DRE Defense lawyer in California gives overview of SAFE ACT compliance

THE SAFE ACT: CALIFORNIA RULES FOR COMPLIANCE

The recent “Mortgage Meltdown” and “Foreclosure Crisis” has turned the real estate industry upside down and paved the way for new rules for Real Estate Professionals. One of the newest rules is the SAFE ACT. This act was crafted by the Federal Government to abolish shoddy residential lending and protect mortgage borrowers. The SAFE ACT institutes a system for licensing and regulating loan originators. California adopted the SAFE ACT by enacting SB36 and requires all loan originators to comply with the new rules by January 1, 2011 and obtain BOTH a California DRE License as well as a MLO Endorsement.

Formerly, loan officers, also known as “loan originators,” were often just commissioned salespeople with no special training to help borrowers understand and select the right loan. Worse still – in many cases, loan companies hired “loan specialists” who had no license at all. The SAFE ACT increases transparency and ethical reporting standards for mortgage loan originators. These provisions include:

Criminal history & record information checks,
Federal originator I.D. numbers,
Credit report checks,
Tracking of consumer complaints,
National & State Testing,
National pre-licensure and continuing education,
Bond and recovery fund requirements,
Greater accountability to the public provided free of charge via the internet.

The SAFE ACT applies to both current DRE license holders and new licensees. All Brokers, Salespersons, Underwriters, Processors, Independent Contractors etc. must obtain a Mortgage Loan Originator License Endorsement. Below are some helpful definitions from the SAFE ACT.

MLO – Mortgage Loan Originator is a person:
- Who takes Residential Mortgage Loan Applications; or
- Who negotiates terms of a residential loan
- And will be compensated for arranging the loan
- Residential Loan
  - Secured by real property with a dwelling
  - Dwelling is a residential structure (1-4 units)
- Independent loan processors/underwriters
  - Must comply with SAFE Act licensing requirements

GENERAL REQUIREMENTS FOR COMPLIANCE WITH CALIFORNIA SAFE ACT:

Pre-License Education: All new applicants on or after 1/2/2011 must have completed 20 hours of NMLS approved pre-license education. EXISTING REAL ESTATE LICENSEES will not need 20 hours of NMLS approved pre-license education if all other MLO requirements are met by 12/31/2010. (This is currently under review as California and the Federal system are reviewing the current education requirements)

Continuing Education: All licensees must take 8 hours of NMLS continuing education in 2011 in order to renew for 2012.

“SAFE ACT” MLO (Mortgage Loan Originator) Test: All licensees must pass the National and State component of the SAFE MLO test by 12/31/2010.

Criminal Background Check: All applicants must submit fingerprints through NMLS for a criminal background check by 12/31/2010.

Credit Report: All applicants must authorize a credit report through NMLS by 12/31/2010.

Endorsement applications: Must be submitted electronically to the NMLS&R by September 15, 2010 to be issued by January 1, 2011

FORMS REQUIRED:

Application forms are filed on-line on the NMLS system
- MU 4- salespersons, brokers, or broker-officers performing MLO activities
  - Includes brokers or designated corporations broker-officers who only supervise other MLO licensees
MU 1- licensed brokers who run their own company must file as a sole proprietor
MU 1-corporations which employ licensees performing MLO activates must file as a corporation
MU 2- is filed in conjunction with any MU 1 filing-this is a no fee filing which lists details on owners, officers, and control persons
MU 3-must be filed by any broker or corporation to establish a branch office location where MLO activities are performed

For brokers or corporations
- DBA’s (trade names), and branch office locations used for mortgage loan origination activities must be established on DRE record before adding to NMLS record

For salespersons or broker associates
- If in the employ of a broker or corporation must have employing entity create a company relationship after completing their MU 4 and establish sponsorship with employing entity

HELPFUL LINKS & NUMBERS:

www.dre.ca.gov – California Department of Real Estate

Licensing Questions/SAFE ACT Compliance – (877) 373-4542

http://www.dre.ca.gov/ppt/SAFE_DRE_9-28-10.pps

(Power Point Presentation by California DRE)

http://www.dre.ca.gov/lic_safe.html#1 – California Department of Real Estate Licensing Requirements

http://www.ffiec.gov/safeact.htm – Federal Government SAFE ACT site (FFIEC)

If you are a Real Estate or Mortgage Professional and need help determining if the SAFE ACT applies to you, call The Law Offices of Steven C. Vondran. The Law Offices of Steven C. Vondran can help in DRE Defense, SAFE ACT Compliance, and Broker Compliance.

Call (877) 276-5084 or visit us at www.vondranlaw.com.

You can follow us on Twitter at http://twitter.com/VondranLaw

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The Law Offices of Steven C. Vondran

DRE Defense Lawyer, Broker Defense Attorney, Broker Compliance

General Real Estate Law