Congress Amends SAFE Act to Facilitate MLO Mobility

By Litigation & Creditors’ Rights & Bankruptcy Practice Groups

Congress recently passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (“Act”), which, among other things, amends the Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) to ease the movement of mortgage loan originators (“MLOs”) from employment with federally insured institutions to non-bank lenders.

Originally passed in 2008, the Safe Act was part of the federal response to the financial crisis. The SAFE Act created a registration and licensing regime for MLOs, with different requirements based on the MLO’s employer. MLOs employed by federally-insured banks and lenders must register with the Nationwide Mortgage Licensing System and Registry (“NMLS”). In contrast, MLOs employed by other types of lenders must be licensed with state agencies in addition to registering with NMLS. State licensure includes continuing education requirements, a test, and background checks. The more onerous requirements for state licensure disincentivized the movement of MLOs from federally-insured institutions to non-bank lenders, because the MLO would not be able to work for the other lender until receiving her or his license.

The Act seeks to remove this disincentive and facilitate greater mobility for MLOs. The Act creates a 120-day transition period that allows both registered MLOs moving from a federally insured institution to a non-bank lender and state-licensed MLOs moving to a different state to continue working while also navigating the process to obtain the appropriate license for their new job. States have until November 24, 2019 to amend their statutes, rules and regulations to provide this transitional authority to MLOs moving to new jobs.

Additional guidance on implementation of the Act will likely follow from the Consumer Financial Protection Bureau, which is tasked with enforcement of the Safe Act, will likely follow. The attorneys in Saalfeld Griggs’ Financial Services industry group continue to monitor developments in this area of the law and are happy to answer any questions you may have regarding the Act.

Joshua Feil is an associate in the Litigation and Creditors’ Rights & Bankruptcy practice groups. The information in this article is not intended to provide legal advice. For a professional consultation, please contact Erich Paetsch or Joshua Feil at Saalfeld Griggs PC.  503.399.1070.  © 2018 Saalfeld Griggs PC.