The mission of the CFPB, The Consumer Financial Protection Bureau is to make markets for consumer financial products and services work for Americans. It is focused on one goal: watching out for American consumers in the market for consumer financial products and services. This includes ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families by making sure prices are clear up front, risks are visible, and that nothing is concealed in fine print. A working market allows consumers to make direct comparisons among products and prohibits providers from using unfair, deceptive, or abusive practices.
In protecting consumers by carrying out federal consumer financial laws, the CFPB:
- writes, rules, supervises companies, and enforces federal consumer financial protection laws;
- restricts unfair, deceptive, or abusive acts or practices;
- takes consumer complaints;
- promotes financial education;
- researches consumer behavior;
- monitors financial markets for new risks to consumers; and
- enforces laws that outlaw discrimination and other unfair treatment in consumer finance.
Within the Housing and Economic Recovery Act of 2008, created to address the housing crisis of the early 2000s, is Title V, the Secure and Fair Enforcement for Mortgage Licensing Act, or S.A.F.E. Mortgage Licensing Act (the SAFE Act). This law was enacted because abuses and events occurring in the mortgage lending business throughout the country led Congress to believe there was a need to:
- increase uniformity in licensing and registration requirements among the states.
- reduce the regulatory burden of states.
- enhance consumer protection.
- reduce fraud.
Federal before 2008 didn’t require licensing for loan originators. Some states tool initiative to license those who were taking a mortgage applications and negotating loan terms. There were few differences and some similarities between states. There were different licensing standards in different states. Some states are still of of the UST. After mortgage market fall apart in 2007, Congress took care of it by setting up new laws:
- HERA – Housing and Economic Recovery Act in 2009 for subprime lending. Regulation for loan originators can be found in HERA’s Title V, the SAFE Act.
- CFPB – Consumer Financial Protection Bureau was created in 2010 when Wall Street Reform and Consumer Protection Act was passed.
From July 21st of 2011 CFPB is responsible for establishing a loan originator system in states which have no system in place. Before that date – HUD (Department of Housing and Urban Development) was responsible for it.
SAFE Act directs states to adopt minimum uniform standards for the licensing. It forces to participate all states in NMLS (national Mortgage Licensing System and Registry) database. It must include
- loan originator licensing requirements
- effective supervision of those whoa are licensed
- Enforcement of the law program
SAFE Act Standards For MLO – Loan Offciers/Mortgage Brokers
- Registration in NMLS.
- Preparing rules and regulation and adopting procedures for the licensing of loan originators.
- Conducting background checks for (criminal history through fingerprint and other databases, civil or administrative records, credit history check or any additional information as deemed necessary by the NMLS.