SAFE Act Revisions: Transitional Authority

The federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008 created two parallel but asymmetrical regulatory regimes for mortgage loan originators (MLOs) that have resulted in uneven consumer protections and an un-level playing field for MLOs. MBA supports the creation of a transitional authority to originate loans, which would promote a fair and competitive labor market by eliminating barriers to the ability of non-bank lenders (especially small lenders) to compete for talented MLOs. It would also allow MLOs to more easily move to the employer that offers them the best chance to succeed.


  • The SAFE Act requires MLOs employed by non-bank lenders to be licensed, which includes pre-licensing and annual continuing education requirements, passage of a comprehensive test, and criminal and financial background reviews conducted by state regulators. These MLOs are also registered in the Nationwide Mortgage Licensing System and Registry (NMLS).
  • By contrast, MLOs employed by federally insured depositories or their affiliates must be registered in the NMLS, but they do not have to pass a test or meet standardized education requirements.
  • Currently, a bank-employed MLO seeking to move to a non-bank lender must cease all sales activity in order to complete pre-licensing education, take the test, undergo a background check and achieve licensure. This requires the MLO to forego weeks or months of income and to cease contacts with prospective borrowers and referral sources.
  • To make a more competitive market for quality MLOs, MBA supports the adoption of a transitional authority to originate loans, wherein experienced bank MLOs moving from a depository institution to a non-bank, or non-bank MLOs moving to a different state, can continue to originate in the new jurisdiction for a temporary period of time while simultaneously working toward their new state license.
  • H.R. 2121, the SAFE Transitional Licensing Act, provides for such a transitional authority period for bank MLOs moving to a non-bank lender, or MLOs already working for a non-bank lender seeking licensure in another state (or states). The language of the bill was developed in consultation with the Conference of State Bank Supervisors to incorporate important consumer protections.
  • On March 2, 2016, the bill was approved by the House Financial Services Committee by a unanimous 56-0 vote and subsequently passed the House by voice vote on May 23, 2016.
  • In the Senate, language to create a transitional MLO license was included in S. 1484, the comprehensive regulatory relief package that passed the Senate Banking Committee in May 2015. Similar language was also included in the Democrats' substitute regulatory relief proposal.


  • State licensing of MLOs can be a slow and burdensome process, which creates a disincentive for MLOs already employed at bank and bank affiliated lenders from moving to non-bank lenders. Under the current process, an MLO making the move from bank to non-bank is required to sacrifice their income for several weeks or months. Alternatively, the lender is required to pay the MLO even though they cannot originate loans or meet with prospective borrowers or referral sources. Neither option is tenable or appropriate for a competitive labor market. 
  • Enactment of H.R. 2121 will promote a fair and competitive labor market by eliminating barriers to:
    • The ability of non-bank lenders, especially small lenders, to compete for talented MLOs.
    • The ability for MLOs to work for any employer-bank or non-bank-that offers them the best chance to succeed in their field. 
  • By breaking down artificial employment barriers, H.R. 2121 will result in more MLOs completing pre-licensing education and taking a standardized test, leading to a better-qualified MLO workforce, a larger number of test-takers, and therefore greater compliance with lending laws. 

MBA's Position / Next Steps:

  • MBA strongly supports Senate passage of H.R. 2121.
  • States should provide for speedy licensure of qualified MLOs moving from a bank or bank affiliate lender to a non-bank lender and those licensed MLOs seeking licensure in another state.
  • While the adoption of a transitional authority is an important first step, MBA ultimately believes that all MLOs should take and pass the SAFE MLO National Test with Uniform State Content, regardless of their place of employment.

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