By Adam Thorpe, President and Chief Operating Officer at Castle & Cooke Mortgage, LLC

It’s a win-win situation for loan officer recruitment. Mortgage loan officers (MLOs) at banks want more product flexibility and higher compensation, while non-depository mortgage companies want full access to highly qualified talent within the industry. The SAFE Transitional License Act of 2015 provides a simple solution to eliminate current licensing barriers (albeit temporarily), allowing MLOs and non-depository mortgage companies to meet both demands.

Currently, MLOs transitioning from banks to non-bank entities may be required to sit idle for weeks and in some cases for months while they work to meet the SAFE Act’s licensing requirements. The result is recruitment deals falling through and loan officers unable to advance their careers due to regulatory constraints.

The mortgage industry has its eyes on the new bill, which could provide some regulatory relief for those MLOs looking to make the switch to an independent mortgage company. Introduced by Congressman Steve Stivers, R-Ohio, the SAFE Transitional License Act of 2015 would authorize bank MLOs to work at a non-bank lenders for 120 days while they complete the necessary requirements to obtain a state license.

How the SAFE Mortgage Licensing Act of 2008 affected the industry

When the SAFE Mortgage Licensing Act of 2008 was passed nearly seven years ago, it was intended to bring greater regulation uniformity between loan officer employees of banks and independent mortgage companies.

Instead, it created an unlevel playing field for independent mortgage companies by giving an advantage to banks in recruiting mortgage loan officers as they can avoid the rigors of testing and still be hired. According to the Mortgage Bankers Association, only about two-thirds of MLOs pass the SAFE Act test on the first try.

The law requires loan officers employed at federally insured depositories to only be registered in the Nationwide Mortgage Licensing System and Registry (NMLS). Meanwhile, mortgage originators at non-bank lenders must be licensed, which includes pre-licensing and annual continuing education requirements, passage of a comprehensive test in addition to criminal and financial background reviews conducted by state regulators.

While loan officers at banks are knowledgeable, they are not required to go through the same extensive trainings as those at non-bank entities. Additionally, MLO employees at FDIC-regulated institutions typically do not have access to the bevy of loan products that independent mortgage companies offer and, in turn, may not be able to serve all of the clients’ needs.

The proposed SAFE Transitional License Act of 2015 addresses a key component of the SAFE Act by providing temporary licensing to loan originators transitioning between employers and across state lines. Additionally, it in no way weakens the consumer protections of the SAFE ACT and provides independent mortgage companies with full access to highly qualified talent.

In the complex regulatory environment in which we conduct business, the testing and education requirements are valuable. The goal is not to remove these requirements or the other state-specific requirements, but to ease the transition for MLOs from a bank employer to a non-depository employer.

More Bank MLOs Migrating to Independent Mortgage Companies

The SAFE Transitional License Act of 2015 comes at an opportune time in the mortgage industry as more and more loan officer employees at banks are transitioning to independent mortgage companies in favor of more product flexibility and better compensation.

Generally, banks have a stricter loan process, increased credit overlays and a smaller product offering, which could prove to be problematic for a MLO seeking financing for a borrower with an unusual circumstance, like being self-employed, or if the loan needs to be executed in a timely manner. Typically, larger banks have more established brands that help their loan officers garner business.

While banks are more focused on their brands, independent mortgage companies focus on investing in their loan officers. These companies generally offer an extensive loan platform, higher compensation and more individualized support to help their MLOs build their business in their own ways. For example, Castle & Cooke Mortgage provides advanced technology solutions, personalized marketing support, loan officer and administrative assistants and in-house underwriting and funding to help its loan officers close more loans.

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