All those mortgages that were granted to homeowners with questionable credit and were a driving force behind the Great Recession were overseen by mortgage loan originators and mortgage brokers. Most of these individuals were on the up and up, but a few were crooks. They were out to make as much as they could by seducing consumers into taking out loans that they couldn’t afford.
It is this later category that led Congress to pass the Secure and Fair Enforcement of Mortgage Licensing Act of 2008. This law is designed to protect the public from loan officers who are operating without a license or who are not “in good standing” with their state licensing board. Most states went on to pass their own local version of the SAFE Act to create the infrastructure required to support the federal law. Many also took this opportunity to strengthen their state requirements to exceed that of the federal government.
Loan Officer Training has always been a component of most state licensing. The new system just instituted stricter requirements for content, especially regarding knowledge of federal mortgage law and fair lending practices. Training programs will also include a significant component on state mortgage laws as well as ethics and other mortgage topics.
By creating a national registry of those brokers and loan originators who have valid and active licenses, it makes it much easier for consumers to check that the loan officers they are dealing with are licensed and in good standing. It also makes it easier for state and federal authorities to find those who are operating illegally and take steps against them.