Refinancing to the wrong residential loan could cost you your home, ruin your credit and disrupt family. In an attempt to combat faulty lending practices, earlier this year, lawmakers passed the Secure and Fair Enforcement Mortgage Licensing Act “SAFE Act.” It establishes a national standard mandating consumer protection against fraud and misleading lending practices. Crafted to abolish shoddy residential lending, SAFE primarily institutes a system for licensing and registering loan originators. California must comply with enact requirements by the end of 2010.
While many of the prior deceptive loan programs have been eliminated, vigilance is still needed when choosing a lending expert to ensure you’re not being mislead or signing up for a financial disaster.
Formerly, loan officers, also known as “loan originators,” were often just commissioned salespeople with no special training to help borrowers understand and select the right loan. Worse still – in many cases, loan companies hired “ loan specialists” who had no license at all.
The ensuing “mortgage meltdown” paved the way for this new bureaucratic oversight. Hence, the SAFE Act increases transparency and ethical reporting standards for mortgage loan originators. These provisions include: Criminal history, record information checks, Federal originator I.D. numbers, credit reports, tracking of consumer complaints, national testing, national pre-licensure and continuing education, bond and recovery fund requirements, and greater accountability to the public provided free of charge via the internet.
Policymakers have further engaged safeguards in establishing requirements. They include reducing regulatory burdens, streamlining licensing while providing increased accountability such as the maintenance of a database that monitors a loan officer or company’s history of complaints and their license status. In the quest to facilitate responsible behavior in what remains of the residential 1-4 family loan market, there are new mandates for comprehensive training and examination prerequisites.
Still of concern, however, are the Act’s gaps. Not all loan officers are required to complete pre-license training and to pass a comprehensive licensing exam, enabling the use of legislative loopholes.
Loan officers who work for Federally chartered banks or credit unions DON’T have to take the exam or the pre-license training. So unless your loan officer works for a certain type of company, you’re really no safer. Lawmakers decided to trust the banks to properly screen and train their originators. Hmmm, do you trust the banks?
To find out if your loan professional is really qualified, has undergone required training and passed the exam – a little due diligence may be necessary.
First, ask for their license number and what agency they’re licensed by. If they work for a bank or Federally chartered credit union, they might tell you they don’t have to be licensed. If they tell you what license they work under, you can check on that licensing authority’s website for their license history.
But be careful. Whether you’re buying foreclosed homes, looking for home refinancing, or you’re a first time homebuyer, you need to speak with a real financing expert. Sure, the SAFE ACT makes it a little safer – but….