A SAFE refresher

Earlier this year, the CFPB filed a lawsuit against a mortgage lender and its top executives for violation of multiple federal and state laws. Among a host of other offenses, the CFPB claimed that the lender violated the Truth in Lending Act and multiple state-level “SAFE Act” laws by hiring unlicensed and unregistered employees to conduct mortgage origination activities, including accepting mortgage applications and negotiating the terms of loans. The complaint alleged that unlicensed and unregistered employees completed applications for applicants online and also by taking intake calls where applicants and employees discussed loan options, rates, payment options, and other specifics pertaining to the applicant’s qualifications. In the end, the bureau requested injunctive relief, consumer redress, damages, and other costs to be paid by the lender.

Although this complaint centered around state-level licensing and registration requirements for mortgage loan originators, I thought this would be a good time to go over some of the federal SAFE Act requirements for our readers.

As background, the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) prohibits anyone from “engaging in the business of a loan originator” without meeting certain requirements, including licensing and registration, a background check, and educational requirements. The SAFE Act defines “loan originator” as an individual who both: takes a residential mortgage loan application; and offers or negotiates terms of a residential mortgage loan for compensation or gain.

 

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