Safe Act Training

Secure and Fair Enforcement for
Mortgage Licensing Act
effective 10-1-10 and beyond
Ace In The Hole Management, LLC 2010 All Rights Reserved

What we will cover in this training session
Important Dates
Bank Management Responsibilities
Who is a Mortgage Loan Originator?
Mortgage Loan Originators Responsibilities.
What is the Nationwide Mortgage Licensing
System and Registry?
What does the Dodd-Frank Act change?

10-1-10
• Approved policy
• Written Procedures
• Job descriptions for all loan department
personnel.
• Start using new 1003 which has the identifier field
in the GMI section.
1-28-11 (approximate date)
• Implement procedures for registration
• Within 180 days, register all mortgage loan
originators.

By definition an MLO is an individual who:
1-Takes an application, and
2-Negotiates terms for compensation or
gain, including salary, incentive or bonus.
The SAFE Act is not guided by the new compensation rules related to other
regulations.

Who is……
• Loan Assistant that inputs
application date during
person to person
interview with applicant.
• Loan Officer (or any
employee no matter what
their title) that discusses
loan terms with applicant.
• 3rd party originator that
discusses terms with
applicant, if the bank
direct funds the loan.
Who isn’t….
• Loan Assistant that inputs
application data to system receiving
customer information indirectly, with
no discussion of terms with
applicant.
• Back Officer clerk that gathers
supporting documentation, with no
discussion of terms with applicant.
• Closer, with no discussion of terms
related to the approval process.
• Credit Administration or
Underwriting , as long as they do
not discuss terms with applicant or
offer alternative terms.

Who isn’t….
• It is important to understand that credit underwriting
does not require registration.
• If the underwriter can discuss terms or negotiate
rate, they must be registered.
• Job Description should clearly state they do not
negotiate rate or discuss terms with applicant.
• Use caution if the credit underwriting process can
propose or discuss alternatives to the original offered
terms or rate.
 If they can, they need to register.

FEDERALLY INSURED
FINANCIAL
INSTITUTION
Federal Registration on
NMLS required for the
a financial institution
that has employees
that originate
mortgage loans.
MLO
Federal Registration on
NMLS required for the
MLO employed or
compensated by a
federally regulated
financial institution .

STATE FINANCIAL
INSTITUTION THAT IS
NOT FEDERALLY
REGULATED
Must register their
institution with the state
regulatory agency, such
as a mortgage company
that is independent of a
bank.
MLO
The MLO that is not
employed by a federally
regulated financial
institution, such as a
mortgage broker or
lender employed or
compensated by a
mortgage company that
is independent of a
bank.

The role bank
management plays in
the registration
process.
The role the Human
Resources
department plays in
the registration
process.

The Initial Bank Registration Process

 Make sure that the bank is registered as a
federally regulated institution that originates
mortgage loans.
 Approve each lender that is defined as a
mortgage loan originator for the bank.
 Assure information provided by the originator
is accurate to the best of their ability.
 Bank is responsible for accuracy of information
on the MLO form MU4R.
 Track renewal requirements.

The bank must provide institution
information to the registry.
Bank must include contact person
information.
Bank must appoint registry account
administrators.
This is accomplished using a MU1R form.
Get the form
www.nationwidelicensingsystem.org

Bank will have to pay fees for initial filing,
as well as an annual renewal fee. In
addition, the two-factor annual fee for each
administrator.
Proposed fees:
• $100 initial fee
• $100 annual renewal fee
• $70 annual administrator fee

Once each MLO is registered:
• Their unique identifier must be added to each
1003 application form.
• Their unique identified must be disclosed along
with the MLO’s name on the bank website or in
the bank lobby, wherever a consumer can apply
for a mortgage loan.
• Must be provided to a consumer upon request.

If the mortgage lending entity is owned by
the holding company and not the federally
regulated bank, they must comply with the
state licensing requirements.
Those include each MLO must:
• Provide financial statements
• Successfully complete tests

The Hiring and Registration Process

 The financial institution is responsible for
underwriting of an MLO prior to the MLO’s
application or approval for registration.
• Establish underwriting criteria.
• Do not allow an MLO to register if criminal history is
known.
• Do not allow an MLO to register if their credit does
not meet bank guidelines.
• Do not allow an MLO to register if their information
they submitted is inaccurate.

 Job descriptions should
state specifically that
the individual in this job
is not a Mortgage Loan
Originator or state that
they do not discuss
terms or negotiate rates
for mortgage loans.
• Describe an MLO
 Hiring policy should
already include that
criminal acts or a
breach of honesty or
trust is prohibited.
 Hiring Practices should
already include: credit
check and verification
the applicant is not
barred from banking via
FDIC website.

