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10/8/2010

S.A.F.E. Act Secure and Fair Enforcement

Financial Institution Implementation

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Housekeeping

Use the chat feature to ask your questions

Questions will be answered throughout

session

Email additional questions:

tballard@bfosolutions.com

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WELCOME

Theresa Ballard Compliance Specialist – BFO Solutions

Ginger Bell Education Specialist-Go2Training

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Introduction

Interagency Final Rule effective October 1, 2010

• New employee designation “MLO”

Federally insured credit unions and employees

who act as an MLO

• Registration requirement for MLO

• Adopt and follow written policies and procedures

• Federal regulations

National Credit Union Administration

o 12 CFR Part 741 and 761

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Goals

Important dates

Understand changes

Why duties of employee are important

Who is considered to be a MLO

De Minimis Exception

Who is not considered to be an MLO

MLO info required for registration

Institution’s requirements

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Why the changes???

Housing and Economic Recovery Act

• Title V S.A.F.E. Act

Amendment made July 21, 2010

• Dodd-Frank Wall Street Reform and

Consumer Protection Act

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Dodd-Frank Amendment

Expanded definition of “mortgage originator”

• Any person who for direct or indirect compensation or gain:

Takes a residential loan application (RML)

Assists a consumer in obtaining or applying to obtain an RML

Offers or negotiates terms of a RML

Represents to public that he/she can or will perform any such

services

Residential Mortgage Loan (RML) expanded from

primary residence to include 2nd home

MLO must include on all “loan docs” unique identifier

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What’s required?

Policies to assure each MLO is registered.

• Both institution and individual is responsible

for compliance.

• Both institution and individual must submit

information to NMLSR

Renewal required annually

• Annual renewal period November 1 through

December 31

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Important dates

October 1, 2010

• All credit unions that originate any mortgage

loans must have written policies and procedures

that address the requirements of the SAFE Act

2011

• All credit unions must have MLOs identified and

registered within 180 days of the date NCUA

provides public notification that registry is open.

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Purpose of Registration

Enhancement of consumer protection • Provides consumers free information about Originator

Employment history

Publicly adjudicated disciplinary history

Enforcement Actions

Reduce fraud in residential mortgage

originations

Increased accountability and tracking

Flow of information to and from Regulators

improved and combined

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Mortgage Loan Originator

“MLO”

An individual who:

• Takes a residential mortgage loan application;

and

• Offers or negotiates terms of a residential

mortgage loan for compensation or gain

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Registered Mortgage Loan

Originator

An individual who:

• Meets the definition of a MLO and

• Employee of a Federal Credit Union and

• Registered with National Mortgage Licensing

System Registry (NMLSR) and

• Maintains a unique identifier

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Unique Identifier

A number assigned by NMLSR*

Number is a permanent identifier of MLO

Will be used for electronic tracking of MLO

Will be required on loan applications

• FNMA 1003

• FHLMC 65

*National Mortgage Licensing System and Registry

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De Minimis Exception

Any employee of credit union who:

• Has never been registered or licensed

through the Registry and

• Acted as a MLO for 5 or fewer residential

mortgage loans during the past 12 months

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CUSO Employees

NCUA does not have direct regulatory

oversight or enforcement authority

CUSO employees engaging in loan

origination activities, whether owned by a

state or a federal credit union:

• Need to be licensed in accordance with

applicable state requirements

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Others considered NOT

to be an MLO?

Any individual who performs purely administrative or

clerical tasks on behalf of an MLO

Any individual who only performs real estate brokerage

activities and is licensed or registered as a real estate

broker in accordance with applicable State law

• Unless individual is compensated by a lender, mortgage broker,

or other MLO and meets the definition of mortgage loan

originator

Any individual or entity solely involved in extensions of

credit related to timeshare plans, as that term is defined

in 11 U.S.C. 101(53D)

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Administrative or Clerical

Tasks

Receipt, collection, and distribution of

information common for

• Processing or underwriting of a loan in the

residential mortgage industry and

• Communication with a member to obtain

information necessary for the processing or

underwriting of a residential mortgage loan

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Duties –vs- Title

MLO definition based on activities NOT job

classification!

