The S.A.F.E. Mortgage Licensing Act & Regulation G

Instructor: Racquel Fulton

Racquel is a Real Estate Licensee and holds a New Jersey Title Insurance Producer Certification

The housing crash of 2007 caused the government to enact new laws to stimulate the economy and protect consumers. Learn how the Secure and Fair Mortgage Enforcement Licensing (S.A.F.E.) Act was designed to make obtaining a mortgage more secure.

Safer Mortgages

Mike worked as a mortgage loan originator until the mortgage crisis of 2007. A mortgage loan originator (MLO) is a person who works with borrowers to negotiate residential mortgage loans. Mike wants to return to his previous career; however, he will now have to obtain a license to do so. The Secure and Fair Enforcement Mortgage Licensing Act, known as the S.A.F.E. Act, was enacted by Congress on July 30, 2008. The S.A.F.E. Act was created to protect consumers from unscrupulous loan originators and risky loan products.

In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act eliminated, upgraded and created several laws and regulations affecting the U.S. financial sector. Under Dodd-Frank, the authority to enforce the S.A.F.E. Act was given to the Consumer Financial Protection Bureau, which instituted the S.A.F.E. Act as Regulation G.

Regulation G requires that every U.S. state establish a system to issue licenses to loan originators. To help states simplify the process of enacting the S.A.F.E. Act and maintain a registry of each license that is issued, the Conference of State Bank Supervisors and American Association of Residential Mortgage Regulators created the Nationwide Mortgage Licensing System and Registry (NMLS). States are required to utilize the nationwide registry to process license applications.

Becoming a Mortgage Loan Originator

Mike will need to complete the following steps to obtain a mortgage loan originator license:

Take a Pre-Licensing Course

Pre-Licensing is an approved course of study designed to teach the fundamentals of a subject. Students also learn what their legal responsibilities will be once they become licensed. The course must contain 20 hours of instruction.

Pass an Examination

After completing a pre-licensing course, Mike must pass a test with a minimum score of 75%.

Background Check

Mortgage loan originators must not possess any felony convictions. Mike will also have to submit his fingerprints to the FBI to pass a criminal background check.

Credit Check

Mike's personal credit history will be reviewed to determine that his personal finances do not include delinquencies, bankruptcies, liens and judgments.


Originators are required to obtain a surety bond. This type of bond is issued by an insurance company on behalf of the state that the originator is licensed in. If a consumer suffers a financial or other loss due to the fault of an originator, the state will use the bond to pay the consumer. Some states require that originators purchase bonds that cover up to the dollar amount of loans that they will originate.

Maintaining the License

If Mike's application is approved, a unique identifier will be issued. A mortgage loan originator's license is issued for a period of one year. The license can be renewed by completing an approved continuing education course and paying a renewal fee.

Exceptions to the S.A.F.E. Act

Mike plans to work for a bank that only issues residential mortgage loans. The law classifies this type of bank as a non-depository institution, which is a federally regulated bank that does not hold checking and savings accounts.

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