In California, in order to originate loans, real estate licensees must get a mortgage loan originator (MLO) license endorsement. This means that they must complete 20 hours of initial education, pass an exam and criminal background check and complete annual continuing education in order to maintain their MLO license endorsement[1]. Failure to do so means that they will be unable to legally originate or broker residential mortgage loans. The new requirement is part of California’s SAFE Act which was designed, among other things, to minimize mortgage fraud in the state.
Although the legislation regarding MLO licensing has been in effect since the first of the year, more and more educational outlets are now getting their courses approved so that real estate licensees can complete the requisite initial and continuing education requirements. HUD’s original SAFE act was passed in 2008 and “encouraged states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators”[2]. Critics of the act argue that the additional regulations make loan origination more expensive and are restricting access to credit and having a “profound impact on…our overall economy,” as one Mortgage Bankers Association (MBA) member testified before congress yesterday[3]. However, most concern over lending regulations currently centers around issues with the definition of qualified residential mortgages (QRMs) rather than educational requirements.
Do you think that California’s approach to the SAFE act is effective and responsible?
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[1] http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/07/15/prweb8641825.DTL
[2] http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/safe/sfea
[3] http://www.loansafe.org/mba-testifies-on-impact-of-changes-to-mortgage-origination
The Federal Reserve, which received sweeping new authority under the Obama regulatory re-authorization, wants to effectively eliminate seller-held (a.k.a. purchase money) mortgages. It will do this by enacting a rule for the Dodd-Frank Act prohibiting property sellers from taking back a mortgage unless the buyer essentially can qualify for conventional financing!
What’s more, Ma and Pa Homeowner, who create 95% of seller-held mortgages, won’t be able to qualify buyers under the same underwriting standards that banks are required to perform, and therefore the cash flow notes won’t be created.
If this is enacted it also will remove access to housing for millions of Americans, because seller “financing” is the only way people who can’t qualify for conventional loans can buy a house.
Moreover, it would allow a buyer a three year right of rescission (they can cancel the sale) if the seller did not properly qualify them. The right of rescission also applies to anyone who buys the note.
We have precious little time to try to stop this. The deadline to comment is FRIDAY, July 22.
So to whom…where…how do we submit comments for consideration before the July 22 deadline?
Thanks
Washington state implemented loan originator licensing in 2006 for mortgage brokers and consumer loan companies and the federal legislation is very similar to our law, but also includes bank employed LO’s. We had approximately 15000 loan originators working for mortage brokers in 2006, by 2008 the number was down to about 5000. The main reason — most could not pass the background investigation because of felony records. Kansas, Colorado and other states that were also early adopters of MLO licensing had similar experieces. California is doing the right thing.
Barry,
I find it hard to believe that two thirds of all mortgage loan originators in the state of Washington were felons. Can you tell me where you got that information?