HUD Issues Interpretive Guidance on Implementation of SAFE Mortgage Licensing Act

The Department of Housing and Urban Development (HUD) has posted on its website new guidance on how it will interpret state compliance with the SAFE Mortgage Licensing Act (Act). The guidance provides that HUD has reviewed the state model bill prepared by the Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) and found that states adopting that bill will be in compliance with the SAFE Act requirements. Of note in the guidance are HUD's expansive interpretation of the Act's definition of "loan originator" as well as its deadlines for compliance. On loan originators, HUD considers the definition of loan originator to encompass any individual who, for compensation or gain, offers or negotiates loan terms pursuant to a request from and based on the information provided by the borrower. Such an individual would be included in the definition of loan originator, regardless of whether the individual takes the request from the borrower for an offer (or positive response to an offer) of residential mortgage loan terms directly or indirectly from the borrower. Individuals offering loan terms to family members, attorneys offering loan terms as part of their legal representation, if not compensated by a lender, mortgage broker, originator, or an agent of these, and sellers offering loan terms on seller-financing would not be covered, however. Regarding deadlines, the guidance provides that, with respect to individuals who do not already possess a valid loan originator license, July 31, 2010 is the date by which loan originators must be licensed in a state. For individuals who possess licenses granted under a system that was in place prior to the SAFE Act-compliant system, HUD has set December 31, 2010 as the final date for obtaining a license to comply with the SAFE Act. See the full guidance at http://www.hud.gov/offices/hsg/sfh/mps/smlicact.cfm