QUESTION
We are a small mortgage broker up in the Pacific Northwest. The banking department here cited us for not having a policy for the SAFE Act. Aside from being blindsided by them, we honestly have no idea what should be in such this policy.
Your firm has a reputation for having really good policies that the regulators like. So many companies offer policies that it is confusing to choose the best one, and their prices are all over the place and ridiculously high. Some of them will give us policies "free" if we sign up with them for their compliance services.
I guess we're asking you to tell us what to do. We need to know at least what goes into a SAFE Act policy. I realize you probably sell the policy, but hopefully, you will tell us some of the basics.
What are some basic features of a good SAFE Act policy?
ANSWER
For many years I have railed against companies that provide the one-size-fits-all policies. There are all sorts of deals out there, and it is caveat emptor ("let the buyer beware") all the way!
I have an old friend who is a high-level regulator. He tells me that his field examiners keep track of policies that are the same from shop to shop but have different company names stated on the policies.
My term for these policy vendors is Mortgage Policy Mills. And, yes, some companies give out policies as a shill to get the buyer into becoming a client of their other services. Their templated policies are known to regulators, and it's not a good look.
From the regulator's point of view, when they see the same policy in your shop that they already saw at another shop, it makes them think that you are not serious about implementing the policy guidelines. In some cases, it makes the regulator test to see if you are doing what your policy says you are doing. It is not a smart idea to go in that direction.
Yes, we have a SAFE Act policy. There are no strings attached. And it is affordable. But the most important thing is that we work with you to ensure it conforms to your business model. Just contact us HERE, and we'll be in touch.
Under the S.A.F.E. Mortgage Licensing Act (SAFE),[i] institutions that employ one or more mortgage loan originators must adopt and follow written policies and procedures designed to assure compliance with the Nationwide Multistate Licensing System ("NMLS" or "Registry") rules.
These policies and procedures must be appropriate to the nature, size, complexity, and scope of the mortgage lending activities of the institution and apply only to those employees acting within the scope of their employment at the institution.
In my view, at a minimum, these policies and procedures must:
· Establish a process for identifying which employees must be licensed or registered mortgage loan originators;
· Require that all employees who are mortgage loan originators be informed of the licensing and registration requirements of the SAFE Act and the Registry rules and be instructed on how to comply with such requirements and procedures;
· Establish procedures to comply with the unique identifier requirements;[ii]
· Establish reasonable procedures for confirming the adequacy and accuracy of employee registrations, including updates and renewals, by comparisons with its own records;
· Establish reasonable procedures and tracking systems for monitoring compliance with registration and renewal requirements and procedures;
· Provide for independent testing for compliance with the Registry rules to be conducted at least annually by institution personnel or by an outside party;
· Provide for appropriate action in the case of any employee who fails to comply with the licensing and registration requirements of the SAFE Act, the Registry rules, or the institution's related policies and procedures, including prohibiting such employees from acting as mortgage loan originators or other appropriate disciplinary actions;
· Establish a process for reviewing employee criminal history background reports received under the Registry rules, taking appropriate action consistent with applicable federal law and implementing regulations with respect to these reports, and maintaining records of these reports and actions taken regarding applicable employees;
· Establish procedures to ensure that any third party with which the institution has arrangements related to mortgage loan origination has policies and procedures to comply with the SAFE Act, including appropriate licensing and/or registration of individuals acting as mortgage loan originators.
Finally, be sure you have properly defined who is a mortgage loan originator and, therefore, which individuals within your organization must be licensed or registered.
[i] 12 CFR §
1007.104 - Policies and Procedures
[ii] See § 1007.105
