A new lending law for mortgage brokers will be implemented in the US, aimed at reducing mortgage fraud and increasing consumer protection.
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) sets minimum standards for state registration and licensing of mortgage brokers, including education requirements and criminal background checks. Mortgage brokers have only until early next year to comply with the new law.
Many local lenders said that the changes in policy are more visible to lenders than to consumers, but they noted that it doesn’t mean that the new rules don’t have profound implications for borrowers in the long run.
“When everything get smoothed out, it’ll get better I’m sure,” said Lynda McGriff Hankey, owner of Mortgages by Lynda. “But, if you can buy something now, you still better jump on it. In some ways, it’ll be very good for the customer—there are things that do need to be regulated and guidelines that need to be followed—but on the other hand, you’ve got people who’ve been in this business for 30 years, and this has had a big impact on them.”
The new rules will affect mortgage originators in a form of testing and certification requirements, which did not exist before the housing market slumped. Under the SAFE Act, which is aimed at curbing the so-called predatory lending practices that affected the once-booming housing market in the US, all mortgage brokers are required to pass a background check and obtain a license. All the costs and fees will be paid for by brokers out of their own pockets.
“You have to pay for every bit of it, and you’re having to do it at a time, in the mortgage industry, that has been rough. If you’re used to closing 40 mortgage loans a month, and now you’re doing 5 or 6, you’re talking about having to find a way to have to absorb that added expense,” said Hankey.
However, she noted that, “some of it can help the customer. [For example], we now have to fill out a sheet of paper that says that it’s a benefit to the customer to do the loan. That can give people confidence, and with interest rates what they are now, it’s already a great time to go ahead—if you’re one of the people lucky enough to get qualified—and buy something. Especially for young people; not necessarily people wanting to get into a $200,000 house, it’s a good time, because your house payment can easily be less than what your payment is going to be if you’re renting.”
Licensees will be required to authorize a credit report through the Nationwide Mortgage Licensing System (NMLS), starting in October, which must be completed before March next year. Mortgage originators must also pass the two-part Mortgage Loan Originator test, which comprises both a national and state component, before they can submit their 2011 licensing applications to the state.