1. S.A.F.E. Act
Secure and Fair Enforcement
Financial Institution Implementation
10/8/2010 0

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3. Housekeeping
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 Email additional questions:
tballard@bfosolutions.com
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4. WELCOME
Theresa Ballard Ginger Bell
Compliance Specialist – Education Specialist-
BFO Solutions Go2Training
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5. Introduction
 Interagency Final Rule effective October 1, 2010
• New employee designation “MLO”
Federally insured credit unions and employees
who act as an MLO
• Registration requirement for MLO
• Adopt and follow written policies and procedures
• Federal regulations
National Credit Union Administration
o 12 CFR Part 741 and 761
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6. Goals
 Important dates
 Understand changes
 Why duties of employee are important
 Who is considered to be a MLO
 De Minimis Exception
 Who is not considered to be an MLO
 MLO info required for registration
 Institution’s requirements
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7. Why the changes???
 Housing and Economic Recovery Act
• Title V S.A.F.E. Act
 Amendment made July 21, 2010
• Dodd-Frank Wall Street Reform and
Consumer Protection Act
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8. Dodd-Frank Amendment
 Expanded definition of “mortgage originator”
• Any person who for direct or indirect compensation or gain:
 Takes a residential loan application (RML)
 Assists a consumer in obtaining or applying to obtain an RML
 Offers or negotiates terms of a RML
 Represents to public that he/she can or will perform any such
services
 Residential Mortgage Loan (RML) expanded from
primary residence to include 2nd home
 MLO must include on all “loan docs” unique identifier
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9. What’s required?
 Policies to assure each MLO is registered.
• Both institution and individual is responsible
for compliance.
• Both institution and individual must submit
information to NMLSR
 Renewal required annually
• Annual renewal period November 1 through
December 31
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10. Important dates
 October 1, 2010
• All credit unions that originate any mortgage
loans must have written policies and procedures
that address the requirements of the SAFE Act
 2011
• All credit unions must have MLOs identified and
registered within 180 days of the date NCUA
provides public notification that registry is open.
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11. Purpose of Registration
 Enhancement of consumer protection
• Provides consumers free information about Originator
 Employment history
 Publicly adjudicated disciplinary history
 Enforcement Actions
 Reduce fraud in residential mortgage
originations
 Increased accountability and tracking
 Flow of information to and from Regulators
improved and combined
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12. Mortgage Loan Originator
“MLO”
 An individual who:
• Takes a residential mortgage loan application;
and
• Offers or negotiates terms of a residential
mortgage loan for compensation or gain
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13. Registered Mortgage Loan
Originator
 An individual who:
• Meets the definition of a MLO and
• Employee of a Federal Credit Union and
• Registered with National Mortgage Licensing
System Registry (NMLSR) and
• Maintains a unique identifier
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14. Unique Identifier
 A number assigned by NMLSR*
 Number is a permanent identifier of MLO
 Will be used for electronic tracking of MLO
 Will be required on loan applications
• FNMA 1003
• FHLMC 65
*National Mortgage Licensing System and Registry
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15. De Minimis Exception
 Any employee of credit union who:
• Has never been registered or licensed
through the Registry and
• Acted as a MLO for 5 or fewer residential
mortgage loans during the past 12 months
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16. CUSO Employees
 NCUA does not have direct regulatory
oversight or enforcement authority
 CUSO employees engaging in loan
origination activities, whether owned by a
state or a federal credit union:
• Need to be licensed in accordance with
applicable state requirements
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17. Others considered NOT
to be an MLO?
 Any individual who performs purely administrative or
clerical tasks on behalf of an MLO
 Any individual who only performs real estate brokerage
activities and is licensed or registered as a real estate
broker in accordance with applicable State law
• Unless individual is compensated by a lender, mortgage broker,
or other MLO and meets the definition of mortgage loan
originator
 Any individual or entity solely involved in extensions of
credit related to timeshare plans, as that term is defined
in 11 U.S.C. 101(53D)
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18. Administrative or Clerical
Tasks
 Receipt, collection, and distribution of
information common for
• Processing or underwriting of a loan in the
residential mortgage industry and
• Communication with a member to obtain
information necessary for the processing or
underwriting of a residential mortgage loan
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19. Duties –vs- Title
 MLO definition based on activities NOT job
classification!
