Q: What is the Secure and Fair Enforcement for Mortgage Licensing Act of 2008?
A: On July 30, 2008, President Bush signed into law the Housing & Economic Recovery Act which includes the Secure & Fair Enforcement for Mortgage Licensing Act (“ SAFE Act”). The SAFE Act requires all states to pass mortgage licensing laws and regulations that meet or exceed certain national standards. If a state fails to do so, the United States Department of Housing and Urban Affairs is required to establish and implement a licensing regime for the state. During the 2009 legislative session, Texas lawmakers passed House Bill 10, the Texas Secure & Fair Enforcement for Mortgage Licensing Act (“Texas SAFE Act ”) to meet the federal mandate.
Q: What is the Nationwide Mortgage Licensing System?
A: The SAFE Act encourages the states, through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to development and implement a nationwide mortgage licensing system and registry (“ NMLS”) for the residential mortgage industry. Quite simply, NMLS is a secure online mortgage licensing database that provides a centralized system where companies and individuals may transition, apply for, sponsor, amend, renew, or surrender licenses in jurisdictions where they conduct business. NMLS has created a Resource Center that contains a number of helpful tutorials, guidebooks, navigational guides and additional tools concerning education, testing, and background check requirements as well as guides for using the system. The Texas Department of Savings and Mortgage Lending plans to start accepting applications through the NMLS on April 2, 2010.
Q: Where may I find information on FannieMae's requirement to provide NMLS unique identifier numbers on all mortgage loans delivered to FannieMae?
A: Fannie Mae has provided FAQs to answer questions about the new loan originator and appraiser identifiers that are required to be provided for all mortgage loans delivered with applications dated on or after July 1, 2010.
Q: Who is required to be licensed under the Texas SAFE Act?
A: The Texas SAFE Act requires individuals acting as residential mortgage loan originators to be licensed. A residential mortgage loan originator is defined as an individual who for compensation or gain, or in expectation of compensation or gain, takes a residential mortgage loan application or offers or negotiates the terms of a residential mortgage loan. The Texas SAFE Act also requires individuals who provide clerical or support duties as independent contractor loan processors or underwriters to be licensed. The requirements for licensure cover a broad range of loan origination and lending activities. In some cases, individuals previously exempt from licensure may need to be licensed under the Texas SAFE Act. If you are uncertain whether or not you need to be licensed, please contact the department, or seek additional legal assistance. Unlicensed residential mortgage loan origination activity may subject you to sanctions, administrative penalties, and even criminal charges
Q: Do I need a Texas SML license if I am licensed with the Texas Office of Consumer Credit Commissioner (OCCC)?
A: A regulated loan originator license issued by Texas OCCC under Finance Code Chapter 342 authorizes residential mortgage loan activity for 2nd lien mortgages with interest rates above 10%. If you are brokering or lending 1st lien mortgage loan activity, regardless of the interest amount, you will need to be licensed by Texas SML as required under Finance Code Chapters 156 and 157. A holder of a Texas SML license is also authorized to broker or lend for 2nd lien mortgage activity.
Q: Do I need a Texas OCCC license if I am licensed by Texas SML?
A: A regulated loan originator license issued by Texas OCCC under Finance Code Chapter 342 authorizes residential mortgage loan activity for 2nd lien mortgages with interest rates above 10%. If you are brokering or lending any 1st lien activity, then a licensed issued by Texas SML is required under Finance Code Chapters 156 and 157. A holder of a Texas SML license is also authorized to broker or lend for 2nd lien mortgage activity. You will need to review Finance Code Chapter 342 and/or discuss your requirements with Texas OCCC to determine if you are required to obtain a regulated loan license by them if you are also originating any 2nd lien activity.
Q: What if there is no structure on the property but the intent is for a house to be built?
A: The Texas SAFE Act defines residential real estate as “real property located in this state on which a dwelling is constructed or intended to be constructed.” So, even if there is no dwelling on the property at the time the mortgage loan is originated, if the intent is for there to be a dwelling, the residential mortgage loan originator must be licensed.
Q: Do individuals who are employees of credit union subsidiaries and engage in residential mortgage lending have to obtain a license from TDSML?
A: The SAFE Act treats employees of depository institution subsidiaries the same as employees of the depository institution only if the subsidiary is owned by the depository institution and regulated by a federal banking agency. In the case of credit union subsidiaries, the National Credit Union Administration (NCUA) has issued an opinion letter stating that it does not have direct oversight or enforcement authority over these entities. Therefore, individuals employed by a credit union subsidiary that engages in residential loan origination activities, whether the subsidiary is owned by a state or a federal credit union, will need to be licensed in accordance with Texas requirements.
Q: Does a company that makes a construction loan to a builder for a spec. home need to be licensed? What about a construction loan made to an individual to build their own residence?
A: The Texas SAFE Act defines a residential mortgage loan as a loan primarily for personal, family, or household use. The loan made to the builder is for business purposes, not for personal, family, or household use, and no license would be required. The loan made to the individual to build their own residence would be considered for personal, family, or household use, and a license would be required.
