SECURE AND FAIR ENFORCEMENT FOR MORTGAGE

Page 1 of 9

Revised November 2018

SECURE AND FAIR ENFORCEMENT FOR

MORTGAGE LICENSING ACT (SAFE Act)

Overview

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) mandates a

nationwide licensing and registration system for residential mortgage loan originators (MLOs).

The SAFE Act prohibits individuals from engaging in the business of a residential mortgage loan

originator without first obtaining and maintaining annual registration as a registered mortgage

loan originator and a unique identifier (federal registration).

The SAFE Act requires that federal registration and state licensing and registration be

accomplished through the same online registration system, the Nationwide Mortgage Licensing

System and Registry (NMLS).

The objectives of the SAFE Act include aggregating and improving the flow of information to

and between regulators; providing increased accountability and tracking of MLOs; enhancing

consumer protections; supporting anti-fraud measures; and providing consumers with easily

accessible information at no charge regarding the employment history of and publicly

adjudicated disciplinary and enforcement actions against MLOs.

Relation to other laws:

The Loan Originator Rule, 12 CFR 1026.36, effective January 2014, imposes additional

requirements relating to anti-steering, compensation, background checks, qualifications, training,

and use of the NMLS identifier.

Training: The Loan Originator Rule requires the employing institution to provide periodic training

covering Federal and State requirements that apply to the individual loan originator’s loan

origination activities. 12 CFR 1026.36(f) (3) (iii)

Federal MLO Registration Requirements Chart:

https://fedregistry.nationwidelicensingsystem.org/MLOs/Pages/RequirementsforMLOs.aspx

Laws and Regulation SAFE Act

On July 21, 2011, Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act

(Dodd-Frank Act) transferred rule-making authority for the SAFE Act from the Agencies to the

Consumer Financial Protection Bureau (CFPB). On December 19, 2011, the CFPB restated the

implementing SAFE Act regulations to 12 CFR 1007 (76 Federal Register 78483), establishing a

Page 2 of 9

Revised November 2018

new Regulation G, SAFE Mortgage Licensing Act–Federal Registration of Residential

Mortgage Loan Originators.

Definitions – 12 CFR 1007.102

Annual renewal period means November 1 through December 31 of each year.

Administrative or clerical tasks means the receipt, collection, and distribution of information

common for the processing or underwriting of a loan in the residential mortgage industry and

communication with a consumer to obtain information necessary for the processing or

underwriting of a residential mortgage loan.

Covered financial institution means any national bank, federal branch or agency of a foreign

bank, member bank, insured state non-member bank, (including state-licensed insured branches

of foreign banks), savings association, or certain of their subsidiaries; branch or agency of a

foreign bank or commercial lending company owned or controlled by a foreign bank; Farm

Credit System institution; or federally insured credit union, including certain non-federally

insured credit unions.

Employee is not defined in the SAFE Act or SAFE Act regulation. However, the regulation’s

preamble explains that the meaning of “employee” under the SAFE Act regulation is consistent

with the common-law right-to-control test. For example, the results of this test generally

determine whether an institution files an Internal Revenue Service Form W-2 or Form 1099 for

an individual.

Mortgage loan originator or MLO means an individual who (1) takes a residential mortgage

loan application and (2) offers or negotiates terms of a residential mortgage loan for

compensation or gain. The term mortgage loan originator does not include:

• An individual who performs purely administrative or clerical tasks on behalf of an individual

who is an MLO;

• An individual who only performs real estate brokerage activities (as defined in 12 U.S.C.

Section 5102(3)(D)) and is licensed or registered as a real estate broker in accordance with

applicable state law, unless the individual is compensated by a lender, a mortgage broker, or

other MLO or by any agent of such lender, mortgage broker, or other MLO, and meets the

MLO definition; or

• An individual or entity solely involved in extensions of credit related to time-share plans, as that

term is defined in 11 U.S.C. Section 101(53D).

