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Tips to Stay SAFE Act Compliant

November 08, 2018  //  BY Team DataTree

In the world of mortgage origination, you have to stay abreast of a lot more than current interest rates, the pros and cons of a 15-year mortgage to a 30-year and how the housing market is acting on any given day. You also have to brush up on the various laws that pertain to the industry while making sure your company is compliant.

A great example of this is the Secure and Fair Enforcement for Mortgage Licensing Act (or SAFE Act). Let’s take a closer look at this act, what it means for the mortgage industry and how and why you have to follow it.

The Who, What, When, Why and How of the SAFE Act

As is the case with many things in life, it’s hard to follow the rules if you don’t have a good handle on them in the first place. With that in mind, the following is a crash course in the SAFE Act. This act was enacted on July 30, 2008, and it established federal registration requirements for an individual who acts as a residential mortgage loan originator (MLO), and is employed by a company that is regulated by the (get ready — there are a lot here to remember): Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), Office of Thrift Supervision (OTS), National Credit Union Administration (NCUA), or the Farm Credit Administration (FCA). Fast forward to July 2010, and the aforementioned agencies decided that MLOs must register with the Nationwide Mortgage and Licensing System and Registry. Essentially, the intent of the SAFE Act is to improve the flow of information to and among regulators, boosting accountability and tracking of MLOs, giving added protection to consumers and giving them more easily accessed info at no cost regarding an MLO’s employment history and any previous actions that were taken against an MLO.

What Happens to the MLOs Who Don’t Want to Be “SAFE”?

While some MLOs might figure they can fly under the governmental radar and not jump through the SAFE Act hoops, they may want to think again, as it might hit them hard in their bottom line. Fines for violating the SAFE Act and making unlicensed loans are $25,000 per incident. In addition, under the SAFE Act, if the Bureau of Consumer Financial Protection determines that a state’s loan origination licensing system does not meet the minimum requirements, the Bureau has to get busy creating and implementing a system for all MLOs in the state. If the Bureau finds out that a state is not in compliance with the SAFE Act, they will notify the state and offer the opportunity for public comment. After that time, if the Bureau determines that the state does not have regulations in place that comply with the SAFE Act, it will publish that info in the Federal Register. In other words, it is probably best to go ahead and follow the SAFE Act to the letter, follow the rules regarding mortgage loan origination data and avoid company-specific penalties.

How to “Stay SAFE” in the Land of MLO

In order to be compliant with the SAFE Act, all residential mortgage loan originators and their third parties must be either state-licensed of federally regulated. In addition, if an MLO is working with a third party, it would be quite prudent on your part to check and make sure that they meet national definitions and minimum standards, including: criminal history and credit background checks, pre-licensure education, pre-licensure testing, continuing education, net worth, surety bond or recovery fund. You can also use a SAFE Act audit checklist to determine if your MLO is following all of the rules pertaining to this act.

DataTree Can Help MLOs “Play it SAFE”

If the above information has left you kind of cross-eyed, confused and concerned about following the SAFE Act to the letter, take heed: thanks to DataTree’s Third Party Review (TPR), you can rest assured that you are compliant with this important act. Verifying key background data is an important aspect of regulatory compliance in regards to the SAFE Act and other laws. TPR, provided by our friendly and experienced team, will look at all of the third party originator application information with real-time license checks and will assure compliance with this key act.

You have worked too hard at your business to get in trouble over inadvertent non-compliance with the SAFE Act. While it may seem confusing at first, it does not have to be — especially when you join forces with DataTree and use our TPR to be sure you're doing everything you are supposed to regarding the SAFE Act.


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