In the past, pretty much anyone could choose to be a mortgage loan officer without any training or licensing. The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act of 2008) was enacted to provide consumer protection while reducing fraud. Since states could establish minimal standards for organizations originating mortgage loans, a national mortgage system could be set up and maintained for the licensing and registration on mortgage loans for residential properties. But are we safer now as a result of the SAFE Act?
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Many feel the licensing requirement of the SAFE Act is beneficial. Now those who wish to originate mortgage loans need to pass tests and background checks. However, not all loan officers are required to be licensed. Credit unions and banks are examples of those exempt from the licensing requirement, and they provide the majority of total mortgage loans. Because of this, some question whether they are safer if the law doesn’t apply to all mortgage lenders.
Standard requirements force those in the lending business to have a certain number of hours of education (plus annual continuing education), as well as to pass state and federal lending-law exams. These minimum requirements help keep the consumer safer since they know the requirements must be met. This should help remove the bad lenders that existed in the past.
The SAFE Act also provides consumers with the ability to access a national database registry for originators of mortgage loans. Those who borrow can view their lender’s history and any past indiscretions, disciplinary actions, or enforcements so they are more informed about who originates their loan. This database is called the Nationwide Mortgage Licensing System and Registry. Consumers can feel more confident knowing lenders who give them quotes, rates, and mortgage advice are licensed.
With the restrictions to brokers for compensation, it benefits the consumer because the lenders can’t force the borrower into more profitable types of loans that may be less affordable. Compensation cannot be based on the interest rate. Compensation is based on the amount of the loan or the total number of loans the officer completes.
Overall, the SAFE Act has provided changes that provide the borrower with greater confidence because the mortgage loan originators have rules and guidelines they have to follow.