NOTE: The 2014 Loan Originator Rule under Regulation Z broadly expanded the definition of

loan originator to include “a person who, in expectation of direct or indirect compensation or

other monetary gain or for direct or indirect compensation or other monetary gain, performs any

of the following activities: takes an application, offers, arranges, assists a consumer in obtaining

or applying to obtain, negotiates, or otherwise obtains or makes an extension of consumer credit

for another person; or through advertising or other means of communication represents to the

Page 3 of 9

Revised November 2018

public that such person can or will perform any of these activities. The term “loan originator”

includes an employee, agent, or contractor of the creditor or loan originator organization if the

employee, agent, or contractor meets this definition”. 12 CFR 1026.36(a). Regulation Z

implements the Truth in Lending Act (TILA) and is much broader than the SAFE Act. It covers

secured and unsecured credit transactions, rather than only loans secured by a mortgage.

Registry means the Nationwide Mortgage Licensing System and Registry, or NMLS system,

developed and maintained by the Conference of State Bank Supervisors and the American

Association of Residential Mortgage Regulators for the state licensing and registration of state

licensed MLOs, and through which federal MLO registrations must be accomplished.

See the Nationwide Mortgage and Licensing System and Registry website:

https://fedregistry.nationwidelicensingsystem.org/Pages/default.aspx)

Registered mortgage loan originator or registrant means any individual who (1) meets the

MLO definition; (2) is an employee of a covered financial institution; (3) is registered pursuant

to the regulation with the Registry; and (4) maintains a unique identifier through the Registry.

Residential mortgage loan means any loan primarily for personal, family, or household use that

is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a

dwelling (as defined in Section 103(v) of the Truth in Lending Act, 15 U.S.C. Section 1602(v))

or residential real estate upon which is constructed or intended to be constructed a dwelling

(including manufactured homes) and includes refinancings, reverse mortgages, home equity lines

of credit, and other first and additional lien loans.

Unique identifier means a number or other identifier that: (1) permanently identifies a registered

MLO; (2) is assigned by protocols established by the Registry and the Bureau to facilitate

electronic tracking of MLOs, as well as uniform identification of, and public access to, the

employment history of and the publicly adjudicated disciplinary and enforcement actions against

MLOs; and (3) must not be used for purposes other than those set forth under the SAFE Act.

De Minimis Exception – 12 CFR 1007.101(c)(2)

The SAFE Act regulation provides an exception to the MLO registration requirements for any

employee of a covered financial institution who has never been registered or licensed through the

Registry as an MLO if during the past 12 months the employee acted as an MLO for five or

fewer residential mortgage loans.

When an institution relies on the de minimis exception in lieu of registration, the MLO employee

must register prior to originating the sixth residential mortgage loan within 12 months. Covered

financial institutions are prohibited from engaging in any acts or practices to evade the

registration requirement.

Mortgage Loan Originator (MLO)

Registration Requirements – 12 CFR 1007.103

Page 4 of 9

Revised November 2018

Each MLO employee of a covered financial institution must register with the Registry, obtain a

“unique identifier,” maintain the registration by updating certain information within 30 days of

specified changes, and annually renew the registration during the annual renewal period.

Initial Registration – 12 CFR 1007.103(a)

Each employee of a federally regulated institution who is an MLO must submit to the Registry

the following:

• identifying information, including name, home address, social security number, gender, date

of birth, and principal business location;

• financial-services-related employment history for the prior 10 years;

• disclosure of specified criminal, civil, judicial, or state, federal, or foreign financial authority

regulatory actions against the employee; and

• fingerprints, for purposes of a Federal Bureau of Investigation background check.

The employee must attest to the correctness of the information submitted to the Registry; must

authorize the Registry and the institution to obtain information related to any administrative,

civil, or criminal action to which the employee is a party; and must authorize the Registry to

make certain information available to the public.

NOTE: Employees hired in January 2014 and later:

Under the Loan Originator Compensation Rule effective January 2014, new registrants must meet

the same felony standards as state-licensed MLOs (no felony within past 7 years, no felony at any

time that involves fraud, dishonesty, breach of trust, or money laundering.) 12 CFR 1026.38 (f).

Employing institutions must obtain a credit report for new registrants outside of NMLS to use in

determining financial responsibility. Maintaining Registration – 12 CFR 1007.103(b)

Renewal

An MLO must renew his or her registration during the annual renewal period by confirming and

updating his or her registration records. This requirement does not apply to an MLO who

completed his or her initial registration less than six months prior to the end of the annual

renewal period. Any registration that is not renewed during this period will become inactive, and

the individual cannot act as an MLO at a covered financial institution until the registration

requirements are met. Individuals who fail to update their registrations during this two-month

renewal period may renew their registration at any time and need not wait until the start of the

next annual renewal period.

