1. The SAFE Act Chapter 6 Chapter 6: The SAFE Act
Mortgage Lending Principles & Practices (6th Edition) 04/16/15

2. Chapter 6: The SAFE Act
Chapter Objectives
Identify licensing requirements and procedures for mortgage loan professionals.
Recognize education requirements for MLOs.
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3. Chapter 6: The SAFE Act
The SAFE Act
HERA
Modernized Federal Housing Administration, foreclosure prevention, and enhancement of consumer protections
Title V, Secure and Fair Enforcement for Mortgage Licensing Act or SAFE Act
Requires states to implement an MLO licensing process that meets certain standards through the Nationwide Mortgage Licensing System & Registry (NMLS)
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12 CFR 1008
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4. Objectives of The SAFE Act
Chapter 6: The SAFE Act
Objectives of The SAFE Act
Provide uniform license applications and reporting requirements for state-licensed MLOs.
Provide comprehensive licensing and supervisory database.
Aggregate and improve flow of information to and between regulators.
Provide increased accountability and tracking of MLOs.
Streamline licensing process and reduce regulatory burden.
Enhance consumer protections and support anti-fraud measures.
Provide consumers with free, easy-to-access information about an MLO’s employment history and public disciplinary /enforcement actions.
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5. Objectives of The SAFE Act (cont.)
Chapter 6: The SAFE Act
Objectives of The SAFE Act (cont.)
Establish means for residential MLOs to act in the best interests of the consumer.
Facilitate responsible behavior in the subprime mortgage marketplace.
Provide comprehensive training and examination requirements related to nontraditional mortgage products.
Facilitate collection and disbursement of consumer complaints on behalf of state mortgage regulators.
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6. SAFE Act Mandates for States
Chapter 6: The SAFE Act
SAFE Act Mandates for States
Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) work with HUD to:
Establish minimum standards for licensing or registration of all MLOs
Develop model state law that meets minimum standards in the SAFE Act, including definitions, education, testing requirements, financial responsibility, and background standards for MLOs
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7. Loan Originator An individual who:
Chapter 6: The SAFE Act
Loan Originator
An individual who:
Takes a residential mortgage loan application.
Offers or negotiates terms of a residential mortgage loan for compensation or gain.
Assists a consumer in obtaining or applying for a residential mortgage loan by:
Advising on loan terms (including rates, fees, other costs)
Preparing loan packages
Collecting information on behalf of the consumer
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8. Loan Originator (cont.)
Chapter 6: The SAFE Act
Loan Originator (cont.)
Does NOT include:
Any individual who performs administrative or clerical tasks for licensee
A person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable state law
Extending credit on timeshare plans
Loan processor and underwriter who don’t represent to the public that he or she can or will conduct loan origination activities
Independent contractor must be state-licensed MLO for residential loan origination activities
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9. Unique NMLS Identifier
Chapter 6: The SAFE Act
Unique NMLS Identifier
SAFE Act requires all MLOs to be identified by a unique NMLS identifier number either as:
Federally registered
State licensed
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10. 6.1 Knowledge Check A loan originator takes a mortgage loan
Chapter 6: The SAFE Act
6.1 Knowledge Check
A loan originator takes a mortgage loan
application with the expectation of
compensation.
true
false
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Answer: A
The SAFE Act defines a loan originator as a natural person who takes a mortgage loan application or negotiates or offers mortgage rates or terms for
compensation or in the expectation of compensation.
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11. Other Definitions Administrative or Clerical Tasks
Chapter 6: The SAFE Act
Other Definitions
Administrative or Clerical Tasks
Depository Institution
Federal Banking Agencies
Loan Processor or Underwriter
Nontraditional Mortgage Product
Real Estate Brokerage Activity
Registered Loan Originator
Residential Mortgage Loan
State-Licensed Loan Originator
Unique Identifier
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12. Prelicensing Education Requirement
Chapter 6: The SAFE Act
Prelicensing Education Requirement
At least 20 hours of NMLS-approved prelicensing education on national topics:
Federal law and regulation (3 hours)
Ethics, including fraud, consumer protection, and fair lending (3 hours)
Nontraditional mortgage products (2 hours)
Electives (12 hours)
It is up to each state to determine whether to also require state-specific topics, either as part of the 12 hours of electives or in addition to the 20 hours required.
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12 CFR 1008, § (d)
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13. Mortgage Loan Originator Test
Chapter 6: The SAFE Act
Mortgage Loan Originator Test
State-licensed MLOs must pass the NMLS National Test. The national component covers:
Federal mortgage-related laws (23%)
General mortgage knowledge (23%)
Mortgage loan origination activities (25%)
Ethics (16%)
Uniform State Test (UST) (13%)
Note: Some states still require passing a state specific exam in addition to the National Test Component.
