James B. Lockhart, director of the Federal Housing Finance Agency (FHFA), says that, effective with mortgage applications taken on or after Jan. 1, 2010, Freddie Mac and Fannie Mae are required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser.
FHFA's requirement is consistent with Title V of the Housing and Economic Recovery Act of 2008, the S.A.F.E. Mortgage Licensing Act, enacted July 30, 2008. With that act, Congress required the creation of a nationwide mortgage Licensing system and registry. In prior years, both enterprises worked with the Mortgage Bankers Association of America and the National Association of Mortgage Brokers on a similar initiative.
However, that effort was thwarted due to the absence of a national registration and identification system. With enactment of the S.A.F.E. Mortgage Licensing Act, identifiers will now be available for each individual loan originator.
"This represents a major industry change," says Lockhart. "Requiring identifiers allows the enterprises to identify loan originators and appraisers at the loan level, and to monitor performance and trends of their loans. If originators or appraisers have contributed to the incidences of mortgage fraud, these identifiers allow the Enterprises to get to the root of the problem and address the issues."
The FHFA says the requirement's purpose is to prevent fraud and predatory lending, to ensure mortgages owned and guaranteed by the enterprises are originated by individuals who have complied with applicable licensing and education requirements, and to restore confidence and transparency in the credit markets. In addition, the enterprises will use the data collected to identify, measure, monitor and control risks associated with originators' and appraisers' performance, negligence and fraud.
To implement the requirement, the FHFA has been working with the Conference of State Bank Supervisors and the Federal Financial Institutions Examination Council's Appraisal Subcommittee. Within the next 30 days, both Fannie Mae and Freddie Mac will be issuing guidance related to implementation of the requirement.