Insights

As Basis Points goes to press, twenty states have enacted state SAFE Act legislation. An overview of this legislation as it relates to loss mitigation activities is summarized below.

Arkansas: House Bill No. 1881, enacted April 1, 2009, amends the state’s existing loan officer licensing provisions found in the Arkansas Fair Mortgage Lending Act to conform to the SAFE Act requirements. As amended, the definition of “loan officer” includes a persons who negotiates or offers to negotiate the terms or conditions of a mortgage loan. There is no exclusion for loss mitigation activities.

The legislation does not include a transitioning period and becomes effective 90 days following the legislature’s formal adjournment on May 1, 2009.

Georgia: House Bill No. 312, enacted April 22, 2009, creates a new licensing requirement for mortgage loan originators. The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. Mortgage loan originators, unless exempt, must be licensed on and after January 1, 2010, or such later date approved by HUD.

Idaho: House Bill No. 169, enacted April 7, 2009, amends the state’s existing loan originator licensing requirements to comply with the SAFE Act. The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. For individuals currently licensed as mortgage loan originators, the effective date is January 1, 2011, or such later date approved by HUD. For all individuals, the effective date is July 31, 2010, or such later date approved by HUD.

Iowa: Senate File No. 355, enacted April 15, 2009, replaces the state’s existing loan originator registration requirement under the Mortgage Bankers and Brokers Act with a SAFE Act licensing requirement under a newly created Iowa Secure and Fair Enforcement for Mortgage Licensing Act.

The legislation adopts definition of mortgage loan originator found in the HUD model act, but includes an exclusion from the definition for “[a]n individual employed by a residential mortgage loan servicer if the individual is involved solely in loss mitigation efforts.” ”Loss mitigation efforts” means, “when a residential mortgage loan borrower is in default or default is reasonably foreseeable, working with the borrower on behalf of the residential mortgage loan servicer to modify either temporarily or permanently the obligation or otherwise mitigate loss on an existing residential mortgage loan.”

The licensing requirements under the new legislation take effect January 1, 2010. For individuals presently registered as a loan originator who have not met newly enacted pre-licensing education or examination requirements, the Superintendent of Banking is authorized to issue temporary mortgage loan originator licenses, which will expire on December 31, 2010. Thereafter, such individuals must meet all of the qualifications for licensure under the legislation.

Kansas: Senate Bill No. 240, enacted March 27, 2009, modifies the loan originator registration provisions of the Kansas Mortgage Business Act and adds a new loan originator registration requirement to the Uniform Consumer Credit Code.

Under both statutes, the definition of loan originator is limited to persons whose job responsibilities include contact with borrowers “during the loan origination process.” By requiring that the contact with the borrowers be during the origination process, servicers engaged in loss mitigation appear to be excluded from the licensing requirement.

The legislation does not provide for a transition period for licensing, but instead provides that it takes effect once published in the statute book. On its website, the Office of the State Bank Commissioner of Kansas (OSBC) has stated that “[a]ll Supervised Lender licensees who engage in mortgage loan activities must ensure individuals who originate mortgage loans on their behalf are properly registered as Mortgage Loan Originators with the [OSBC] on and after July 1, 2009. Any mortgage loan origination activities conducted after this date by unregistered individuals may result in fines and/or penalties against the Supervised Lender licensee as well as the individual loan originator.” To ensure timely registration, the OSBC has requested that applications for the Mortgage Loan Originator registration be received by the OSBC no later than June 1, 2009.

Kentucky: House Bill No. 106, enacted March 27, 2009, modifies the existing loan originator registration provisions of the Kentucky Mortgage Loan Company and Mortgage Loan Broker Act to comply with SAFE Act requirements under a newly renamed Mortgage Licensing and Regulation Act.

The definition of mortgage loan originator includes persons who negotiate terms and conditions of a mortgage loan with a borrower and persons who explain any term or aspect of any disclosure or agreement given at or after the time a mortgage loan application is received. There is no exclusion for loss mitigation activities.

The legislation does not provide for a transitioning period with respect to the new registration requirements. However, the legislation provides that the executive director of the Kentucky Office of Financial Institutions may establish interim procedures to promote and establish an orderly and efficient transition for the registration, review, and acceptance of new applications. The executive director may also establish interim procedures and expedited review and registration procedures for previously registered individuals. The Office of Financial Institutions’ web site indicates that, effective Jan. 1, 2010, any person applying for registration must pass a written examination and that administrative regulations will be promulgated at a later date to issue guidance in this area.

Maryland: Senate Bill No. 269, enacted April 14, 2009, amends Maryland’s existing loan originator licensing requirements under the Mortgage Originators Law to conform to SAFE Act requirements.

