Loophole in the SAFE Act

testing How safe are you really with the SAFE Act?

The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act of 2008) mandates nationwide licensing and registration for residential mortgage loan originators. The law was enacted with the idea of making borrowers safer from loan fraud, fee scams, lies, and hidden tricks.

While that sounds good, there is a loophole you might not be aware of (but should).

Namely, the SAFE Act supposedly ensures that all loan salespeople, brokers or bankers, receive an adequate base of training in order to get licensed. However, only non-supervised institutions have to pass the NMLS testing process. This means that bank employees are except from this training and testing.

Yes, you got that right! Loan officers at Bank of America, Wells Fargo, Chase, and other registered banks only have to register–not pass a test.

Listen to what one insider says:

I have files of cases of loan originators who failed the test and ended up working for a bank.

Here’s what another insider said:

For the past year I have been helping loan officers prepare to pass the federal and state test. The potential mortgage loan originators are new, and a large percentage are from the banking side of the industry. The 80 loan officers I have worked with shows me that the loan officer coming from the banking side are not understanding of the laws and are having a very difficult time passing the test. In some cases, it is like deer in the headlights.

This is one of the reasons why I say you do not choose your lender according to the institution. You are not assured of working with a higher level of expertise with a banker than you are with a broker. More often, it’s the other way around. It is truly an individual consideration. You must not execute blind trust in a loan officer simply because he or she works for a Big Bank.

Please don’t misunderstand. I know expert, experienced, ethical loan officers who work at Chase and Wells Fargo. But I consider them to be above the norm: the Mortgage Stars. I am not against getting a loan at a bank, but I am against having more faith in a bank than in a mortgage broker, because that is not the reality.

At present time, the law favors the bank employees with an advantage, so when you’re loan shopping, keep that in mind. Choose your lender by the individual loan officer, not by the type of lending institution or by the name on the building.

Talk About a Match Made in Hell!

Bank of America has agreed to pay $2.43 Billion to investors as compensation for its decision to match-up with Merill Lynch and its toxic mortgage loans.

I remember when account executives representing subprime loans came calling on our office at the mortgage brokerage. They invited us to submit loans that couldn’t get approved anywhere else. You know, those “no income, no problem” loans.

There was even a loan called NINA. It stood for No Income No Assets. And no questions were asked. The borrower signed what was basically a blank loan application.

Beats me why squeaky-clean Bank of America thought it was a good idea to buy high-risk loans. Oh wait, I think I know. BOA was hungry for bigger profits, and since these loans carried higher interest rates, the insatiable desire for more money was fed.

Now, without admitting guilt (of course!), Bank of America will dole out more than two billion dollars to its investors who were duped into thinking the match between the Big Bank and Merill Lynch would bring them increased profits.