Individual who engages in activities of

mortgage loan origination is considered an

MLO

Examples of MLO activities found in

Appendix A of Final Rule

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Does Employee take

Loan Applications?

Does individual receive information provided in

connection with a request for a loan to offer or

negotiate loan terms?

• Can be directly or indirectly

Does individual input info into an online application

system on behalf of consumer?

Individual does not make loan approval decision

• If answer is “YES” then individual must Register!

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Offering or Negotiating

Loan Terms

Verbally or in writing presenting a loan

offer to a consumer

• Not limited to providing disclosure of terms

after application under TILA, even if:

Further verification info is necessary

Offer is conditional

Other individuals must complete loan process

Responding to request from consumer for

a lower rate on a pending application

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Offering or Negotiating

Loan Terms –

For compensation or gain

Offering or negotiating terms of a loan for compensation

or gain includes

• Engaging in any of the activities of an MLO in the course of

carrying out employment duties, even if the employee does not

receive a referral fee or commission or other special

compensation for the loan.

Offering or negotiating terms of a loan for compensation

or gain does not include engaging in a seller-financed

transaction for the employee's personal property that

does not involve the credit union.

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What’s not considered to be

“Taking a Loan Application”

Contacting borrower to verify info on

application (i.e. pay stubs or tax returns)

Receiving loan application in the mail and

then forwarding to appropriate personnel

with no action

Clarifying or explaining to borrower what

type of information is necessary

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What’s not considered to be

“taking a Loan Application” (continued)

Responding to an inquiry regarding a

prequalified offer that borrower received

• Collecting only basic identifying info about

borrower

• Forwarding the borrower to the MLO or

Receiving info in connection with a

modification of an existing loan

• Existing Borrower

• Part of Credit Union’s loss mitigation efforts

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What’s not considered to be

“Offering/Negotiating Terms”

Providing general explanations in response to borrower

questions about specific loan products

Responding to borrowers request about publicly

available loan rates

• Applicable only if there’s no discussion of whether or not

borrower qualifies for loan product

Arranging loan closing or processing loan as long as:

• Communication only verifies loan terms already offered or

negotiated

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What’s not considered to be

“Offering/Negotiating Terms” (Continued)

Provide borrower with info unrelated to loan

terms

Make underwriting decision

Explain loan process

Describe criteria necessary to qualify without

providing guidance specific to borrower

Providing disclosures or communication on

behalf of MLO.

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Employee requirements

Any employee considered to be an MLO

must obtain a Unique Identifier

Register with NMLSR within 180 days

from date that NCUA provides in a public

notice that the Registry is accepting

registrations

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MLO information required

for Registration

Name (to include all names previously

used and variations)

Home address and contact info

Address of employee’s principal business

and business contact

Social Security number

Gender

Date and place of birth

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MLO information required

for Registration (Continued)

Financial Services related employment

history for past 10 years

• including date of employment with credit

union

Convictions of any criminal offense

involving:

• dishonesty, breach of trust, money laundering

or agreements to enter a pretrial diversion

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MLO information required

for Registration (Continued)

Civil judicial actions against employee with

financial services related activities,

dismissals with settlements,

Judicial findings that the employee

violated financial services related statutes

or regulations

• Exception made for actions dismissed without

a settlement agreement

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MLO information required

for Registration (Continued)

Actions or orders by State or Federal regulatory

agency or foreign financial regulatory authority

that found employee to have:

• Made false statement or omission, been

dishonest, unfair or unethical

• Been involved in a violation of a financial

services related business that had its

authorization to do business denied,

suspended, revoked or restricted.

