Assists a consumer in obtaining or applying for a residential mortgage loan by: • Advising on loan terms (including rates, fees, other costs) • Preparing loan packages • Collecting information on behalf of the consumer Refer to page 123

  8. Chapter 6: The SAFE Act Loan Originator (cont.) • Does NOT include: • Any individual who performs administrative or clerical tasks for licensee • A person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable state law • Extending credit on timeshare plans • Loan processor and underwriter who don’t represent to the public that he or she can or will conduct loan origination activities • Independent contractor must be state-licensed MLO for residential loan origination activities Refer to page 123

  9. Chapter 6: The SAFE Act Unique NMLS Identifier SAFE Act requires all MLOs to be identified by a unique NMLS identifier number either as: • Federally registered • State licensed Refer to page 123

  10. Chapter 6: The SAFE Act 6.1 Knowledge Check A loan originator takes a mortgage loan application with the expectation of compensation. • true • false Refer to page 123

  11. Chapter 6: The SAFE Act Other Definitions • Administrative or Clerical Tasks • Depository Institution • Federal Banking Agencies • Loan Processor or Underwriter • Nontraditional Mortgage Product • Real Estate Brokerage Activity • Registered Loan Originator • Residential Mortgage Loan • State-Licensed Loan Originator • Unique Identifier Refer to page 123-124

  12. Chapter 6: The SAFE Act Prelicensing Education Requirement • At least 20 hours of NMLS-approved prelicensing education on national topics: • Federal law and regulation (3 hours) • Ethics, including fraud, consumer protection, and fair lending (3 hours) • Nontraditional mortgage products (2 hours) • Electives (12 hours) • It is up to each state to determine whether to also require state-specific topics, either as part of the 12 hours of electives or in addition to the 20 hours required. Refer to page 125

  13. Chapter 6: The SAFE Act Mortgage Loan Originator Test • State-licensed MLOs must pass the NMLS National Test. The national component covers: • Federal mortgage-related laws (23%) • General mortgage knowledge (23%) • Mortgage loan origination activities (25%) • Ethics (16%) • Uniform State Test (UST) (13%) Note: Some states still require passing a state specific exam in addition to the National Test Component. Refer to page 125

  14. Chapter 6: The SAFE Act Minimum Competence and Retakes • Must achieve test score of 75% or above to pass • A total of 190 minutes is allotted to complete the test • May only take and fail national component of SAFE MLO Test three consecutive times • Separated by 30-day waiting periods • After third failure, candidate must wait six months before taking test again Refer to page 125

  15. Chapter 6: The SAFE Act Minimum Standards for License Renewal • The mortgage loan originator continues to meet the minimum standards for license issuance as defined by the state. • The mortgage loan originator has satisfied the annual continuing education requirements as defined by the state. • The mortgage loan originator has paid all required fees for renewal of the license. Refer to page 126

  16. Chapter 6: The SAFE Act Continuing Education • At least 8 hours of annual continuing education: • Federal Law and Regulation (3 hours) • Ethics, including fraud, consumer protection, and fair lending (2 hours) • Nontraditional mortgage products (2 hours) • Elective (1 hour) • Jurisdictions may impose additional continuing education requirements. • The one hour of elective content may present as required content under a state licensing authority. Refer to page 126

  17. Chapter 6: The SAFE Act Courses, Offerings, and Credits • Courses reviewed/approved by NMLS • Nothing in the SAFE Act shall preclude any education course, as approved by the NMLS • Continuing education may be offered either in a classroom, online, or by any other means approved by the NMLS. • Successive Year Rule • May only receive credit for continuing education course in the year in which the course is taken • Cannot take same course in successive years Refer to page 127

  18. Chapter 6: The SAFE Act Other Licensing Maintenance • Reciprocity of Education • Successful completion of NMLS requirements for any state shall be accepted as CE credit in any other state • Lapse in License • Must complete education requirements for the last year the license was held • Make Up of CE • Person meeting requirements defined by state may make up deficiency in CE Refer to page 127

  19. Chapter 6: The SAFE Act 6.2 Apply Your Knowledge Match each listed MLO license-related term with the general description. Refer to page 128

