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House of Representatives Passes Bill to Strengthen Mortgage Lending Consumer Protections

Legislation adopts federal guidelines to standardize licensing of loan originators

BOSTON – State Representative Peter Koutoujian joined his colleagues in the Massachusetts House of Representatives in passing legislation that will bring Massachusetts into compliance with a federal law to require all mortgage loan originators to be licensed through the Nationwide Mortgage Licensing System and Registry.  

In an effort to address the role of unprofessional and unscrupulous individuals offering risky home loans which contributed to the mortgage lending crisis, Congress passed and the President signed the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) which is designed to provide additional safeguards for consumers when working with their mortgage loan originators. 

Prior to the SAFE Act, states had varying standards of compliance for loan originators who offered mortgage loan services to consumers.  A mortgage loan originator accepts a residential mortgage loan application; or negotiates terms of a residential mortgage loan in exchange for compensation.  As a result, in some cases unqualified or unscrupulous individuals who lacked education and training provided confusing and false information to borrowers.

The SAFE Act will not only enact important consumer safeguards, but will establish a system of compliance, enforcement and continuing education for mortgage loan originators to ensure that the highest ethical standard be met.

“The SAFE Act is critical to ensuring that what contributed to the downturn in the housing market never happens again,” House Speaker Robert DeLeo said.  “Consumers are entitled to mortgage loan originators who have the stamp of approval from both the Commonwealth of Massachusetts and the federal government.”

“Millions of Americans lost their homes because of unprofessional -- and in some cases -- deceitful individuals looking to make a quick buck off of people’s dreams of homeownership,” said Representative Peter Koutoujian, House Chairman of the Joint Committee on Financial Services.  “This legislation, which is a national model, will help prevent consumers from suffering the heartache and loss that so many were victim to over the past few years.”

While states are charged with enacting licensing standards that meet the requirements of the SAFE Act, overall responsibility for interpretation and compliance rests with the Department of Housing and Urban Development.  The law requires that all states codify the legislation by July 31, 2009.

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