SAFE Act Concerns are Voiced

Many lending groups have expressed serious concerns about several proposed regulations under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), and to address these concerns, the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA), ""American Bankers Association"":http://www.aba.com/ (ABA), ""American Financial Services Association"":http://www.afsaonline.org/sitepages/1.cfm (AFSA), and 11 state and local mortgage associations filed a ""comprehensive comment letter"":http://www.afsaonline.org/cms/filerepository/JointCommentsLicensingStateStandardsMarch2010.pdf to ""HUD"":http://portal.hud.gov/portal/page/portal/HUD on Friday.

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While the groups support aspects of the proposal, the letter expressed concern that HUD is exceeding its statutory authority under the SAFE Act by establishing a backup system and determining whether state laws meet the SAFE Act's minimum requirements.

HUD has indicated that it may require states to treat servicer employees engaged in loan modifications as ""originator"" for the purpose of the Act. However, HUD's definition of ""loan originator"" is inconsistent with the SAFE Act and the federal banking agencies' approach, the letter said. If the regulation is finalized as proposed, HUD risks significantly limiting the ability of servicers to complete loan modifications under their employees are registered or licensed.

In addition to concerns about the potential for undue coverage of servicing personnel, the groups voiced concern about the fractured nature of a 50-state approach to

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licensing and registering loan originators. The SAFE Act was intended to establish a system that would not unduly burden well-qualified originators from being employed by either state or federally regulated mortgage lenders.

""Additional licensure and registration requirements under SAFE for persons engaged in loan modifications or assumptions as proposed by HUD will unnecessarily lessen the availability of loan modification specialists and increase servicing costs,"" the letter said. ""It will also burden the ability of loan modification specialists to move between federal and state-licensed companies, decrease competition and, most importantly, hinder the ability of the industry to address the needs of troubled borrowers facing foreclosure.""

To prevent these outcomes, the groups said HUD should withdraw this portion of its proposal and make clear that the term ""loan originator"" was not intended to and does not encompass servicers including those engaged in loan modifications and assumptions. In addition, they believe HUD should do considerably more to achieve the SAFE Act's central objective of establishing uniform standards for loan originators of state-regulated lenders throughout the nation.

The letter suggested that HUD should clearly indicated that the SAFE Act law does not preclude and should, in fact, encourage the recognition of out-of-state licenses and provisional licensing of federally registered and other originators pending licensure. In addition, it said the ""purpose"" provisions of the rule should expressly state HUD's role of reviewing compliance with minimum standards and should not indicate that HUD has overall responsibility for interpretation, implementation and compliance with SAFE.

Joining MBA, ABA, AFSA in signing the letter were state and local mortgage lending organizations representing California, Colorado, Indiana, Michigan, Missouri, the Carolinas, Florida, greater Washington, D.C., Ohio, Texas, and Virginia.