In a rapidly changing and highly regulated industry like lending, there are always going to be plenty of topics up for debate. The SAFE Mortgage Licensing Act happens to be one of the interesting issues getting a lot of attention right now.
The bill is up for discussion in the Senate after easily passing approval in the House. Its wide popularity has many predicting that it will become law sooner rather than later.
If you need to catch up on the finer points of this relatively new legislation, we’ve got you covered.
Why Mortgage Loan Originator (MLO) Licensing Matters
Loan officers used to change jobs less frequently than they do now. Job loyalty and security were both higher, making it quite rare for MLOs to leave one state and go to another in search of new employment. In today’s faster-paced, more connected world, seeing someone cross state lines for a better is commonplace.
The SAFE Mortgage Licensing Act is attempting to catch the law up with the new realities of employment in the lending industry. The bill would provide recently relocated loan officers a 120-day grace period in licensing. It would apply if the professional moved from one state to another or from a bank/credit union to an independent lender.
There’s no debate about the fact that MLO licensing is important. Consumers and the industry alike want to ensure that a loan officer can’t escape justice by slipping over state lines. However, many feel a regulatory update is long overdue.
What About Consumer Protection?
SAFE’s authors attempted to account for the protection of borrowers as much as the convenience of MLOs. The new piece of legislation made headlines with its inclusion of minimum standards related to the licensing and registration of loan officers, but some consumer protection groups are asking if the standards go far enough.
The NMLS (Nationwide Multistate Licensing System) is currently in charge of setting federal guidelines for the pre-licensing and education of mortgage originators. Despite the existence of that agency, there is still a great deal of variety in the licensing requirements from one state to another.
Because of the inability of NMLS to set even and consistent requirements nationwide, it looks like the minimum federal standards promised by SAFE Act do provide at least a step in the right direction for the protection of consumers. The new guidelines are expected to do more to guarantee MLOs possess consistent and comprehensive expertise upon achieving licensing.
For now, SAFE appears to be a positive step for all parties — borrowers, institutions and loan officers themselves.
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