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Wyatt Bell's Blog

SAFE Act of 2008 - Feds Are Coming to a State Near You!
by Wyatt Bell | 2012/04/05 |

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), was passed on July 30, 2008.  The federal law provided states a one year window to pass legislation requiring the licensing of mortgage loan originators according to national standards. State agencies would hook into the Nationwide Mortgage Licensing System and Registry (NMLS).

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The federal government is on the march and it appears from recent developments that licensing, testing and a number of former state level functions are beginning to give way to a giant federal net that will cover most all commerce.

This was highlighted by a headline, "NMLS is Being Outfitted for Non-Mortgage Industries". This article states the purpose is to "enhance the use of the NMLS to accommodate state use of the System for non-mortgage, non-depository financial services industries. This will give states the ability to use NMLS to license or register entities in a number of financial services industries, including consumer lending, money services businesses and debt collection. A dozen states are scheduled to start transitioning existing licenses and registrations onto NMLS as soon as this April, with more to follow in 2013".

Two entities of which I've never heard popped out -  the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators - who are responsible for the Nationwide Mortgage Licensing System & Registry (NMLS).

If NMLS&R doesn't do its job Sec. 1509 states this:

Backup authority to establish a nationwide mortgage licensing and registry system. If HUD determines that the NMLSR is failing to meet the requirements of the legislation, HUD will develop and maintain system for registration and regulation of mortgage originators.

Also, those falling under its (SAFE) jurisdiction must pass a written test developed by the NMLSR (at least 75% correct answers out of minimum 100 questions) and administered by an NMLSR approved test provider. I would imagine the test development would apply to all commerce which would eventually come under SAFE.

But the larger issue is how this federal creep is bringing federal registries into dominance over state systems. Inasmuch as this articles refers to "non-depository and non-mortgage financial services industries" I can only assume it is a matter of time before title insurance licensing and regulation move to the federal level, especially with the fiduciary responsibilities regarding trust accounts.

The SAFE act is to establish a minimum net worth or surety bonding requirement that reflects the dollar amount of loans originated by a residential mortgage loan originator, or has established a recovery fund paid into by the loan originators

I'm curious how Closing Protection Letters will develop as these implementations unfold. Do you suppose the SAFE legislation could be expanded by agency interpretation to include a fund for title company defalcations?


SAFE Mortgage Licensing Act of 2008





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