 SAFE Act requires the
hiring policy stipulate
general rules for credit.
• What score is required
before an offer of
employment is extended.
 Procedures must be
written regarding the
tracking of initial and
annual renewals.
 Policies should stipulate
the prohibition of
originating mortgage
loans without a license
and identifier after (18
months after effective
date) specific date.

 Consider defining
compensation in the HR
policy to include salary,
incentive, bonus or any
fees paid in relationship
to production.
• An lender must be
registered if they receive
“compensation” for
originating a mortgage
loan.
 Consider including in
your HR Policy that you
may conduct annual
review of MLO’s credit
and criminal
background .
• FI is responsible to track
renewal and provide
underwriting for MLO
registration and renewal.

This is not designed to be the responsibility of
the bank.
NMLS will manage the entire fingerprint and
criminal background check process. There is
nothing a bank must do outside of the
registration and attestation process.

Create an individual file.
Upload Data
Complete a MU4R form. Note: bank may
complete this form for the MLO but the
MLO must attest to accuracy.
Authorize a criminal background check.
Submit fingerprints for a national criminal
background check.

 MLO will have to pay for initial registration
fee, annual renewal fee and criminal
background check fee.
 Proposed Fee structure:
• $30 initial registration fee
• $30 annual renewal fee
• $39 criminal background check fee
 The initial fee will likely be doubled if the MLO registers after
July 1.
 It is not finalized yet if the bank can pay these fees for the
MLO.

Once the MLO is registered and assigned a
Unique Identifier:
• The number will stay with them forever.
• Consumers can access certain public information
about the MLO.
• The number must be on every 1003.
• The number must be available along with the MLO’s
name on the bank website or in the lobby, wherever
the consumer can apply for a mortgage loan.
• The number must be provided to a consumer upon
request.

MLO will complete their identifying
information.
Attest to their current residential address.
Provide 10 years of financial services
employment history.
Provide and attest to current employer.
Answer 15 disclosure questions designed
to cover criminal, judicial, regulatory and
arbitration topics.

 After the MLO completes and submits the
form, the bank will attest to the accuracy of
the information.
 The MLO will be notified to contact a
fingerprint site in their area.
 They will need to schedule an appointment
with the site.
 The site will fingerprint the MLO, submit the
fingerprints electronically to the FBI, the FBI
will send the information back to the NMLS
and the bank.

There are approximately 800 sites that
provide electronic fingerprinting in the
system.
Electronic submission results in turn
around time of less than 48 hours.
• Majority are turned around within 24 hours.
• There are thousands of sites that do paper
submission.

Lots of media hype, not must impact unless you bank if over $10
billion in assets.
The Dodd-Frank Act addressed the S.A.F.E.
Act by changing the regulating agency for
banks over $10 billion in assets to the new
consumer bureau. Banks under $10 billion
in assets remain regulated by their current
federal regulator.

Federally Regulated
Institution process
Institution must register
with NMLS. Appoint NMLS
Administrators for the FI.
Approve each MLO for
your institution on the
NMLS. Procedures should
address credit and criminal
qualifications.
Manage the approval
process for your MLO,
manage renewal process.
Mortgage Loan Originators
must register with NMLS
Must complete information
in registry accurately and
completely. Submit Annual
Renewal.
Each MLO must authorize
a criminal background
check and credit report.

Missouri State Licensing Process
for non-federally regulated entities
and bank holding companies
Institution must register with NMLS
Approve each MLO for your
institution on the NMLS
Manage the approval process for
your MLO, manage renewal
process.
MLO must have completed 20
hours of NMLS approved pre-
licensure education BEFORE
submitting an application to NMLS.
Must complete information in
registry accurately and completely.
Submit Annual Renewal.
Must take 8 hours of continuing
education in 2011 in order to
renew for 2012 unless pre-
licensure education was completed
in 2011.
All applicants must pass both the
State and National Component of
the SAFE MLO test.
Each MLO must submit fingerprints
and have a criminal background
check at the time of application for
a license.
All MLO’s will have to provide
authorization for a credit report.
MLO in the State of Illinois, critical deadlines
have already passed. Consult your institution
or the Department of Financial and Professional
Reguation at 312-793-2284.

To receive credit for viewing this training,
please click on the icon below.
This training has been provided as of November 1, 2010. Pending changes are not
reflected in this training. The Bank and MLO’s are advised to obtain additional
information after approval of all provisions of the S.A.F.E. Act in early 2011.

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