Updates to Registration

An MLO must update his or her registration within 30 days for specified significant changes,

Page 5 of 9

Revised November 2018

including name changes, employment termination, and reportable changes to legal or

regulatory actions.

Previously Registered Employees – Change of Employment

The regulations provide streamlined registration requirements for an MLO employee previously

registered or licensed through the Registry who maintained this registration or license and who

changes employment. Such an employee must update certain information, provide the required

attestation and authorizations, and submit new fingerprints unless the employee has fingerprints

on file with the Registry that are less than three years old. There is no grace period in this

situation. An employee must update his or her Registry record before acting as a loan originator

for the new employer.

2018 Update:

The Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115-174

Section 106 amends the S.A.F.E. Mortgage Licensing Act of 2008 to revise the Act's civil liability

immunity provisions and to temporarily allow loan originators that meet specified requirements to

continue to originate loans after moving: (1) from one state to another, or (2) from a depository

institution to a non-depository institution.

Section 1518 (b)(1) provides temporary authority to act as a loan originator in an application

State if the individual has not had an application for a loan originator license denied or revoked,

has not been convicted of a misdemeanor or felony, and was registered on the NMLS during the

year prior to the application.

Previously Registered Employees – Mergers, Acquisitions, or

Reorganizations

A registered or licensed MLO whose employment changes as the result of a merger, acquisition,

or reorganization has 60 days from the effective date of a merger, acquisition, or reorganization

to update information in the Registry.

Financial Institution Requirements for MLO Registration,

Renewal, and Changes to Information –

12 CFR 1007.103(e)

Required Financial Institution Information – 12 CFR

1007.103(e)(1)(i)

In connection with the registration of one or more MLOs, financial institutions and certain of

their subsidiaries must submit certain required information to the Registry:

• contact information;

• Employer Tax Identification Number;

Page 6 of 9

Revised November 2018

• Research Statistics Supervision and Discount (RSSD) number issued by the Board;

• primary Federal regulator;

• primary point of contact for the Registry;

• individuals with authority to enter information into the Registry; and

• if a subsidiary of a financial institution, indication of that fact and the RSSD number of the

parent institution, as applicable.

Once registered, the institution will receive an NMLS identification number for the institution to

use in attesting to MLO employment and for other Safe Act-related purposes.

Attestation – 12 CFR 1007.103(e)(1)(ii)

An individual with authority to enter information in the Registry must verify his or her identity

and attest that he or she has that authority, that the information is correct, and that the institution

will keep the information current.

Registration – 12 CFR 1007.104(b)

A covered financial institution must require an MLO employee to register with the Registry,

maintain this registration, and obtain a unique identifier. A covered financial institution must

also confirm each MLO’s employment status once the MLO submits registration information to

the Registry and before the registration is activated.

Within 30 days of the date an MLO ceases to be an employee of the institution, the institution

must notify the Registry of that fact along with the date the MLO ceased being an employee, so

that consumers searching for an MLO in the publicly available consumer access portal will know

that the MLO no longer has a relationship with the institution.

Renewal and Updates – 12 CFR 1007.103(e)(1)(iii) and (iv)

A covered financial institution must update the information it submitted to the Registry during

the annual registration renewal period and must confirm the registration information provided by

MLO employees during this period.

An institution must update the required institution information provided to the Registry within 30

days of any change in such information.

Policies and Procedures – 12 CFR 1007.104

Covered financial institutions that have one or more MLO employees must adopt and follow

written policies and procedures to carry out their SAFE Act responsibilities. The requirement

to adopt and follow policies and procedures applies to all covered financial institutions that

employ individual MLOs, where MLOs act within the scope of their employment, and regardless

of the application of any de minimis exception to their employees. In addition, covered financial

Page 7 of 9

Revised November 2018

institutions must conduct annual independent compliance tests to ensure compliance with the

regulation. The policies and procedures must be appropriate to the nature, size, complexity, and

scope of the institution’s mortgage lending activities and apply only to those employees acting

within the scope of their employment at the institution. The policies and procedures must:

• Establish a process for identifying which employees of covered financial institutions must be

registered;

• Require that all employees who are MLOs be informed of the registration requirements of the