The legislation adopts definition of mortgage loan originator found in the HUD model act, but includes an exclusion for those engaged in loss mitigation efforts. It does so by excluding from the definition “an individual loan servicer.” “Individual loan servicers” means “an individual who on behalf of a note holder or mortgage loan servicer: (1) collects or receives payments, including payments of principal, interest, escrow amounts, and other amounts due on existing mortgage loan obligations owed to the note holder or mortgage loan servicer, at a time when the borrower is in default, or in reasonably foreseeable likelihood of default; and (2) working with the borrower and the note holder or mortgage loan servicer, collects data and makes decisions to modify, either temporarily or permanently, the terms of the mortgage loan obligations described in Item (1) of this subsection or to proceed with collection efforts through foreclosure or other processes.” The legislation further provides that that this exemption is subject to modification by regulations adopted by the Commissioner of Financial Regulation that are consistent with any applicable written interpretations issued by HUD.

Applicants for the renewal of a license that are licensed as of July 1, 2009, appear have until December 31, 2010, to comply with the new license requirements. For those now subject to the licensing requirements, and subject to certain statutory limitations, the Commissioner authorized to issue interim mortgage loan originator licenses to individuals who meet certain requirement by July 31, 2010. The Commissioner may accept such applications through July 31, 2009, and the term of the license is effective until December 31, 2010, at which time full compliance with the statute is required.

Mississippi: Senate Bill No. 2983, enacted April 15, 2009, amends Mississippi’s existing loan originator registration requirements under the Mississippi Mortgage Consumer Protection Law under a newly renamed Mississippi S.A.F.E. Mortgage Licensing Act of 2009. The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities.

For all individuals not presently licensed as mortgage loan originators, the effective date of the licensing requirements is July 31, 2010, or such later date approved by HUD. For all individuals licensed as mortgage loan originators as of July 31, 2009, the effective date is January 1, 2011, or such later date approved by HUD.

Montana: Senate Bill No. 351, enacted April 20, 2009, amends Montana’s existing loan originator licensing requirements under the Mortgage Broker and Loan Originator Licensing Act to conform to the SAFE Act under a newly renamed the Montana Mortgage Broker, Mortgage Lender, and Mortgage Loan Originator Licensing Act.

The legislation adopts definition of mortgage loan originator found in the HUD model act, but potentially delays the licensing requirements for “mortgage servicer loss mitigation specialists.” “Mortgage servicer loss mitigation specialist” means “a person who on behalf of the person making the residential mortgage loan works with a borrower who is in default or in a foreseeable likelihood of a default to modify or refinance either temporarily or permanently the borrower’s obligations in order to avoid foreclosure or otherwise to finalize collection through the foreclosure process.”

For all individuals not presently licensed as mortgage loan originators, the implementation date of the new licensing requirements is April 1, 2010. For current licensees, the date is June 30, 2010. For mortgage servicer loss mitigation specialists, if not exempt under 32-9-104(2), the effective date is a date “as set by the [Department of Administration] by rule.” Section 32-9-104(2) provides that HUD may exempt from licensing mortgage servicer loss mitigation specialists if it determines by guideline, interpretation, or rule that an exemption of a mortgage servicer loss mitigation specialist is not in violation of the federal SAFE Act.

Nebraska: Legislative Bill No. 328, enacted April 22, 2009, amends the Mortgage Banker Registration and Licensing Act to add a mortgage loan originator license requirement under a newly renamed Residential Mortgage Licensing Act. The legislation adopts the definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. The effective date of the new requirements is July 31, 2010.

New Jersey: Assembly Bill No. 3816, enacted May 1, 2009,
completely revises and supplements the current New Jersey Licensed Lenders Act, under which mortgage solicitors presently must be licensed. The legislation creates two separate regulatory schemes, with one part dedicated to mortgage activities, titled the New Jersey Residential Mortgage Lending Act, and the other reorganizing the remaining provisions which concern non-mortgage lending activities, titled the New Jersey Consumer Finance Licensing Act. The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities The new licensing requirements applicable to mortgage loan originators will apply no later than July 31, 2010, or a later date approved by HUD.

New Mexico: Senate Bill No. 342, enacted April 6, 2009,
creates a new licensing requirement for mortgage loan originators under a newly enacted New Mexico Mortgage Loan Originator Licensing Act. The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. The effective date of the new licensing requirements is July 31, 2010.

North Dakota: Senate Bill No. 2160, enacted April 9, 2009, modifies the existing money broker licensing requirements and creates a new license requirement for mortgage loan originators under a new Chapter 13-10 of the North Dakota Century Code. The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities.

