S.A.F.E. Mortgage Licensing Act

     The Secure and Fair Enforcement (S.A.F.E.) for a nationwide mortgage licensing system and registery is one of the provisions of this housing legislation.  It provides for licensing and supervision and a nationwide database of all loan originators.   The purpose is to enhance consumer protection.

    Publically adjudicated disciplinary and enforcement actions are specified for violations and mortgage fraud with a maximum penalty of $25,000.  Additionally, loan originators will be required to be fingerprinted, provide history and experience, a credit report, and any admission of civil or criminal findings to the Conference of State Banking Supervisors and the American Association of Residential Mortgage Regulators.  A surety bond is also required.    Pre licensing classes will be required as well as continuing education classes including classes in ethics.      

   A study and report concerning defaults and foreclosrues will be prepared to determine the “root causes of default and foreclosure of home loans” using empirical evidence.  This report will be presented to Congress within one year. 

    The FHA Modernization Act of 2008, also known as Building American Homeownership Act of 2008 prohibits seller funded down payments as has been permitted in the past.  At least 3.5% of the appraised value of the house must be a down payment, which can be borrowed from family members but any lien against the property must be subordinate to the first mortgage.

   The Act prohibits any third party from putting money down and then be reimbursed.  This targets programs such as Ameridream and Nehemiah.  The borrower did not have to put any money down on a property.  The down payment was paid for by inflating the price of the house about 4% .  Usually 3% was used for down payment and 1% was the income earned by the program.

    Other types of loans such as 203 K loans, or loans which provide funds for rehabiitation of properties, the insurance of condos , the Hawaiian Home Lands and Indian Reservations  and Home Equity Conversion Mortgages, also known as Reverse Mortgages, and Energy Efficient Mortgage Programs all have specific guidelines within the legislaton.

   Provision is made for alternative methods of credit ratings for people who have insufficient credit histories by using rent history, payment of utilities and insurance payment history.

    A pilot program for not more than 3,000 home buyers annually will be enacted by the Department of Housing and Urban Development for pre purchase home ownership counseling.   This will target first time home buyers with loan to value ratios of 97% to 98.5%.  Counseling can be via telephone, in person counseling, web based counseling, counseling classes or any other method deemed appropriate by the Secretary of HUD.   HUD will follow the progression of these homebuyers and attempt to determine if pre purchase counseling impacts the numbers of defaults or foreclosures.

Next:  Manufactured Housing and Mortgage Foreclosure Protection for Servicemen

Resources:  http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221eas2.pdf

http://www.ameridream.org/

http://www.nehemiahcorp.org/

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