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See “
Mortgage Lending Principles & Practices (6th Edition) 04/16/15
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14. Minimum Competence and Retakes
Chapter 6: The SAFE Act
Minimum Competence and Retakes
Must achieve test score of 75% or above to pass
A total of 190 minutes is allotted to complete the test
May only take and fail national component of SAFE MLO Test three consecutive times
Separated by 30-day waiting periods
After third failure, candidate must wait six months before taking test again
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12 CFR 1008, § (e)(1) and (2)
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15. Minimum Standards for License Renewal
Chapter 6: The SAFE Act
Minimum Standards for License Renewal
The mortgage loan originator continues to meet the minimum  standards for license issuance as defined by the state.
The mortgage loan originator has satisfied the annual  continuing education requirements as defined by the state.
The mortgage loan originator has paid all required fees for renewal of the license.
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12 CFR 1008, § and (e)(3)
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16. Continuing Education At least 8 hours of annual continuing education:
Chapter 6: The SAFE Act
Continuing Education
At least 8 hours of annual continuing education:
Federal Law and Regulation (3 hours)
Ethics, including fraud, consumer protection, and fair lending (2 hours)
Nontraditional mortgage products (2 hours)
Elective (1 hour)
Jurisdictions may impose additional continuing education requirements.
The one hour of elective content may present as required content under a state licensing authority.
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12 CFR 1008, § (a)(2)
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17. Courses, Offerings, and Credits
Chapter 6: The SAFE Act
Courses, Offerings, and Credits
Courses reviewed/approved by NMLS
Nothing in the SAFE Act shall preclude any education course, as approved by the NMLS
Continuing education may be offered either in a classroom, online, or by any other means approved by the NMLS.
Successive Year Rule
May only receive credit for continuing education course in the year in which the course is taken
Cannot take same course in successive years
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12 U.S.C. Chapter 51, §5104(c)(2)/(3) and 12 CFR 1008, § (b
Mortgage Lending Principles & Practices (6th Edition) 04/16/15
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18. Other Licensing Maintenance
Chapter 6: The SAFE Act
Other Licensing Maintenance
Reciprocity of Education
Successful completion of NMLS requirements for any state shall be accepted as CE credit in any other state
Lapse in License
Must complete education requirements for the last year the license was held
Make Up of CE
Person meeting requirements defined by state may make up deficiency in CE
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19. 6.2 Apply Your Knowledge Match each listed MLO license-related term
Chapter 6: The SAFE Act
6.2 Apply Your Knowledge
Match each listed MLO license-related term
with the general description.
MLO License
Description
1. Continuing Education
A. 3/1 Adjustable Rate Mortgage
2. Federal Registered MLO
B. Clerical/Administrative Duties
3. Loan Originator
C. Depository Institution
4. Loan Processor
D. HERA
5. Nontraditional
E. NMLS #
6. Prelicensing
F. Takes Application
7. SAFE Act
G. Twenty Hours of Education
8. Unique Identifier Number
H. Two Hours of Ethics Education
9. UST
I. Uniform State Test
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Answer: 1-H, 2-C, 3-F, 4-B, 5-A, 6-G, 7-D, 8-E, 9-I
Mortgage Lending Principles & Practices (6th Edition) 04/16/15
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20. 6.2 Apply Your Knowledge (cont.)
Chapter 6: The SAFE Act
6.2 Apply Your Knowledge (cont.)
Answer Key:
MLO License
Description
1. Continuing Education
H. Two Hours of Ethics Education
2. Federal Registered MLO
C. Depository Institution
3. Loan Originator
F. Takes Application
4. Loan Processor
B. Clerical/Administrative Duties
5. Nontraditional
A. 3/1 Adjustable Rate Mortgage
6. Prelicensing
G. Twenty Hours of Education
7. SAFE Act
D. HERA
8. Unique Identifier Number
E. NMLS #
9. UST
I. Uniform State Test
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Answer: 1-H, 2-C, 3-F, 4-B, 5-A, 6-G, 7-D, 8-E, 9-I
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21. SAFE Act Licensing Requirements
Chapter 6: The SAFE Act
SAFE Act Licensing Requirements
Background check (fingerprints, criminal check)
Provide personal history and experience
Authorization to obtain an independent credit report, and information relative to any administrative, civil, or criminal findings
Never had an MLO license revoked in any government jurisdiction
Not convicted of or pled guilty or nolo contendere to a felony
Meet these requirements according to revisions to §
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12 CFR 1008, §
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22. Chapter 6: The SAFE Act
Character and Fitness
Must exhibit financial responsibility, character, and general fitness, including
No current outstanding judgments (except medical expenses)
No current outstanding tax/government liens or filings
No foreclosures within past 3 years
No pattern of seriously delinquent accounts within past 3 years
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12 CFR 1008, § (c)
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23. 6.3 Knowledge Check If an individual fails the national SAFE MLO
Chapter 6: The SAFE Act
6.3 Knowledge Check
If an individual fails the national SAFE MLO
test, he can repeat taking the test up to three
times as part of the same enrollment.
true
false
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Answer: A. An MLO candidate is entitled to try passing the test three times; if he fails all three times, then the candidate must wait at least six (6) months before trying
it again.
