The following excerpt is to HUD Secretary Donovan, from Representative Frank and Senator Bachus. The passage addresses a minimum standard believed to be safe, (no pun intended) from Mortgage Loan Originator (MLO) licensing requirements in the S.A.F.E. Act. The letter encourages HUD to allow sellers a, (5 transactions per 12 months) exemption to the MLO licensing requirements. However, the letter requests new requirements. All loan activity be registered regardless of MLO licensing requirements with the NMLS registry. Necessitating a registration requirement for all private loans. This is a new twist to the whole seller financing scenario. In Note Builders opinion this proposal just adds another layer of bureaucracy and restrictions to seller financing as well as a method for the IRS to track all private loans. The complete letter can be found on http://www.notebuilders.com/safe-act-safe-mortgage-licensing-act-hud .
De Minimis Standard:
We think it is permissible for States to consider a de minimis standard for registration and licensing requirements under the Act. Several states allow for a de minimis standard that exempts seller financed and/or personal investment loan origination where there are five or fewer loans annually. We believe that these types of standards are consistent with the S.A.F.E. Act language that requires consideration of the commercial context in which mortgage loan origination activities are undertaken. We also note that such an exemption would be in line with the federal banking agencies' draft final rule implementing the S.A.F.E. Act, (74 FR 27385) that pursuant to language in the Act, exempts from federal registration employees of federally regulated entities who originate five or fewer loans per year.
In addition, we believe that states may consider S.A.F.E. Act de minimis standard language for an individual who acts as a loan originator exclusively for a single federally chartered depository institution. However, we strongly recommend that such individuals also be required to register with the NMLS and obtain a unique identifier (we recognize that operating protocols for NMLS may need to be modified to accommodate this type of organization). Further, in implementing this de minimis exception, we urge the adoption of a reporting process for such individuals to ensure the number of loans originated is at or below the de minimis threshold during any 12 month period and that any originator who wishes to exceed such threshold may only do so after obtaining a loan originator license from the state, Finally, we also strongly recommend that any de minimis standard or other exemptions from the provisions of the Act be revisited by states on an annual basis.
The author Terry Lewis is the Chief Compliance Officer of Note Builders, Inc. He has been a licensed broker for 30 years. Notebuilders.com is a loan compliance service for seller financing. DRE # 01898702 NMLS # 517367
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