V. Compliance Lending —SAFE Act

1 V. Compliance Lending safe Act Secure and Fair Enforcement for Mortgage Licensing registration requirements for covered institutions and their Act Examination Procedures for Covered Financial MLO employees ( safe Act regulation). 5. Institutions On July 21, 2011, Title X of the Dodd-Frank Act transferred Introduction rulemaking authority for the safe Act to the Consumer Financial Protection Bureau (CFPB). 6 The CFPB published an The Secure and Fair Enforcement for Mortgage Licensing Act interim final rule, which recodified the Agencies' safe Act of 2008 1 ( safe Act) was enacted on July 30, 2008, and regulations as a single regulation, Regulation G, at 12 CFR.

2 Mandates a nationwide licensing and registration system for Part 1007, effective December 30, 2011. 7. residential mortgage loan originators (MLOs). 2. These examination procedures lay out the background and The safe Act prohibits individuals from engaging in the requirements of the safe Act and the safe Act regulation business of residential mortgage loan origination without first concerning federal registration. obtaining and maintaining annually: Definitions For individuals employed by a covered financial institution, registration as a mortgage loan originator and a Annual renewal period means November 1st through unique identifier (federal registration); or December 31st of each year.

3 For all other individuals, a state license and registration as a mortgage loan originator, and a unique identifier (state Administrative or clerical tasks means the receipt, licensing/registration). 3 collection, and distribution of information common for the processing or underwriting of a loan in the residential The safe Act requires that federal registration and state mortgage industry and communication with a consumer to licensing/registration be accomplished through the same obtain information necessary for the processing or online registration system, the Nationwide Mortgage underwriting of a residential mortgage loan.

4 Licensing System and Registry (Registry). Covered financial institution means any national bank, The objectives of the safe Act include aggregating and Federal branch and agency of a foreign bank, member bank, improving the flow of information to and between regulators; insured state nonmember bank (including state-licensed providing increased accountability and tracking of MLOs; insured branches of foreign banks), savings association, or enhancing consumer protections; supporting anti-fraud certain of their subsidiaries; branch or agency of a foreign measures; and providing consumers with easily accessible bank or commercial Lending company owned or controlled by information at no charge regarding the employment history of, a foreign bank; Farm Credit System institution; or federally and publicly adjudicated disciplinary and enforcement actions insured credit union, including certain non-federally insured against MLOs.

5 4 credit unions. 8. On July 28, 2010, the OCC, Board, FDIC, OTS, NCUA, and FCA (collectively the Agencies) published substantively similar regulations implementing the safe Act federal 5. 75 Fed. Reg. 44656 (July 28, 2010). The interagency Federal Register notice may be found at See also the revised Federal Register Preamble (Aug. 23, 2010), available at (revising footnote numbering from the original release). 1. 12 USC 5101-5116, Title V of the Housing and Economic Recovery Act 6. On July 21, 2011, pursuant to the Dodd-Frank Act the CFPB assumed: (1). of 2008 (Pub. L. 110 289, 122 Stat.)

6 2654), as amended by Title X of the responsibility for developing and maintaining the federal registration Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- system (including rulemaking authority); (2) supervisory and enforcement Frank Act) (Pub. L. No. 111-203, 124 Stat. 1376). authority for safe Act Compliance for entities under the CFPB's 2. More specifically, the safe Act required the Office of the Comptroller of jurisdiction; and (3) HUD's safe Act authority to oversee state the Currency (OCC), Board of Governors of the Federal Reserve System Compliance with safe Act requirements that had previously been under (Board), Federal Deposit Insurance Corporation (FDIC), and National HUD's authority.

7 Refer to Dodd-Frank Act Sections 1025, 1061 and 1100. Credit Union Administration (NCUA), with the Farm Credit In addition, the Dodd-Frank Act merged functions of the OTS into the Administration (FCA), and through the Federal Financial Institutions OCC, FDIC, and Board. Examination Council (FFIEC), to develop and maintain a federal system 7. See 76 Fed. Reg. 78483 (Dec. 19, 2011), available at for registering MLOs employed by covered financial institutions. In the 3. The safe Act authorized the Department of Housing and Urban preamble to the interim final rule, the CFPB stated that [t]he interim final Development (HUD) to monitor and enforce states' Compliance with the rule substantially duplicates the Federal registry agencies' largely identical statute's requirements for state licensing and registration.

8 On June 30, coordinated rules as the Bureau's new Regulation G, 12 CFR part 1007, 2011, HUD published a final rule setting minimum standards for state making only certain nonsubstantive, technical, formatting, and stylistic licensing and registration. 76 Fed. Reg. 38464 (June 30, 2011). changes.. 4 8. 12 USC 5101. 12 CFR Secs. (c), FDIC Consumer Compliance Examination Manual September 2015 V V. Compliance Lending safe Act Employee is not defined in the safe Act or safe Act pursuant to the regulation with the Registry; and (4) maintains regulation. However, the original regulation's preamble a unique identifier through the Registry.

9 Explains that the meaning of employee under the safe Act regulation is consistent with the common law right-to-control Residential mortgage loan means any loan primarily for test. For example, the results of this test generally determine personal, family, or household use that is secured by a whether an institution files an Internal Revenue Service Form mortgage, deed of trust, or other equivalent consensual W-2 or Form 1099 for an individual. 9 security interest on a dwelling (as defined in Section 103(v) of the Truth in Lending Act, 15 USC Section 1602(v)) or Mortgage loan originator or MLO means an individual residential real estate upon which is constructed or intended to who: (1) takes a residential mortgage loan application and (2) be constructed a dwelling (including manufactured homes) and offers or negotiates terms of a residential mortgage loan for includes refinancings, reverse mortgages, home equity lines of compensation or gain.

10 10 The term mortgage loan originator credit, and other first and additional lien loans. does not include: Unique identifier means a number or other identifier that: An individual who performs purely administrative or (1) permanently identifies a registered MLO; (2) is assigned clerical tasks on behalf of an individual who is an MLO; by protocols established by the Registry and the Bureau to facilitate electronic tracking of MLOs, as well as uniform An individual who only performs real estate brokerage identification of, and public access to, the employment history activities (as defined in 12 USC Section 5102(3)(D)) and of and the publicly adjudicated disciplinary and enforcement is licensed or registered as a real estate broker in actions against MLOs; and (3) must not be used for purposes accordance with applicable state law, unless the individual other than those set forth under the safe Act.