Mortgage Lending Principles & Practices (6th Edition) 04/16/15
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24. Chapter 6: The SAFE Act
Summary
In response to a failed economy, HERA was passed. A significant part of the ACT was Title V, or the SAFE Act.
The SAFE Act implemented nationwide testing, prelicensing education, and annual continuing education for all state-licensed loan originators.
The SAFE Act required states to implement the use of Nationwide Mortgage Licensing System and Registry (NMLS) to provide a centralized and standardized system for mortgage licensing and registration of all MLOs. All requirements and functions of an MLO are accomplished through this website.
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25. Chapter 6: The SAFE Act
Summary (cont.)
A loan originator is an individual who takes a residential mortgage loan application or offers/ negotiates terms of a residential mortgage loan for compensation or gain.
Employees of a mortgage company are not required to be licensed if they perform only administrative functions subsequent to the taking of a mortgage loan.
A registered loan originator is one who is employed by a depository institution, which is regulated by a federal banking agency. A registered loan originator must meet the requirements imposed on a state licensed originator, such as background checks, fingerprints, credit report verification, felony conviction regulation, etc.
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26. Chapter 6: The SAFE Act
Summary (cont.)
A loan originator who is not a registered loan originator must be a state-licensed originator.
The unique identifier is issued on a nationwide basis and serves as a means to identify a mortgage loan originator. The NMLS number issued to the MLO must be on every form of advertisement and communication from the originator.
State-licensed MLOs must pass a National Test with a score of 75% or better. States that do not participate in the UST program may also require a separate state component to be passed.
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27. Chapter 6: The SAFE Act
Summary (cont.)
An MLO may take and fail the test three times, separated by a 30-day waiting period, before being required to wait a six-month period before retaking the test.
MLO’s must take 20 hours of approved education prior to licensing and then must take eight hours annually to maintain their license. If a loan originator allows their license to lapse, they must complete the entire licensing process from the beginning.
MLO must pass background check, have good character and financial fitness, provide personal and employment history, have credit report reviewed, never had license revoked or convicted of felony for financial crime.
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28. Chapter 6: The SAFE Act
Chapter 6 Quiz
According to the SAFE Act, which incident from 10 years ago would NOT automatically disqualify an applicant for a mortgage loan originator license?
conviction for felony assault
conviction for felony fraud
conviction for felony money laundering
revocation by the state of a mortgage broker’s license
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Answer: A
A felony conviction from 10 years ago for any crime other than a financial crime would automatically not keep an MLO candidate from obtaining a license.
Mortgage Lending Principles & Practices (6th Edition) 04/16/15
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29. Chapter 6: The SAFE Act
Chapter 6 Quiz
The SAFE Act requires state-licensed originators to have a minimum of how many hours of approved prelicensing education? 8 12 20 24
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Answer: C
The prelicensing requirement for education is 20 hours for licensure.
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30. Chapter 6: The SAFE Act
Chapter 6 Quiz
An MLO applying for a state license must provide all of the following EXCEPT
employment history.
evidence of completion of the mandatory 8-hour education requirement.
pass a background check.
a personal residence and employment history.
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Answer: B
For an MLO, 8 hours is the continuing education requirement after a license is granted.
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31. Chapter 6: The SAFE Act
Chapter 6 Quiz
The SAFE Act defines a loan originator as a natural person who
offers or negotiates terms of a residential mortgage.
processes a mortgage loan under the direction of a mortgage banker.
takes a residential mortgage loan application.
both A & C
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Answer: D
The SAFE Act defines an MLO as a natural person who takes a residential loan application or offers or negotiates a mortgage loan application.
Mortgage Lending Principles & Practices (6th Edition) 04/16/15
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32. Chapter 6: The SAFE Act
Chapter 6 Quiz
Which of the following is NOT a required continuing education topic under the SAFE Act?
ethics
federal mortgage laws
nontraditional mortgage loans
property taxes
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Answer: D
The SAFE Act doesn’t designate property taxes as a required topic for MLO continuing education.
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