MBA: Servicing Specialists Should Not be Required to Obtain SAFE Act Licensing

by devteam March 8th, 2010 | Share

ThernMortgage Bankers Association (MBA), American Bankers Association (ABA), and thernAmerican Financial Services Association (AFSA) joined with 11 state and localrnmortgage lending groups on Friday to send a letter to the U.S. Department of Housingrnand Urban Development expressing concerns about the way in which HUD isrnproposing to implement the 2008 SAFE Act. 

The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing), was passed in July 2008rnas part of the Housing and Economic Recovery Act.  It directs states to adopt licensing andrnregistration requirements for loan originators that meet minimum standards establishedrnby the act in lieu of HUD establishing nationwide standards.  It also encourages the Conference of StaternBank Supervisors (CSBS) and the American Association of Residential MortgagernRegulators (AARMR) to set up a nationwide residential mortgage licensing systemrnand registry.

Thernletter from MBA and others expresses concern that HUD is proposing to exceed thernauthority granted to it by SAFE by establishing a backup system and determiningrnwhether individual state laws meet the minimum requirements established byrnSAFE.  The specific concern of thernwriters is that HUD may require persons, usually those employed by servicers,rnwho undertake to perform loan modifications as though they were loanrnoriginators and thus subject to the licensing requirements of SAFE.  This, the letter stated, could “significantlyrncurtail the ability of servicers to complete loan modifications until theirrnemployees are registered or licensed.”

Although HUD indicates it is continuing to consider the matter of whether to require the states to treat servicer employees engaged in loan modifications as originators, the groundwork is laid by the proposed definitions for just such an outcome.

HUD'srnProposed Rules for implementing the act, posted in the Federal Register onrnDecember 15, 2009 answered a question regarding the applicability of therndefinition of loan originators to individuals who modify existing residentialrnloans, saying in part;

…given the extent to which today'srnloan modifications can be virtually indistinguishable from refinances, HUD seesrnthe reasonableness of covering these individuals under the definition of loanrnoriginator and has advised that it is inclined to require the licensing ofrnindividuals who perform loan modifications for servicers.”

The letter states that requiring additional licensing and registration under the SAFE Act for loan modification specialists would “unnecessarily lessen the availability of loan modification specialists and increase servicing costs”

The MBArnet al letter said that the chief objective of SAFE is to establish uniformstandards for loan originators of state-regulated lenders throughout the nationrnand that HUD can and should do considerably more to achieve the goal by, forrnexample, “clearly indicating that the SAFE law does not preclude andrnshould, in fact, encourage the recognition of out-of-state licenses andrnprovisional licensing of federally registered and other originators pendingrnlicensure

Thernparties that joined MBA, ABA and AFSA in signing the letter are state and localrnmortga”ge lending organizations representing California, Colorado, Indiana,rnMichigan, Missouri, thernCarolinas, Florida, GreaterrnWashington (DC), Ohio, Texas and Virginia.

HERE is the letter

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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