SAFE Act and SAFE Act regulation and instructed on how to comply;

• Establish procedures to comply with the SAFE Act regulation's unique identifier requirements;

• Establish reasonable procedures for confirming the adequacy and accuracy of MLO employee

registrations, including updates and renewals, by comparisons with its own records;

• Establish reasonable procedures and tracking systems for monitoring compliance with

registration and renewal requirements and procedures;

• Provide for annual independent testing for compliance with the SAFE Act regulation by

institution personnel or an outside party;

• Provide for appropriate action if an employee fails to comply with the registration requirements

of the SAFE Act regulations or the institution’s related policies and procedures, including

prohibiting such employees from acting as MLOs or other appropriate disciplinary actions;

• Establish a process for reviewing employee criminal history background reports received

pursuant to the regulation, taking appropriate action consistent with applicable federal law

and implementing regulations with respect to the reports, and maintaining records of the

reports and actions taken with respect to applicable employees; and

• Establish procedures designed to ensure that any third party with which the institution has

arrangements related to mortgage loan origination has policies and procedures to comply

with the SAFE Act and SAFE Act regulation, including appropriate licensing and/or

registration of individuals acting as MLOs.

Unique Identifier – 12 CFR 1007.105

When an MLO registers with the Registry, he or she receives a unique identifier — a series of

numeric characters assigned for life. The unique identifiers allow MLOs to be tracked if they

move between state and federal jurisdictions and/or change employers, and help consumers to

find certain information about a particular MLO when they search on the Registry’s consumer

access portal. The MLO information that is publicly available on the consumer access portal will

ultimately include federal and state registrations and licenses held, the MLO’s employment

history, and publicly adjudicated disciplinary and enforcement actions, if any.

To make sure that consumers have access to an MLO’s unique identifier before committing to a

Page 8 of 9

Revised November 2018

mortgage loan transaction, an MLO must provide the unique identifier upon request (orally or in

writing), before acting as an MLO (orally or in writing), and in any initial written

communication (paper or electronic) from the MLO to the consumer (such as a commitment

letter, good faith estimate, or disclosure statement). MLO unique identifiers may be used on

written materials or promotional items distributed by the institution for general use, for example

on loan program descriptions, advertisements, business cards, stationery, notepads, and similar

materials; the SAFE Act regulation does not prohibit such use.

The regulation also requires institutions to make MLO unique identifiers available to consumers

in a practicable way. This could be achieved, for example, by:

• Directing consumers to a listing of registered MLOs and corresponding unique identifiers on

the institution’s website;

• Posting the information prominently in a publicly accessible place, such as a branch office

lobby or lending office reception area; and/or

• Establishing a process to ensure that institution personnel provide MLO unique identifiers

when requested by consumers from employees other than the MLO.

Relation to Other Laws

TILA, GSE, and HUD Requirements

Title XIV, Section 1402 of the Dodd-Frank Act amended the Truth in Lending Act (TILA) to

require (1) MLOs to include on all loan documents any unique identifier of the MLO provided

by the NMLS, and (2) the CFPB to issue implementing regulations requiring depository

institutions to establish and maintain procedures reasonably designed to assure and monitor

compliance with the SAFE Act’s federal registration requirements.

In 2009, the Federal Housing Finance Agency directed government-sponsored enterprises

(GSEs) Fannie Mae and Freddie Mac to require mortgage loan applications to include the

MLO’s unique identifier. The GSEs announced that for federally regulated institutions, the

unique identifier information is required for all applications on or after July 29, 2011. On

January 5, 2011, HUD issued a mortgagee letter requiring the collection of NMLS unique

identifiers for all individuals and entities participating in the origination of Federal Housing

Administration (FHA) loans. The mortgagee letter also requires all FHA approved mortgagee

and their employees to comply with the NMLS registration requirements and “entities with

jurisdiction over their activities” must register in accordance with the guidance set forth by

NMLS.

REFERENCES

Laws

12 U.S.C. 5101 et seq. Secure and Fair Enforcement for Mortgage Licensing Act of 2008,

amended by the Dodd-Frank Act, Section 1100

Page 9 of 9

Revised November 2018

Regulations

Part 1007 Secure and Fair Enforcement for Mortgage Licensing Act:

Federal Registration of Residential Mortgage Loan Originators

(Regulation G)