Regulators Issue SAFE Act Rules for Banks’ Loan Officers

Residential mortgage loan officers at banks, credit unions, and other federally regulated financial institutions are now required to register their names and fingerprints with a national database.

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Six federal agencies â€" including the Office of the Comptroller of the Currency (OCC), Federal Reserve, FDIC, Office of Thrift Supervision (OTS), Farm Credit Administration (FCA), and National Credit Union Administration (NCUA) â€" ""approved new rules"":http://www.fdic.gov/news/news/press/2010/pr10170.html Wednesday that say all mortgage originators who are employees of both state and federally regulated lenders must meet the requirements of the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act).

The S.A.F.E. Act was passed two years ago and creates a central database of mortgage originators' and mortgage brokers' names and fingerprints in order for regulators to perform background checks and keep tabs on where individuals are operating.

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The collapse of the nation's housing market brought to light a number of shady practices in poorly regulated corners of the business, such as work performed by unlicensed professionals and lenders/brokers simply jumping state borders undetected if they were banned in one jurisdiction, only to continue their operations in another state.

The S.A.F.E. Act was enacted to protect consumers from such practices and clean up some of the so-called crooked aspects of the lending business that helped fuel the housing bust and tainted so many lenders credit portfolios.

Under the new rules, residential loan officers must register with the Nationwide Mortgage Licensing System and Registry, which is overseen by the ""Conference of State Bank Supervisors"":http://www.csbs.org. Registrants must provide additional personal information and their fingerprints for background checks. The S.A.F.E. Act also requires that each residential mortgage loan originator obtain a unique identifier through the registry that will remain with that individual, regardless of changes in employment, and must be provided to consumers.

The rules take effect for banks' loan officers on October 1, 2010. The agencies say they expect the registry to begin accepting federal registrations as early as January 28, 2011, at which time lenders and their employees will have 180 days to comply with the new registration requirements.

S.A.F.E. Act rules are already in effect for non-bank mortgage originators and brokers, who have until July 31 to comply with the new registration requirements if their state is already using the new database system.