New Rules for Licensing Mortgage Loan Originators aim to protect consumer

In Home Buyer, lenders, Loan Originator, mortgage, real estate on December 17, 2009 at 11:23 am

Establishing standards for registration and licensing of mortgage loan originator

WASHINGTON – Dec. 16, 2009 – The U.S. Department of Housing and Urban Development (HUD) announced publication of a proposed rule setting the minimum standards that states must meet to comply with the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) in licensing loan originators. The proposed rule is posted in today’s Federal Register and on HUD’s website.

“By introducing nationwide standards of uniform licensing for loan originators, the SAFE Act is taking an important step in returning integrity and accountability to the residential mortgage loan market,” says FHA Commissioner David Stevens.

The SAFE Act was enacted into law on July 30, 2008, as part of the Housing and Economic Recovery Act of 2008. It’s designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of licensed mortgage loan originators. SAFE also mandates the creation of a Nationwide Mortgage Licensing System and Registry (NMLSR).

While states must enact licensing standards that meet the requirements of the SAFE Act, overall responsibility for interpretation, implementation and compliance rests with HUD. If HUD determines that a state’s licensing standards do not meet the minimum requirements of the Act, it’s required to implement and administer a licensing system for that state.

To comply with the Act, states must put in place a Loan Originator Licensing program that requires originators to take an education course, pass a test and undergo civil, criminal and financial background checks. States have until July 31, 2010, to have their loan originators licensed under the SAFE Act criteria, unless they already have them licensed under a different system. If already using a different licensing system, they have until Dec. 31, 2010, to bring them in line with the Act’s requirements.

The proposed rule:

• Addresses HUD’s criteria to determine whether a state has an adequate system for licensing and registering loan originators under the SAFE Act. The rule sets forth the statutorily imposed minimum requirements for a state to be in compliance.

• Outlines the requirements HUD would put in place if a state fails to implement the licensing system and HUD steps in to create one.

• Addresses enforcement authority to HUD, including: (1) summons authority for information on any loan originator; (2) the authority to appoint examiners to assist HUD; and (3) the authority to conduct cease-and-desist proceedings to any person violating any provision of the SAFE Act.

As part of the rule-making process, HUD is soliciting comments for 60 days on its proposal and the comments received will be considered in the development of a final rule. Comments should be submitted by mail or electronically as noted in the Federal Register posting.

The full rule in the Federal Register is available on HUD’s website at:

Reprinted by permission: © 2009 Florida Realtors®

  1. nlms is going to be great for the mortgage industry

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