SAFE Act Overview and Regulations

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary goal of the SAFE Act?

To increase profits for mortgage lending companies

To eliminate all mortgage-related regulations

To promote aggressive lending practices

To protect consumers from predatory lenders and reduce fraud in mortgage lending (correct)

Which of the following is prohibited under the SAFE Act?

Making false/deceptive statements regarding financing terms (correct)

Conducting business with a valid license

Providing accurate disclosures required by the SAFE Act

Acting in the best interest of the customer

Which of these behaviors is considered acceptable conduct for a Mortgage Loan Originator (MLO) under the SAFE Act?

Failing to disclose required information

Making loans with a reasonable expectation of repayment (correct)

Soliciting borrowers with misleading information

Engaging in bait-and-switch advertising

Which of the following actions would be prohibited under the SAFE Act regarding loan contracts?

All of the above Signup and view all the answers

What is an MLO explicitly prohibited from doing in relation to appraisers?

Paying or threatening appraisers to influence their judgment Signup and view all the answers

Which of the following acts would violate the conduct required of an MLO under the SAFE Act?

Knowingly omitting material facts in reports Signup and view all the answers

What responsibility does the SAFE Act impose on MLOs regarding the disclosure of terms?

MLOs must comply with specific disclosure requirements at all times Signup and view all the answers

Which action by an MLO would be considered engaging in unfair or deceptive practices under the SAFE Act?

Engaging in bait-and-switch advertising Signup and view all the answers

What organization is responsible for overseeing the creation of a nationwide mortgage licensing system?

American Association of Residential Mortgage Regulators Signup and view all the answers

What minimum requirement must state regulatory agencies fulfill under the SAFE Act?

Regularly report enforcement actions to the NMLS Signup and view all the answers

Which of the following is NOT a power granted to state regulatory authorities under the SAFE Act?

Impose prison sentences Signup and view all the answers

What is the maximum civil penalty for violations of the SAFE Act, as of January 15, 2022?

$31,928 Signup and view all the answers

Which authority has rulemaking and supervisory power over federal depository institutions under the Dodd-Frank Act?

Consumer Financial Protection Bureau Signup and view all the answers

State regulatory authorities have the ability to conduct investigations and examinations of which of the following?

Any individual or entity subject to the SAFE Act Signup and view all the answers

Which of the following is a requirement for the state regulatory authority regarding state-licensed MLOs?

They must be registered with the NMLS Signup and view all the answers

Which of these roles can state regulatory authorities hire to assist with examinations?

Attorneys and accountants Signup and view all the answers

What must individuals and entities subject to the SAFE Act do upon request from the state regulatory authority?

Submit documentation and records Signup and view all the answers

Which agency developed the model state law to assist in MLO licensing legislation?

American Association of Residential Mortgage Regulators Signup and view all the answers

What must state regulatory authorities provide for challenging information in the NMLS?

A formal process Signup and view all the answers

What civil measure can state regulatory authorities NOT enforce under the SAFE Act?

Require state licensure for employees of depository institutions Signup and view all the answers

How often must mortgage entities submit Mortgage Call Reports (MCR)?

Quarterly Signup and view all the answers

Which of the following is included in the state authority's responsibility regarding financial practices?

Establishing minimum net worth requirements Signup and view all the answers

Study Notes

SAFE Act and State Regulatory Authority

Housing and Economic Recovery Act (HERA) of 2008: Introduced to aid in the repair of the U.S. residential housing market. A key part is the SAFE Act.
SAFE Act Purpose: Protect consumers from predatory lenders and other unfair practices in mortgage lending; reduce fraud.
MLO Conduct Standards: Act in customer's best interest; make loans with reasonable expectation of repayment.
Prohibited MLO Conduct:
- Schemes to defraud, unfair/deceptive practices.
- Obtaining property via fraud/misrepresentation
- Soliciting fees for "best efforts" loan acquisition (regardless of success).
- Soliciting, advertising, or entering contracts tied to specific interest rates, points, etc. unless those terms are available at the time of action.
- Operating without a valid license.
- Failing to disclose required information under the act.
- Failure to comply with SAFE Act or state/federal regulations.
- Making false/deceptive statements about loan terms.
- Bait-and-switch advertising.
- Negligently/knowingly making/omitting false material facts on reports/investigations
- Paying/threatening/promising appraisers to influence their judgment on appraisal value/mortgage.
- Collecting/charging/using prohibited fees
- Requiring excessive property insurance coverage.
- Failing to account for money in loan transactions.
State Responsibilities: Licensing mortgage brokers, lenders, mortgage loan originators (MLOs); establishing minimum standards for MLO licensing.
NMLS (National Mortgage Licensing System and Registry):
- Centralized system to record MLO licensing and registration.
- Developed by AARMR (American Association of Residential Mortgage Regulators) and CSBS (Conference of State Bank Supervisors).
- Model State Law (MSL) provides guidance to states to establish needed legislation.
CFPB (Consumer Financial Protection Bureau) Role:
- Rulemaking authority for federal depository institutions.
- Supervisory authority for SAFE Act.

State Regulatory Authority Requirements

Six Minimum Requirements for State Agencies:
- Effective Supervision/Enforcement: Investigating, examining, issuing subpoenas; reviewing, investigating, examining MLOs and mortgage entities (audit records). State licensing agencies can control access to documents of a examined licensee/person. They may retain outside professionals (attorneys, accountants, specialists). Requiring reports and information from MLOs & Individuals; accessing records. Lenders must make books and records available to state licensing.
- MLO Registration with NMLS: Ensuring all state-licensed MLOs are registered with NMLS.
- Reporting Violations: Regularly reporting violations and enforcement actions to NMLS.
- Challenging NMLS Information: Providing a process for challenging information in the NMLS.
- Civil Money Penalties: Assessing civil money penalties for unlicensed or unregistered MLOs.
- Minimum Requirements: Establishing minimum net worth or surety bonding requirements, or an established recovery fund for MLOs to ensure monetary compensation for complainants.
Prohibited State Agency Actions: Imposing prison sentences; requiring state licensure for employees of depository institutions.
Enforcement Actions:
- Issuing civil penalties for violations (maximum penalty as of January 15, 2022: $31,928).
- Denying, suspending, revoking, conditioning, declining to renew licenses;
- Ordering restitution for violations;
- Imposing fines;
- Issuing cease and desist orders (immediate temporary orders also possible);
- Ordering any necessary action.
Required reporting: Mortgage Call Reports (MCR) with Residential Mortgage Loan Activity (RMLA) and Financial Condition (FC) by mortgage entity licensees is required, submitted quarterly.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz focuses on the SAFE Act, part of the Housing and Economic Recovery Act of 2008, and its role in protecting consumers in the mortgage lending process. It covers MLO conduct standards, prohibited actions, and the importance of regulatory compliance. Test your understanding of these critical mortgage regulations!