The Consumer Financial Protection Bureau (CFPB) said federal law permits a level of reciprocity between the states for granting loan originator licenses. In an April 19 bulletin, the CFPB explained that the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act and its implementing regulations allows states to provide a transitional license to a licensed loan originator who holds a valid license from another state.
The CFPB received authority over the SAFE Act and Regulation H from the Department of Housing and Urban Development under the Dodd-Frank Act. The CFPB’s bulletin explained that several state regulators have asked the new agency whether they may rely on another state’s licensee in considering an application for a transitional license.
Regulation H provides that, for an individual to be eligible for a loan originator license, “a state must require and find that an individual has met certain minimum standards. The preamble to the final SAFE Act rule states that the rule “does not limit the extent to which a state may take into consideration or rely upon the finding made by another state in determining whether an individual is eligible under its own laws.”
The bureau noted, however, that to receive a transitional loan originator license from the second state, an individual must meet either a net worth or surety bond requirement, or pay into a state fund as required by the second state’s loan originator supervisory authority.
The CFPB also stated that its regulations do not allow states to provide for transitional licensing for registered but unlicensed loan originators who leave banks to act as loan originators while pursuing a state license. The acknowledged that this could create impediments to job changes, an promised to work with the states, industry and the National Mortgage Licensing System and Registry to minimize these impediments.