  20. Chapter 6: The SAFE Act 6.2 Apply Your Knowledge (cont.) Answer Key: Refer to page 128

  21. Chapter 6: The SAFE Act SAFE Act Licensing Requirements • Background check (fingerprints, criminal check) • Provide personal history and experience • Authorization to obtain an independent credit report, and information relative to any administrative, civil, or criminal findings • Never had an MLO license revoked in any government jurisdiction • Not convicted of or pled guilty or nolo contendere to a felony • Meet these requirements according to revisions to §1026.36 Refer to page 128

  22. Chapter 6: The SAFE Act Character and Fitness • Must exhibit financial responsibility, character, and general fitness, including • No current outstanding judgments (except medical expenses) • No current outstanding tax/government liens or filings • No foreclosures within past 3 years • No pattern of seriously delinquent accounts within past 3 years Refer to page 128

  23. Chapter 6: The SAFE Act 6.3 Knowledge Check If an individual fails the national SAFE MLO test, he can repeat taking the test up to three times as part of the same enrollment. • true • false Refer to page 129

  24. Chapter 6: The SAFE Act Summary • In response to a failed economy, HERA was passed. A significant part of the ACT was Title V, or the SAFE Act. • The SAFE Act implemented nationwide testing, prelicensing education, and annual continuing education for all state-licensed loan originators. • The SAFE Act required states to implement the use of Nationwide Mortgage Licensing System and Registry (NMLS) to provide a centralized and standardized system for mortgage licensing and registration of all MLOs. All requirements and functions of an MLO are accomplished through this website. Refer to page 129

  25. Chapter 6: The SAFE Act Summary (cont.) • A loan originator is an individual who takes a residential mortgage loan application or offers/ negotiates terms of a residential mortgage loan for compensation or gain. • Employees of a mortgage company are not required to be licensed if they perform only administrative functions subsequent to the taking of a mortgage loan. • A registered loan originator is one who is employed by a depository institution, which is regulated by a federal banking agency. A registered loan originator must meet the requirements imposed on a state licensed originator, such as background checks, fingerprints, credit report verification, felony conviction regulation, etc. Refer to page 129

  26. Chapter 6: The SAFE Act Summary (cont.) • A loan originator who is not a registered loan originator must be a state-licensed originator. • The unique identifier is issued on a nationwide basis and serves as a means to identify a mortgage loan originator. The NMLS number issued to the MLO must be on every form of advertisement and communication from the originator. • State-licensed MLOs must pass a National Test with a score of 75% or better. States that do not participate in the UST program may also require a separate state component to be passed. Refer to page 129

  27. Chapter 6: The SAFE Act Summary (cont.) • An MLO may take and fail the test three times, separated by a 30-day waiting period, before being required to wait a six-month period before retaking the test. • MLO’s must take 20 hours of approved education prior to licensing and then must take eight hours annually to maintain their license. If a loan originator allows their license to lapse, they must complete the entire licensing process from the beginning. • MLO must pass background check, have good character and financial fitness, provide personal and employment history, have credit report reviewed, never had license revoked or convicted of felony for financial crime. Refer to page 129-130

  28. Chapter 6: The SAFE Act Chapter 6 Quiz • According to the SAFE Act, which incident from 10 years ago would NOT automatically disqualify an applicant for a mortgage loan originator license? • conviction for felony assault • conviction for felony fraud • conviction for felony money laundering • revocation by the state of a mortgage broker’s license Refer to page 130

  29. Chapter 6: The SAFE Act Chapter 6 Quiz • The SAFE Act requires state-licensed originators to have a minimum of how many hours of approved prelicensing education? • 8 • 12 • 20 • 24 Refer to page 130

  30. Chapter 6: The SAFE Act Chapter 6 Quiz • An MLO applying for a state license must provide all of the following EXCEPT • employment history. • evidence of completion of the mandatory 8-hour education requirement. • pass a background check. • a personal residence and employment history. Refer to page 130

  31. Chapter 6: The SAFE Act Chapter 6 Quiz • The SAFE Act defines a loan originator as a natural person who • offers or negotiates terms of a residential mortgage. • processes a mortgage loan under the direction of a mortgage banker. • takes a residential mortgage loan application. • both A & C Refer to page 130

  32. Chapter 6: The SAFE Act Chapter 6 Quiz • Which of the following is NOT a required continuing education topic under the SAFE Act? • ethics • federal mortgage laws • nontraditional mortgage loans • property taxes Refer to page 130

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