 Individual who engages in activities of
mortgage loan origination is considered an
MLO
 Examples of MLO activities found in
Appendix A of Final Rule
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20. Does Employee take
Loan Applications?
 Does individual receive information provided in
connection with a request for a loan to offer or
negotiate loan terms?
• Can be directly or indirectly
 Does individual input info into an online application
system on behalf of consumer?
 Individual does not make loan approval decision
• If answer is “YES” then individual must Register!
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21. Offering or Negotiating
Loan Terms
 Verbally or in writing presenting a loan
offer to a consumer
• Not limited to providing disclosure of terms
after application under TILA, even if:
Further verification info is necessary
Offer is conditional
Other individuals must complete loan process
 Responding to request from consumer for
a lower rate on a pending application
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22. Offering or Negotiating
Loan Terms –
For compensation or gain
 Offering or negotiating terms of a loan for compensation
or gain includes
• Engaging in any of the activities of an MLO in the course of
carrying out employment duties, even if the employee does not
receive a referral fee or commission or other special
compensation for the loan.
 Offering or negotiating terms of a loan for compensation
or gain does not include engaging in a seller-financed
transaction for the employee's personal property that
does not involve the credit union.
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23. What’s not considered to be
“Taking a Loan Application”
 Contacting borrower to verify info on
application (i.e. pay stubs or tax returns)
 Receiving loan application in the mail and
then forwarding to appropriate personnel
with no action
 Clarifying or explaining to borrower what
type of information is necessary
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24. What’s not considered to be
“taking a Loan Application”
(continued)
 Responding to an inquiry regarding a
prequalified offer that borrower received
• Collecting only basic identifying info about
borrower
• Forwarding the borrower to the MLO or
 Receiving info in connection with a
modification of an existing loan
• Existing Borrower
• Part of Credit Union’s loss mitigation efforts
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25. What’s not considered to be
“Offering/Negotiating Terms”
 Providing general explanations in response to borrower
questions about specific loan products
 Responding to borrowers request about publicly
available loan rates
• Applicable only if there’s no discussion of whether or not
borrower qualifies for loan product
 Arranging loan closing or processing loan as long as:
• Communication only verifies loan terms already offered or
negotiated
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26. What’s not considered to be
“Offering/Negotiating Terms”
(Continued)
 Provide borrower with info unrelated to loan
terms
 Make underwriting decision
 Explain loan process
 Describe criteria necessary to qualify without
providing guidance specific to borrower
 Providing disclosures or communication on
behalf of MLO.
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27. Employee requirements
 Any employee considered to be an MLO
must obtain a Unique Identifier
 Register with NMLSR within 180 days
from date that NCUA provides in a public
notice that the Registry is accepting
registrations
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28. MLO information required
for Registration
 Name (to include all names previously
used and variations)
 Home address and contact info
 Address of employee’s principal business
and business contact
 Social Security number
 Gender
 Date and place of birth
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29. MLO information required
for Registration (Continued)
 Financial Services related employment
history for past 10 years
• including date of employment with credit
union
 Convictions of any criminal offense
involving:
• dishonesty, breach of trust, money laundering
or agreements to enter a pretrial diversion
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30. MLO information required
for Registration (Continued)
 Civil judicial actions against employee with
financial services related activities,
dismissals with settlements,
 Judicial findings that the employee
violated financial services related statutes
or regulations
• Exception made for actions dismissed without
a settlement agreement
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31. MLO information required
for Registration (Continued)
 Actions or orders by State or Federal regulatory
agency or foreign financial regulatory authority
that found employee to have:
• Made false statement or omission, been
dishonest, unfair or unethical
• Been involved in a violation of a financial
services related business that had its
authorization to do business denied,
suspended, revoked or restricted.