Q: I am an out-of-state lender or broker and I would like to make just one or two loans in Texas. Do I need a license? If I am licensed in my home state, does Texas have reciprocity?
A: The Texas SAFE Act does not allow for an occasional loan without a license. Texas also does not have reciprocity with other states. Therefore, to originate any Texas residential mortgage loans, you must be licensed in Texas.
Q: Does a loan processor or underwriter need to be licensed under SAFE? If yes, what kind of license do I need?
A: If the loan processor or underwriter is a W-2 employee of a mortgage company they do not need to be licensed because they are considered by the Department to be under the direction and supervision of a state licensed residential loan originator or registered loan originator. If the loan processor or underwriter is not a W-2 employee of a mortgage company the Department considers them to be an independent contractor and they do need a license because they, by definition, do not perform their duties at the direction of and under the supervision of a state licensed residential loan originator or registered loan originator. The Department will offer an Independent Contractor Loan Processor/Underwriter License. You and your company would each need to apply for and receive a license. The license would allow you to perform loan processing and underwriting functions, but would not allow you to perform in the capacity of a residential mortgage loan originator. Alternately, you may license as a residential mortgage loan originator. Your license would need to be sponsored by your affiliated mortgage company. With the residential mortgage loan originator license, you would be able to perform loan processing and underwriting functions and perform in the capacity of a residential mortgage loan originator.
Q: I am a “hard-money” lender and all of the loans I make are to investors for the purchase and rehab of single family residences. After the rehab is completed, the investors typically either sell the property or hold on to the property as a rental. Do I need a residential mortgage loan originator license?
A: Not in this specific scenario. Loans made to purchase and rehab properties with the intent to resell and loans to acquire rental properties are for business purposes, not personal, family or household use, and are not subject to licensure under the Texas SAFE Act. If you make any loans to any individual to purchase their own residence, the loan would be considered for personal, family, or household use and a license would be required.
Q: I'm a private lender and I occasionally lend to an individual who will use the funds to purchase a primary residence. All contacts and communications with the applicant are conducted by a licensed residential mortgage loan originator. The licensed originator takes the loan application, provides all disclosures to the applicant and negotiates the loan terms with the applicant. Am I, as the lender, required to be licensed in this scenario?
A: As long as you do not engage in taking the loan application from the consumer or negotiating loan terms with the consumer then you do not need to be licensed under the Texas SAFE Act.
Q: I’m a consultant who assists homeowners in negotiating with their lenders to obtain loan modifications. Do I need to be licensed by the Department?
A: Yes, the Texas SAFE Act requires an individual to be licensed prior to taking a residential mortgage loan application or offering or negotiating the terms of a residential mortgage loan. Additionally, the Mortgage Broker License Act clarifies that residential mortgage loans include, “new loans and renewals, extensions, modifications, and rearrangements”.
Q: I’m currently a W-2 employee for a mortgage banker registered in Texas. Am I required to be licensed under the SAFE Act?
A: Yes, individuals employed by registered mortgage bankers who conduct residential mortgage loan origination activities must be individually licensed. Please discuss these requirements with your employer and review the Department’s Transition Plan for important dates and details.
Q: If I am licensed as a residential mortgage loan originator can I function as a loan processor or underwriter?
A: Yes, the holder of a residential mortgage loan originator license can function as a loan processor or underwriter.
Q: Do I need to have a physical office space in Texas before I can get licensed?
A: Mortgage Companies are required to maintain at least one physical office within the state of Texas as a condition of licensure. Physical office is defined as an actual office where the business of mortgage lending and/or the business of taking or soliciting Residential Mortgage Loan applications is conducted. It must have a street address. A post office box or other similar designation will not suffice. It must be accessible to the general public as a place of business and must hold itself open on a regular basis during posted hours. During the hours in which the physical office is open, at least one staff member must be present to assist customers. Please be aware that companies qualified as Mortgage Bankers and registered with the Department are not required to maintain a physical office within the state of Texas.
Q: I am already licensed as a loan officer in the state of Texas. What do I need to do?
A: Individuals and companies currently licensed by the Texas Department of Savings and Mortgage Lending will need to transition their information onto NMLS. We recommend you review How to Get Started on the NMLS and the SML Transition Announcement Letter for information on how to establish a NMLS account, obtain a unique identifier, and determine testing, education, and professional requirements applicable to your situation.
Q: What steps can I take now on NMLS?
A: It is important that you coordinate use of the NMLS with your employer, but both companies and individuals can establish NMLS user accounts at any time. By establishing an account, you will receive a NMLS user name, a password, and a unique identifier. You will need your user name and password to log into NMLS and complete application forms. You may begin completing these forms prior to April 2, 2010, but you will not be able to submit them to the Texas Department of Savings and Mortgage Lending until that date. Note: Mortgage Companies and Mortgage Company Residential Mortgage Loan Originators will not be able to submit applications to the Department before July 1, 2010.
