Federal Agencies Issue Final Rules On S.A.F.E. Act

Federal agencies have issued final rules requiring residential mortgage loan originators who are employees of national and state banks, savings associations, Farm Credit System institutions, credit unions and certain of their subsidiaries (agency-regulated institutions) to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act). The final rules take effect Oct. 1.

The S.A.F.E. Act requires residential mortgage loan originators who are employees of agency-regulated institutions to be registered with the Nationwide Mortgage Licensing System and Registry. As part of this registration process, residential mortgage loan originators must furnish to the registry information and fingerprints for background checks. The S.A.F.E. Act generally prohibits employees of agency-regulated institutions from originating residential mortgage loans unless the employees register with the registry.

The agencies' final rules establish the registration requirements for residential mortgage loan originators employed by agency-regulated institutions and requirements for these institutions, including the adoption of policies and procedures to ensure compliance with the S.A.F.E. Act and final rules.

As required by the S.A.F.E. Act, the final rules also require that each residential mortgage loan originator obtain a unique identifier through the registry that will remain with that residential mortgage loan originator, regardless of changes in employment. Originators and agency-regulated institutions will have to provide these unique identifiers to consumers.

In the final rules, the agencies also comment on the S.A.F.E. Act's applicability to mortgage servicers.Â

‘[C]ommenters suggested that the agencies exclude loan servicing personnel from the requirements of this rulemaking,’ the agencies say in their filing in the Federal Register. ‘We decline to take this suggested approach, because the S.A.F.E. Act definition is based on the activities of mortgage loan origination, rather than the job classification of the individual. An individual, regardless of job title, is a mortgage loan originator if he or she engages in the activities of mortgage loan origination within the meaning of the S.A.F.E. Act.’

The agencies give the example of a servicing employee of an agency-regulated institution who mainly performs servicing activities but also occasionally originates loans. Such an individual would have to abide by the S.A.F.E. Act requirements.

‘On the other handâ�¦ a loan servicing employee engaged solely in bona fide cost-free loss mitigation efforts which result in reduced and sustainable payments for the borrower generally would not meet the definition of "'mortgage loan originator,'’ the agencies rule.

The agencies anticipate that the registry could begin accepting federal registrations as early as Jan. 28, 2011.

SOURCE: Federal Reserve


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