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32. MLO information required
for Registration (Continued)
 Actions or orders by State or Federal regulatory
agency or foreign financial regulatory authority
that:
• Deny, suspend or revoke the employees registration
or license to engage in financial service related
activity
• Barred the employee from association with an entity
or its officers regulated by the agency or authority or
from engaging in financial service related business.
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33. MLO information required
for Registration (Continued)
 Revocation or suspension of employee’s
authorization to act as an attorney,
accountant or State or Federal contractor
 Customer initiated financial services
related arbitration or civil settlements
• Includes settlements and judgments
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34. MLO information required
for Registration (Continued)
 Fingerprints
• Submitted to FBI
• Used for back ground check
• Prints previously provided not acceptable.
New set of prints to be provided
• Fingerprinting to be completed through a
nationwide vendor to be determined.
There is no Grandfathering!
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35. Institution’s requirements
 Determine which employees are
considered to be an MLOs
• Remember it’s DUTIES not title
 Require each employee MLO to register
with NMLSR
 Not allow any employee who is considered
to be an MLO to act as an MLO until
Registered!
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36. Institution’s requirements
 Develop, adopt and follow written policies and
procedures to assure compliance
 Required by October 1, 2010.
 P&P must be appropriate to the:
• Nature
• Size
• Complexity and scope of mortgage lending activities
• Must be approved by Board of Directors
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37. Institution’s requirements
Policy & Procedures
 Establish process for identifying MLO
 Require all MLOs to be registered
 Instruct each MLO on how to comply
 Establish procedures on compliance with
unique identifier
 Establish procedures for confirming
adequacy and accuracy of employee
registration
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38. Institution’s requirements
Policy & Procedures (Continued)
 Establish procedures and tracking
systems for monitoring compliance
• Registration
• Renewal (must renew annually)
 Provide for independent testing for
compliance
• At least annually by bank personnel or by an
outside party
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39. Institution’s requirements
Policy & Procedures (Continued)
 Provide action steps for employee who
fails to comply with registration
requirements
 Establish process for review of employee
criminal history background reports
received from Registry
 Establish procedures to ensure third party
MLO is in compliance with SAFE Act
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40. Development of
SAFE Act Policy & Procedures
Can prepare your Policy and
Procedures for you!
Phone: 619-397-5191
www.go2comply.com
Email: info@go2comply.com
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41. Resource Materials
AGENCY WEB ADDRESS
Federal Reserve Board www.federalreserve.gov
National Credit Union Administration www.ncua.gov
Department of Housing and Urban www.hud.gov
Development
Conference of State Bank Supervisors www.csbs.org
American Association of Residential www.aarmr.org
Mortgage Regulators
State Regulatory Registry, LLC www.stateregulatoryregistry.org
Financial Industry Regulatory Authority www.finra.org
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42. Theresa Ballard
Phone - 619-397-2603
Email - tballard@bfosolutions.com
www.bfosolutions.com
Services offered
*Quality Control Program Development and Review
*Due Diligence Review
*Loan Guaranty (VA) and Loan Endorsement (FHA) Submissions
*Post Closing and Delivery of Files to Investor
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43. Thank You!
American Family
Funding
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44. Disclaimer
This publication is designed for use in conjunction with Go2Comply and BFO Solutions
Incorporated training programs, and is believed to be accurate and current as of the date
of printing, but is not guaranteed, and due to industry and regulatory changes is subject to
change at any time. This information is provided with the express understanding that BFO
Solutions Incorporated, its agents and/or representatives are not engaged in the providing
of financial, legal or accounting advice. Users should consult with appropriate
professionals for further clarification of contents contained within if desired, and agrees to
hold harmless BFO Solutions Incorporated, its employees, representatives, trainers,
consultants, program sponsors and affiliates from any liability resulting from use or
reliance of any material contained within.
Sources used in this presentation:
Go2Training
BFO Solutions Incorporated
National Credit Union Association (NCUA)
Federal National Mortgage Association (FNMA)
Federal Home Loan Mortgage Corporation (FHLMC)
Bankers On Line
Pegasus Educational Services, LLC
Metavante Regulatory Services
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