Applicability of S.A.F.E. Act Temporary Authorization to Banks

Issue/Inquiry

A depository institution has mortgage loan originators who are planning to leave the Bank to join a non-depository institution in the same state. Will the new S.A.F.E. Act provisions concerning temporary authority apply to them?

Response Summary

Under amendments of the Economic Growth Act to the S.A.F.E. Act, which went into effect on November 24, 2019, a mortgage loan originator moving from a depository institution to a non-depository institution will have temporary authority for up to 120 days to act as a mortgage loan originator, provided certain conditions are met.

Response Detail

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“Economic Growth Act”) was signed into law. Section 106 of the Economic Growth Act amended the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“S.A.F.E. Act”) to give a registered mortgage loan originator moving from a depository institution to a non-depository institution, or a state-licensed lender in one state moving a state-licensed lender in another state, the temporary authority to act as a loan originator without having first been licensed by the state.

In order to obtain this temporary authority, certain conditions must be met, including that the mortgage loan originator:

• Has not had an application for a loan originator license denied
• Has not had a loan originator license revoked or suspended
• Has not been subject to, or served with, a cease and desist order in any governmental jurisdiction or under the S.A.F.E. Act
• Has not been convicted of a misdemeanor or felony that would preclude licensure under the law of the applicable state
• Has submitted a license application in the applicable state. 12 USC 5117(b)(1)

The temporary authority will begin on the day that the mortgage loan originator applies for a state license and registration and will end on the earliest of the date:

• On which the state denies the application or issues a notice of intent to deny;
• On which the state grants a state license; or
• That is 120 days after the date the application was submitted. 12 USC 5117(b)(2)

The effective date of these amendments is 18 months after the enactment of the Economic Growth Act, which would be November 24, 2019.

In this scenario, the S.A.F.E. Act amendments would apply to mortgage loan originators leaving the Bank to join state-licensed non-depository lenders, and they would have temporary authority to continue acting as mortgage loan originators at the new lending institution, assuming that the conditions for such authority are satisfied. The temporary authority requirements would not apply to mortgage loan originators working for the Bank or joining it, since the Bank is a depository institution, to which the temporary authority requirements are not applicable.

This response is for informational purposes only and is not intended for legal guidance.

This entry was posted on Monday, December 16th, 2019 at 6:00 am.