A Servicer’s Take On The SAFE Act Test

ing spent the bulk of his mortgage career in servicing departments,[/b] Ryan LaRose did not have a wealth of origination experience to fall back on when he took the federal SAFE Act test earlier this year. To be more precise, LaRose, chief operating officer of Lansing, Mich.-based Celink, had spent absolutely no time in mortgage production. But when regulators in Mississippi informed the subservicer that new state rules require all companies that accept or disburse mortgage payments to be licensed as lenders – and, in turn, to pass certain licensing tests, including the SAFE Act test – it was LaRose who stepped up to the plate. ‘We don't originate loans; we're just a subservicer,’ explains LaRose, who, in 2005, helped Celink establish its reverse mortgage subservicing division – now the company's calling card. ‘We really don't have anybody in the office here who has ever originated a loan. So all of a sudden, when we found out we had to be licensed as a lender and pass the SAFE Act test, it caused a lot of commotion.’ What it meant for LaRose, specifically, was a rapid acclimation to lending practices. For Celink, a nonbank entity, to continue servicing loans in Mississippi, LaRose had to complete a combined 24 hours of training and pass two tests. One test focused on Mississippi real estate laws and, if passed, would qualify the company as a licensed lender. The second test was the SAFE Act test. LaRose did well on both exams, passing the state-specific test with a score of 90 and the SAFE Act test with an 88. While he concedes that a seasoned loan officer may view the SAFE Act test as a ‘yawner," both tests covered material that was far from standard knowledge for someone with a servicing-only background, he says. ‘I did OK,’ he says, ‘but I did a lot of studying. The test is challenging. The training material is challenging.’ Cramming to learn the minutia of lending, LaRose found himself in a position that other servicers may eventually find themselves. The Department of Housing and Urban Development (HUD) raised more than a few eyebrows last year when it said in a proposed rule that it was inclined to require individuals who perform loan modifications – i.e., servicers – to obtain licensing under the SAFE Act. Since then, numerous organizations have objected to that interpretation. In March, two such groups, the American Association of Residential Mortgage Regulators and the Conference of State Bank Supervisors (which jointly established the Act's National Mortgage Licensing System) explained their opposition in a comment letter to HUD, stating that the "pressing and immediate need for servicers to increase staffing" makes the requirement for licensure of loss mitigation employees counterproductive in the near term. In a subsequent interview with [b][i]Servicing Management[/i][/b], AARMR President Mark Pearce furthered emphasized the practical difficulties of requiring servicers to take a test designed for originators. ‘You have a lot of folks in loss mitigation, I believe, who might struggle to pass a current test,’ Pearce said. LaRose largely agrees with Pearce, saying that unless servicers have an origination background or ‘a very strong test taking and learning ability, they're going to find it very hard’ to pass the test. He further notes that the SAFE Act test experience was beneficial in that it furthered his overall knowledge of the industry. But by his own estimation, little of what he learned will be applied on a day-to-day basis. John LaRose, Celink's CEO and Ryan's father, wrote in an e-mail that he is not aware of any other states requiring servicers to be licensed under the SAFE Act and/or licensed as lenders, but he said he would not be surprised if others followed Mississippi's lead. ‘If it comes to pass that you are required to pass the test if you're doing modifications, that could have a pretty big impact on forward servicing operations,’ the younger LaRos


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