The effective date of the new licensing requirements is August 1, 2009. However, persons currently licensed as money brokers have until January 1, 2010, to comply with the requirements of the new chapter.

South Dakota: House Bill No. 1060, enacted March 20, 2009, amends the existing mortgage loan originator licensing requirements under the Mortgage Lender Business Act to conform with the SAFE Act requirements. The legislation adopts the definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities.

Existing licensees have until December 31, 2010, to comply with the new licensing requirements. Unlicensed persons requiring a license must comply with the licensing requirements by July 31, 2010.

Utah: House Bill No. 286, enacted March 20, 2009, modifies the Utah Consumer Credit Code and creates a Financial Institution Loan Originator Licensing Act (FILOLA) to add a new mortgage loan originator licensing requirement. The legislation adopts the definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. The new licensing requirements become effective January 1, 2011.

For other loan originators not subject to FILOLA, Senate Bill No. 31, enacted February 20, 2009, amends the Utah Residential Mortgage Practices Act to conform the existing loan originator licensing requirements to the SAFE Act. The legislation adopts the definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. The legislation takes effect on January 1, 2010. However, the new nationwide database requirements do not become effective until January 1, 2011.

Virginia: Senate Bill No. 1171, enacted March 27, 2009, adds a new chapter 16.1 to title 6.1 of the Virginia Code to create a new mortgage loan originator licensing requirement.

The legislation adopts the definition of mortgage loan originator found in the HUD model act, but includes an exclusion from the definition for any individual acting as an “individual loan servicer.” “Individual loan servicer” means “any person who, on behalf of the note holder, collects or receives payments, including payments of principal, interest, escrow amounts, and other amounts due, on obligations due and owing to the note holder pursuant to a residential mortgage loan, or who, when the borrower is in default or in foreseeable likelihood of default, works on behalf of the note holder with the borrower to modify or refinance, either temporarily or permanently, the obligations in order to avoid foreclosure or otherwise to finalize collection through the foreclosure process.” The new licensing requirements become effective on July 1, 2010.

Washington: House Bill No. 1621, enacted April 17, 2009, amends the Consumer Loan Act to create a new mortgage loan originator licensing requirement.

The legislation adopts the definition of mortgage loan originator found in the HUD model act. The definition provisions, however, do not apply to an individual servicing a mortgage loan before July 1, 2011. “Individual servicing a mortgage loan” means a “person on behalf of a lender or servicer licensed by this state, who collects or receives payments including payments of principal, interest, escrow amounts, and other amounts due, on existing obligations due and owing to the licensed lender or servicer for a residential mortgage loan when the borrower is in default, or in reasonably foreseeable likelihood of default, working with the borrower and the licensed lender or servicer, collects data and makes decisions necessary to modify either temporarily or permanently certain terms of those obligations, or otherwise finalizing collection through the foreclosure process.” The new licensing requirements become effective on July 1, 2010.

West Virginia: Senate Bill No. 532, enacted May 8, 2009, amends the state’s existing mortgage loan originator licensing requirements to conform to the SAFE Act through the addition of a new Article 17A in Chapter 31 of the West Virginia Code.

The legislation adopts a definition of mortgage loan originator similar to that found in the HUD model act. However, the legislation also provides that, notwithstanding the licensing requirements, “an individual acting exclusively as an employee of a servicer who is engaging in loss mitigation efforts with respect to an existing mortgage transaction serviced by his or her employer is not required to meet the education, testing, background and licensing standards of [the legislation] until July 1, 2011, to the extent that this extension of time is not denied by guideline, rule, regulation, or interpretive letter issued by [HUD]. In the event this extension of time is denied, such individuals shall apply for a license under this section within ninety days of the denial.” For individuals currently licensed, the effective date of the new requirements is January 1, 2011. For all other individuals, the requirements become effective on January 31, 2010.

Wisconsin: Senate Bill No. 62, enacted February 19, 2009, amends the existing loan originator registration requirements under the Mortgage Bankers, Loan Originators and Mortgage Brokers Act to conform to the SAFE Act.

The legislation adopts the definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. The legislation directs the Department of Financial Institutions, Division of Banking, to adopt rules governing the transition from the existing registration requirements to the new licensing requirements.

Wyoming: House Bill No. 169, enacted March 12, 2009, amends the Wyoming Uniform Consumer Credit Code and the Wyoming Residential Mortgage Practices Act to create a new mortgage loan originator licensing requirement.

The legislation adopts definition of mortgage loan originator found in the HUD model act, and there is no exclusion for loss mitigation activities. The effective date of the new licensing requirements is July 1, 2010.