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MLO information required

for Registration (Continued)

Actions or orders by State or Federal regulatory

agency or foreign financial regulatory authority

that:

• Deny, suspend or revoke the employees registration

or license to engage in financial service related

activity

• Barred the employee from association with an entity

or its officers regulated by the agency or authority or

from engaging in financial service related business.

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MLO information required

for Registration (Continued)

Revocation or suspension of employee’s

authorization to act as an attorney,

accountant or State or Federal contractor

Customer initiated financial services

related arbitration or civil settlements

• Includes settlements and judgments

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MLO information required

for Registration (Continued)

Fingerprints

• Submitted to FBI

• Used for back ground check

• Prints previously provided not acceptable.

New set of prints to be provided

• Fingerprinting to be completed through a

nationwide vendor to be determined.

There is no Grandfathering!

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Institution’s requirements

Determine which employees are

considered to be an MLOs

• Remember it’s DUTIES not title

Require each employee MLO to register

with NMLSR

Not allow any employee who is considered

to be an MLO to act as an MLO until

Registered!

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Institution’s requirements

Develop, adopt and follow written policies and

procedures to assure compliance

Required by October 1, 2010.

P&P must be appropriate to the:

• Nature

• Size

• Complexity and scope of mortgage lending activities

• Must be approved by Board of Directors

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Institution’s requirements

Policy & Procedures

Establish process for identifying MLO

Require all MLOs to be registered

Instruct each MLO on how to comply

Establish procedures on compliance with

unique identifier

Establish procedures for confirming

adequacy and accuracy of employee

registration

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Institution’s requirements

Policy & Procedures (Continued)

Establish procedures and tracking

systems for monitoring compliance

• Registration

• Renewal (must renew annually)

Provide for independent testing for

compliance

• At least annually by bank personnel or by an

outside party

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Institution’s requirements

Policy & Procedures (Continued)

Provide action steps for employee who

fails to comply with registration

requirements

Establish process for review of employee

criminal history background reports

received from Registry

Establish procedures to ensure third party

MLO is in compliance with SAFE Act

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Development of

SAFE Act Policy & Procedures

Can prepare your Policy and

Procedures for you!

Phone: 619-397-5191

www.go2comply.com

Email: info@go2comply.com

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Resource Materials

AGENCY WEB ADDRESS

Federal Reserve Board www.federalreserve.gov

National Credit Union Administration www.ncua.gov

Department of Housing and Urban

Development

www.hud.gov

Conference of State Bank Supervisors www.csbs.org

American Association of Residential

Mortgage Regulators

www.aarmr.org

State Regulatory Registry, LLC www.stateregulatoryregistry.org

Financial Industry Regulatory Authority www.finra.org

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Phone - 619-397-2603

Email - tballard@bfosolutions.com

www.bfosolutions.com

Services offered

*Quality Control Program Development and Review

*Due Diligence Review

*Loan Guaranty (VA) and Loan Endorsement (FHA) Submissions

*Post Closing and Delivery of Files to Investor

Theresa Ballard

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Thank You!

American Family

Funding

12/7/2009

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Disclaimer This publication is designed for use in conjunction with Go2Comply and BFO Solutions Incorporated training programs, and is believed to be accurate and current as of the date of printing, but is not guaranteed, and due to industry and regulatory changes is subject to change at any time. This information is provided with the express understanding that BFO Solutions Incorporated, its agents and/or representatives are not engaged in the providing of financial, legal or accounting advice. Users should consult with appropriate professionals for further clarification of contents contained within if desired, and agrees to hold harmless BFO Solutions Incorporated, its employees, representatives, trainers, consultants, program sponsors and affiliates from any liability resulting from use or reliance of any material contained within.

Sources used in this presentation: Go2Training BFO Solutions Incorporated National Credit Union Association (NCUA) Federal National Mortgage Association (FNMA) Federal Home Loan Mortgage Corporation (FHLMC) Bankers On Line Pegasus Educational Services, LLC Metavante Regulatory Services