Know your reforms--S.A.F.E. Act (Registration of mortgage originators)

[Godhumor]

In response to the total housing market collapse and the reprehensible behavior of some originators in selling mortgage loans to consumers, the SAFE Act was set up to require federal registration for all mortgage originators.

Called the SAFE ACT of 2008 and only originally affected credit unions. Was expanded in 2010 to include all agency-regulated institutions (i.e. pretty much every single bank and mortgage company as they all create agency loans)

Final rule went into effect on Oct 1, 2010

The initial registration period began in January of this year with a "must complete" date of July 29, 2011.

http://www.ffiec.gov/safeact.htm

From the FAQ:

The Agencies have published a final rule which becomes effective on October 1, 2010 for the Federal registration required by the S.A.F.E. Act. Under the final rule and the Federal Register notice:

Individual residential mortgage loan originators employed by Agency-regulated institutions must:
Register with the Registry and maintain their registration.
Obtain a unique identifier through the Registry that will remain with that originator, regardless of employment changes. Mortgage loan originators and their employing institutions must provide their unique identifiers to consumers.

Agency-regulated institutions must:
Require their employees who are mortgage loan originators to comply with these requirements.
Adopt and follow written policies and procedures to assure compliance with the registration requirements.
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What it means for consumers:

Registration includes fingerprinting, criminal background check, etc. to create more concrete information on the people who sell loans. Institutions and individuals will be provided a unique identifying "number" to indicate that they are formally registered. After the registering period has expired, public will have full access to the database to check the registration status of any originator.

In essence, this is an additional layer of comfort for those pursuing a mortgage.


The SAFE Act goes hand in hand with Regulation Z changes in the Truth in Lending Act that dictates how an originator may or may not earn commission on a loan, but that is another post (Bet you can't guess what industry I work in, heh).

[notesdev]

1. Stupid waste of time and money

"In essence, this is an additional layer of comfort for those pursuing a mortgage."

Yeah, like that makes any difference in a context of completely unrestrained fraud made possible by the obscene absence of prosecution of anyone of importance.

Origination wasn't the problem in the bubble; securitization was. Without the securitizers' insatiable appetite for more loans to package, the originators would have had to put their own money on the line, and as a result would have adhered to proper lending standards or gone bankrupt, either result of which is a correct and economically healthy end result.

So the net effect is that this law will be another advantage that large organizations (to whom no rules apply, as has consistently been shown to be the case) have over their smaller competitors.

[Godhumor]

2. There are a lot of reforms needed in the mortgage world at many different levels.

Everything from changing how Fannie and Freddie works to rules governing the make-up of MBS batches.

That said, there is a need at the origination level for reform, as well. Originators were making a ton of money through steering to high-commission loans that did not benefit consumers, charging "overages" (Where originators mark up the offered interest rate for additional profit) and flat out lying about both their backgrounds and their licensure.

SAFE Act addresses part of that last concern, Reg Z addresses quite a bit of the other parts on an originator level. The talks of changing how government guarantees and the beginning discussions on dismantling the big agencies are looking at the higher level picture.

And, yes, other steps are needed (Things like splitting commissions so that part is paid only if the loan performs, etc.), but the SAFE Act is actually a very good start.