Q: I can’t log into NMLS with my user name or password. What am I doing wrong?
A: The initial password e-mailed by NMLS to a new user typically contains a series of letters, numbers, and/or symbols. One of the most common mistakes made by new users is to incorrectly type in the password upon login. We recommend copying the password from the e-mail and pasting it when you attempt to log onto the system. If you are still unable to log in, you may wish to contact the NMLS Call Center at (240) 386-4444. Representatives at the NMLS Call Center are trained to assist you in navigating and using the NMLS website.
Q: I’ve been licensed as a loan officer for several years now. I’m concerned that my credit is going to prevent me from keeping my license. What kind of credit problems could disqualify someone?
A: While the Department has not established set criteria for approving or denying license applications for credit reasons, a history of derogatory credit will likely prevent an individual from licensing. Isolated credit blemishes, a foreclosure, or even a bankruptcy may not necessarily lead to a license denial. The Department will consider an applicant’s overall handling of credit accounts in making a determination. In some case, individuals currently licensed by the Department may not be eligible for continued licensure, but the Department anticipates that credit related license denials will impact only a small number of license applicants. See the Notice from the Commissioner regarding credit reporting processing for additional details. Please be aware that the Department is unable to accommodate requests to make a pre-determination of one’s credit history.
Q: I submitted fingerprint cards to the Department and passed the criminal background check a few years ago when I applied for my loan officer license. Do I have to submit fingerprints again?
A: All individuals acting as residential mortgage loan originators must authorize a fingerprint background check through NMLS for the purpose of conducting a national criminal history background check through the Federal Bureau of Investigation. This requirement applies to all individuals, even if you are currently licensed in the state and if you have previously submitted fingerprints and cleared a background check. Once a criminal background report is received, the Department will conduct a review of the report. The Texas SAFE Act prohibits the licensure of individuals who have 1) been convicted of, pled guilty or no contest to, a felony in a domestic, foreign, or military court during the seven-year period preceding the date of the application; or 2) at any time preceding the date of the application, been convicted of, pled guilty or no contest to, a felony in a domestic, foreign, or military court involving fraud, dishonesty, breach of trust, or money laundering.
Q: I don’t understand the pre-license education requirements.
A: The Texas SAFE Act requires all residential mortgage loan originators to complete at least 20 hours of NMLS approved pre-license education. Individuals currently licensed by the Department who have already completed 20 or more hours of Texas SML approved education at the time they transition to the NMLS may be certified by the Department as having fulfilled the pre-licensure requirements depending on the information that is available on their Texas SML licensing record. Check here to determine if you may be eligible to have your education certified.
Q: I have a current mortgage broker license, but I don’t think I can meet the new requirements. Is there any way for me to get grandfathered in?
A: No, all residential mortgage loan originators must meet the Texas SAFE Act requirements.
Q: Can you provide any guidance regarding the Texas SAFE Act exemption for licensed attorneys?
A: The Texas SAFE Act provides an exemption for licensed attorneys under very narrowly defined circumstances. A licensed attorney may negotiate the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client without being licensed as a residential mortgage loan originator. Some examples where the department may consider the loan negotiations as an ancillary matter include:
Q: If an owner–financing seller has an exemption from the Texas SAFE Act, does it automatically mean that they are exempt from other state and federal laws and regulations?
A: No, if an owner-financing seller qualifies for a licensing exemption from the Texas SAFE Act, it does not automatically exempt them from compliance with other applicable state and federal laws and regulations.
Q: Is the Department's interpretation of the five-transaction exemption under Section 156.202(a-1)(7) of the Finance Code is subject to aggregation for entities that share a 25% ownership. This interpretation results in a single five-transaction exemption for the combined entity group, rather than five exempt transactions per entity?
A: Yes, the Department’s position is that the exemption is subject to aggregation for entities that share a 25% ownership which results in a single 5 transaction exemption for the combined entity group rather than five exempt transactions per entity. The 25% threshold is based on federal depository guidance used by the FDIC to establish non-rebuttable presumption of control.
Q: An entity seller can only act through individual representatives. Assuming that an entity owner-financing seller otherwise qualifies for an exemption under Section 156.202(a)(3), does that exemption allow an officer or employee of that entity to act on the entity's behalf in taking an application and negotiating the terms of the owner-financing loan without being licensed?
A: Yes, assuming that the entity qualifies for the exemption.
Q: May realtors/sales people hand out pre-printed seller financing terms without being licensed as a RMLO?
A: Yes, assuming that they do not discuss any of the information on the pre-printed sheet and refer the purchaser to a licensed RMLO for questions.
Q: May an individual or entity owner finance more than five properties within a 12 month period without being licensed if they use a licensed RMLO to facilitate the transaction?
A: Yes, assuming that they only act as the lender in the transaction and do not take an application or negotiate rate and terms with potential borrowers.