Interview with Jillayne Schlicke – Part 2: The SAFE Act

Earlier this month I shared an interview with Jillayne Schlicke.  Part One addressed LO’s getting ready for 2009.  The second half of my interview touches on The S.A.F.E. ACT which is a part of HR 3221.  The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 is a part of the massive HR 3221.  If you are planning on originating residential mortgage loans in 2009, which is just over a month away, I hope you’ve all ready checked out the NMLS (Nationwide Mortgage Licensing System) site to get your ducks in a row…be sure to have a large bottle of aspirin (or something stronger) handy.  The NMLS states that to assure your information is processed by January 1, 2009, you need to submit the required information to by December 1, 2008.   I just checked the process of my NMLS license and because I filed at 9pm on October 1, 2008, my registration is currently showing as “transition requested” and I’m directed to contact DFI.  DFI is telling me that I registered on October 2, 2008, and they’re working on applicants who applied by October 1, 2008.  I do hope my fellow Washington State Loan Originators were at least a day earlier than I with registering at NMLS to be in compliance with The SAFE Act.   Enough of my griping…my questions to Jillayne are bold and italic.

Which loan originators are impacted by the SAFE Act?

All LOs will be impacted by the SAFE Act, some more than others.  Looking up the chain of command, mortgage brokers and consumer loan lender manager/owners will also be impacted because this adds a layer of administration at the federal level that was previously not in place.  Today, brokers and owners can call their state licensing regulators and receive an answer to their licensing questions in a reasonable amount of time.  Networking with the federal regulators back in Washington DC may or may not offer broker/owners the same level of prompt service and hours of operation for those on the west coast.

Non-depository lenders and brokers must take a 20 hour prelicensing class and 8 hours of continuing education every year.  Some states already have these provisions in place and other states go above and beyond this level.  STates that have pre and post education requirements that are less than what’s required under the SAFE Act must raise their standards to the federal level.

The banks asked for and received exemption from the prelicensing and continuing education requirements mandated by the SAFE Act.  It’s quite possible that FDIC insured banks pointed out they already have ongoing training in place for their employees.

All LOs, no matter where they work, must become registered.

Even with the additional costs and time, this is a step in the right direction for our industry.  It’s time to support the framework that will lead to the eventual repair of consumer confidence in our lending system that must begin at some point.  This is a good place to start.

How will the SAFE Act impact your business?

I’ve been thinking about this for several months.  The 20 hour prelicensing mandate will have very little effect on educators at this time.  There are very few people interested in becoming loan originators right now because the income potential for a new licensee who knows relatively little about the complexities of the industry have dropped dramatically in 2008.

The 8 hours of required continuing education is only 2 more hours per year than Washington State’s 6 hour requirement.

Instead of higher revenues, the changes that will impact continuing education will be that of curriculum development and approval.  It appears right now that the states are going to defer to NMLS to approve our courses and to approve course providers, although this has not been confirmed.  Dealing at the state level is always preferred to dealing at the federal level because the states tend to be more responsive.  We can go to regular scheduled meetings and talk directly to our regulators, we can schedule meetings with them and drive to Olympia if needed, to voice concerns and receive direct answers.

I already see a difference.  When asking questons of the NMLS folks they pawn me off to the states.  The state says to call NMLS.  The whole system is suppose to be ready to go in 2009 yet at no point has the NMLS  communicated to us (course providers) what the guidelines will be for approving providers and courses.

The other problem educators face is the mandate on curriculum.  But that’s another topic for another interview.  🙂

The Housing Rescue Bill

Today President Bush signed a housing “rescue” bill HR 3221.  I’m really still absorbing all of this (I think it’s taking me a bit longer after my trip to Inman Connect).   Here are a few quick pointers:

The FHA risked base mortgage insurance pricing (which I’m in favor of) that was to be effective last week is now postponed until September 30, 2009.   FHA can now save some borrowers in trouble with their mortgage if their existing lender will forgive the underlying debt to 85% 90% of the current value of the home.   Gee…risked based MIP might be handy in these cases.

Also with FHA, Seller paid down payment assistance programs are will be gone and the minimum down payment for an FHA insured loan will be 3.5% (which is a very small increase) beginning October 1, 2008.

Jumbo FHA and Jumbo Conforming loan limits will be reduced from the current 125% of median home value to 115% of the median home value beginning January 1, 2009.   As I mentioned, your days of a loan amount of $567,500 are numbered.   The new conforming/FHA jumbo limit may be closer to $520,000.  

First time homebuyers (someone who has not had interested in a property for the past 3 years) are eligible to receive a tax credit…however, it’s really an interest free loan to be paid back over 15 years or from the proceeds when the home is sold (which ever comes first).  This is available only for homes purchased on or after April 9, 2008 and before July 1, 2009.  Income restrictions do apply.   For more information, check out this website.   

Last but not least (and I’m sure I’m missing stuff) Fannie and Freddie have a new regulator: The Federal Finance Housing Agency aka FHFA.   This from James B. Lockhart:

“Today President Bush signed the ‘Housing and Economic Recovery Act of 2008.’ I thank President Bush and Secretary Paulson for their leadership in making government sponsored enterprise (GSE) regulatory reform a reality.

The Act creates a world-class, empowered regulator, the Federal Housing Finance Agency (FHFA), with all the authorities necessary to oversee vital components of our country’s secondary mortgage markets — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — at a very challenging time.  As Director of the new agency I look forward to working with the combined Federal Housing Finance Board (FHFB), Office of Federal Housing Enterprise (OFHEO) and Housing and Urban Development (HUD) GSE Mission teams and with other regulators to ensure the safety and soundness of the 14 housing related GSEs and the stability of the nation’s housing finance system.

For more than two years as Director of OFHEO I have worked to help create FHFA so that this new GSE regulator has far greater authorities than its predecessors.  As Director of FHFA, I commit that we will use these authorities to ensure that the housing GSEs provide stability and liquidity to the mortgage market, support affordable housing and operate safely and soundly.”

Too much to write about in detail for one post…just wanted to throw you some bits.