RSK.IQ Question of the Week 12/23/13

Does the S.A.F.E. Act apply to residential construction mortgages or only to permanent real estate loans?

Whether the requirements of the S.A.F.E. Act applies is determined by the type of loan as well as the kind of property securing it.

The S.A.F.E. Act covers all residential mortgage loans, which are defined as any loan primarily for personal, family, or household use made by a federally regulated bank or creditor that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate, upon which is constructed or intended to be constructed a dwelling. The term includes refinancings, reverse mortgages, home equity lines of credit, and other first and additional lien loans. The term “dwelling” means a residential structure or mobile home which contains one-to-four family housing units or individual units of condominiums or cooperatives. 12 CFR Sections 1007.102 & 103(a).

A residential construction loan that is a consumer loan is covered by the S.A.F.E. Act. A commercial loan is exempt from S.A.F.E. Act requirements, even if it is for the construction of a dwelling.

There is a “de minimus exception” for any employee of a federally regulated bank or creditor who has never been registered or licensed through the Nationwide Mortgage Licensing System and Registry as a mortgage loan originator, if during the past 12 months the employee acted as a mortgage loan originator for five or fewer residential mortgage loans. 12 CFR Section 1007.101(c)(2)(i). A “mortgage loan originator” is an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. It does not include an individual who performs purely administrative or clerical tasks on behalf of a mortgage loan originator. 12 CFR Section 1007.102.

This entry was posted on Monday, December 23rd, 2013 at 2:55 pm.

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