Tuesday, February 9, 2010

SAFE ACT Threatens Foreclosure Counseling

UPDATE: Comment period extended until March 5th, 2010.

The federal Secure and Fair Enforcement for Mortgage Licensing Act of 2009 (SAFE Act) compels states to adopt a uniform process of licensing and reporting for state-licensed loan originators. Its intent is to ensure that residential mortgage loan originators act in the best interest of consumers.

Based on the definitions in the legislation and the accompanying HUD Federal Register, foreclosure prevention counselors - like those in the Center's network - likely will be considered loan originators.

Including Foreclosure Counselors in the legislation will necessitate extreme costs, irrelevant education and unreasonable redundancies, all of which could jeopardize the existence of free, unbiased, trusted, effective foreclosure prevention counseling services at a time when they are most needed.

The Center recently submitted the following comments to HUD and encourages others to do so as well:

Third party loan modification specialists should NOT be covered by the licensing requirements of the SAFE Act; specifically, those housing counselors working for nonprofit and government based organizations to provide much needed foreclosure prevention assistance at no charge to consumers.
While a housing counselor may take some information from consumers to share with lenders in negotiating a loan modification, the counselor is not using that information to underwrite a loan, but rather to assist homeowners in evaluating their position and/or re-negotiating the terms of the loan with the lender. In addition, the statutes imply that the drafters' intent was to include individuals who are in a position to have some level of "adversity" vis a vis the borrower. This is clearly not the case for foreclosure prevention counselors. Furthermore, assistance with loan modifications is a relatively small part of the counselors' job. The preponderance of their time is spent on other activities: explaining the foreclosure process, review of existing mortgage documents, budget counseling, and reviewing and negotiating loss mitigation options other than loan modification. 
I urge you to exempt foreclosure prevention counselors or allow individual states the power to exempt foreclosure prevention counselors.

Please consider submitting these, or other comments to HUD as well.

All comments are due February 16th. March 5th.   Submission instructions appear in the proposed rule: http://www.hud.gov/offices/hsg/ramh/safe/safeprule.pdf

For additional information about the SAFE Act, visit the Center's website, here.

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