Following the release of the QM and Ability to Repay rules from CFPB, I decided to try to read through the proposed Loan Originator Compensation rules. I found this pretty interesting. Instead of making additional regulations for Mortgage Originators who work at banks or credit unions, why not just make them subject to the SAFE Act and require them be licensed?
If I were a consumer, I would only consider working with a Licensed Mortgage Originator verses a “Federally Registered” Mortgage Originator (allowed at depository banks at credit unions).
From the Federal Register Reg Z – Loan Officer Compensation
3. Qualification Requirements for Loan Originators
Section 1402 of Dodd-Frank amends TILA to impose a duty on loan originators to be “qualified” and, where applicable, registered or licensed as a loan originator under State law and the Federal SAFE Act. Employees of depositories, certain of their subsidiaries, and nonprofit organizations currently do not have to meet the SAFE Act standards that apply to licensing, such as taking pre-licensure classes, passing a test, meetingcharacter and fitness standards, having no felony convictions within the previous seven years, or taking annual continuing education classes.
To implement the Dodd-Frank-Act’s requirement that entities employing or retaining the services of individual loan originators be “qualified,” the proposed rule would require entities whose individual loan originators are not subject to SAFE Act licensing, including depositories and bona fide nonprofit loan originator entities, to: (1) Ensure that their individual loan originators meet character and fitness and criminal background standards equivalent to the licensing standards that the SAFE Act applies to employees of non-bank loan originators; and (2) provide appropriate training to their individual loan originators commensurate with the mortgage origination activities of the individual. The proposed rule would mandate training appropriate for the actual lending activities of the individual loan originator and would not impose a minimum number of training hours. In developing this provision, the Bureau used its discretion….
And we should trust banks to train their Loan Originators and continue to not be held to the same standards as a Licensed Mortgage Originator per the SAFE Act because they have such a great history of originating safe mortgages and hiring stellar mortgage originators.
Here’s more about bank/credit union non-licensed mortgage originators:
“For depository institutions, the enhanced requirements related to findings from a criminal background check may cause certain loan originators to no longer be able to work at these institutions. It also slightly limits the pool of employees from which to hire, relative to the pool from which they can hire under existing requirements”
If you work with a Licensed Mortgage Originator TODAY – you are working with someone who has passed a criminal background check and met the SAFE Act Standards. It’s mind boggling to me that LO’s who work for banks and credit unions are not licensed and held to the same standards per the SAFE Act.
Do you trust a bank to look out for your best interest and protect you?
Thank you for all the useful information in your posts. I stop by your site almost daily and enjoy your approach to home finance, both from a consumer standpoint as well as a Licensed LO.