On July 28, 2010, the Federal Reserve, OCC, OTS, FDIC, FCA and NCUA issued final rules requiring residential mortgage loan originators who are employees of banks to the meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). The new rules attempt to increase industry accountability by allowing consumers to more easily access information about individual mortgage loan originators. The final rules take effect on October 1, 2010.
Under the final rules, bank employees who act as mortgage loan originators must register with the Nationwide Mortgage Licensing System and Registry (Registry). The Registry is a database created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The regulatory agencies will provide an advance notice of the date that the Registry will begin accepting registrations from bank employees. Once notification has been given, banks and their applicable employees will have 180 days to comply with the initial registration process. It is anticipated that the Registry could be accepting registrations as early as January 28, 2011. Bank employees who act as mortgage loan originators remain exempt from Wisconsin state licensing requirements provided they register and maintain a unique identifier through the Registry.
The final rules define a "mortgage loan originator" as any individual who takes a residential loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. A "residential mortgage loan" means any loan primarily used for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in section 103(v) of the Truth in Lending Act), or residential real estate upon which is constructed or intended to be constructed a dwelling, and includes refinances, reverse mortgages, home equity lines of credit and other first and additional lien loans that meet the above qualifications.
There is a de minims exemption from the final rules for bank employees who have acted as mortgage loan originators for 5 or fewer residential loan mortgage originations during the past 12 months and who have never registered or been licensed through the Registry. In addition, individuals who perform purely administrative or clerical tasks on behalf of a mortgage loan originators and real estate brokers are exempt. However, a real estate broker will be subject to the registration requirements if the real estate broker meets the definition of a mortgage loan originator and is compensated by a bank, mortgage broker or other loan originator.
Bank employees such as residential loan officers and specialists are clearly subject to the registration requirements. However, the rules specifically avoid classifying covered employees by job title and instead focus on the actions of the specific employee. Therefore, any bank employee who takes a mortgage loan application and offers or negotiates the terms of a residential mortgage loan will be required to register unless they meet the de minims exemption.
As part of the registration process, mortgage loan originators must submit personal information as well as fingerprints for background checks. Once registered, each mortgage loan originator will receive a unique identifier. The rules require a mortgage loan originator to provide his or her unique identifier to a consumer:
The purpose of the unique identifier is to allow consumers to easily access the mortgage loan originator's employment history and other information through the Registry. To comply with the disclosure requirements, consumers must be able to access mortgage loan originators' unique identifiers early enough in the relationship with the originator to enable the consumer to access the Registry before the consumer commits to the loan transaction. According to the rules, compliance mechanisms could include but are not limited to:
The final rules also require banks to adopt written policies and procedures to assure compliance. At a minimum, the bank's policies and procedures must:
Although the Registry will not be accepting new registrations by the final rules' effective date, banks can take immediate steps to be sure that they are in compliance with the new requirements. Banks can begin revising initial written communications to include mortgage loan originators' unique identifiers as they become available. FIPCOŽ has already revised form WBA 130HL Uniform Residential Loan Application (8/12/09), and is in the process of revising forms WBA 130 General Credit Application and WBA 130S Short Form Credit Application to permit loan officers and other mortgage loan originators to include their unique identifiers. Additionally, banks should have the written policies and procedures described above in place by October 1, 2010 so that they may be implemented as soon as the Registry begins accepting registrations.
The complete guidance can be found at http://edocket.access.gpo.gov/2010/pdf/2010-18148.pdf.
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