If you want to be a hair stylist in the state of Georgia,
you have to graduate from a cosmetology school or complete an apprenticeship
program, take and pass an exam, pay fees and complete five hours of education
every two years.
Let’s say the law changed and if you worked for a large
chain salon you no longer had to be licensed. No more exams, fees or continuing
education. You are doing the same job as someone in a small independent salon but
requirements are different for you. That hardly sounds fair, does it?
That’s pretty much the situation when it comes to mortgage
loan originators (MLOs). When the Secure and Fair Enforcement for Mortgage Licensing Act, S.A.F.E.
Act, was
signed into law in 2008, it standardized the process of registration and
licensing for all MLOs, new and existing, in an effort to enhance consumer
protection and reduce fraud. All MLOs, regardless of where they work, must be
registered with the Nationwide Mortgage
Licensing System. (NMLS)
If an MLO works for an FDIC insured bank or savings and
loan, a subsidiary, or an institution regulated by the Farm Credit
Administration that is as far as their requirements go under the S.A.F.E. Act.
However, all other MLOs must get a state license for each
state where he or she originates loans. That process includes a background
check, 20 hours of pre-licensing curriculum, eight hours of continuing
education a year and passing state and national exams. And in the state of
Georgia, for example, fees to become licensed run more than $1,000. Same job,
different requirements.
And let’s say you were an MLO working for a bank, but you
were contemplating a job change and wanted to go work for a non-bank lender. Because
you are going from a position where you don’t need a license to one where you
do, you’d have to take steps to be licensed. But your bank can monitor the NMLS
to determine if you or any other of its loan originators are taking the state
licensing education courses or had taken one of its tests. And if your name
shows up, well, you might as well start cleaning out your desk.
But there is good news on the horizon. The Conference of
State Bank Supervisors (CSBS) recently
announced that as of July 2012 a bank would no longer be able to use the NMLS
to determine if one of its loan originators has done the required state
licensing education or taken its tests. That information will be blocked from
the bank’s view.
E. Robert Levy, Executive Director of the New Jersey Association
of Mortgage Brokers, informed its members of the upcoming change. He also wrote
that CSBS representatives said they were going to address “de novo licensing,”
which would allow an individual to obtain a mortgage loan originator state
license even if he/she is not yet sponsored, a current requirement. (The
originator would not be able to originate loans until sponsored, however.)
What these two developments mean is that MLOs now employed
at banks will have the freedom to complete the education and testing through
the NMLS and become a non-sponsored licensee without the bank knowing of their
plans and letting them go.
Issuing transitional state licenses for these MLOs would
take that process one step further. Richard Cordray, Director of the Consumer
Financial Protection Bureau, (CFPB) recently
wrote that although there may be movement toward transitional licenses, for now
the S.A.F.E. Act “does not allow states to provide for transitional licensing for
registered loan originators who leave federally-regulated institutions to act
as loan officers while pursuing a state license.”
I look forward to the day when all Mortgage Providers (Bank and Non-Bank) MLOs play by the same
rules, no matter where they work. But at least for now, steps are being made
toward having the same rules apply for everyone which
ensures consumers have the same protection as originally intended by our
Government. The S.A.F.E. Act was created to protect consumers
and therefore should be applied consistently.
Cal Haupt, President and Chief Executive Officer, Southeast
Mortgage
Phone: 770-279-0222
Links:
SAFE Act
NMLS
CSBS
CFPB
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