Am I SAFER today as a result of the SAFE Act of 2008?
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (called the SAFE Mortgage Licensing Act of 2008) is being made the rule of the lending land even as we speak. Are you safer as a result?
The SAFE Act of 2008 is a form of legislation that has been batted around in Washington for years now. Lawmakers have long been frustrated with the payment of commissions to mortgage loan officers that are based on the cost of the loan to the consumer. In other words, the more lucrative the loan is for the bank (costlier to the consumer), the more money the sales person makes when the loan closes.
The question I’m posing for consumers today is this: Are you safer as a result of the SAFE Act? It’s a fair question. Let me give a little more information and perspective.
In overly simplified categories, the SAFE Act changed the mortgage industry in two main ways. First, it required its loan originators (the sales end of the business) to be licensed by the federal government. And second, it changed the way these sales persons could be compensated for the loans they originate.
First – licensing. Licensing is a good thing. Getting into this business today is supposedly not as easy because entrants are required to pass a test and a background check. Convicted felons, for example, will not pass. The relevant question however, is do all loan officers need to be licensed? The answer is no.
The reason for this is that banks and credit unions are exempt from the licensing requirement. Did you know that more than 80% of mortgage loan volume is done through a bank or credit union? That means, odds are, your loan officer today is not likely to be an “safer” than before the SAFE Act.
I am not one who normally agrees with the government, but I think that licensing loan officers is a great idea and was long over due. It should simply apply to all who are involved, rather than to just some.
The second change since the SAFE act has to do with how these loan officers are compensated. Stay tuned for my next post on that one.