SAFE Act Amendment: Support Transitional Authority

The federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008 created an asymmetrical regulatory regime for mortgage loan originators (MLOs) that has resulted in uneven consumer protections and an un-level playing field for MLOs. MBA supports the creation of a transitional authority status 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 only have to be registered in the NMLS-they do not have to pass a test or meet standardized pre- and post-licensing 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.
  • 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. The language of the bill was developed in consultation with the Conference of State Bank Supervisors to incorporate important consumer protections.
    • Last Congress, the SAFE Transitional Licensing Act passed the House unanimously as standalone legislation-H.R. 2121. Language supporting transitional authority was included in other legislative vehicles, including S. 1484 that was approved by the Senate Banking Committee.
    • This year, similar bipartisan legislation has been introduced in both the House (H.R. 2984) and the Senate (S. 1753), which would provide at least 120 days to transition from one state to another or from a federally-insured depository to a state-regulated non-depository.


  • 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 the MLO cannot originate loans or meet with prospective borrowers or referral sources. Neither option is tenable or appropriate for a competitive or mobile labor market.
  • Enactment of the SAFE Transitional Licensing Act 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; and
    • The ability for MLOs to work for any employer-bank or non-bank-that offers them the best chance to earn income and succeed in their career.
  • By breaking down artificial employment barriers, the SAFE Transitional Licensing Act 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:

  • 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-bank and non-bank alike-should take and pass the SAFE MLO National Test with Uniform State Content (i.e., the Uniform State Test), regardless of their place of employment.
  • MBA has secured introduction of legislation in both the House and Senate that would provide for "transitional authority to originate" for MLO's moving from a bank to a non-bank, or between states. In the House, Reps. Steve Stivers (R-OH), Joyce Beatty (D-OH), Bruce Poliquin (R-ME), and Kyrsten Sinema (D-AZ) introduced H.R. 2948, The SAFE Transitional Licensing Act. In the Senate, Senators Dean Heller (R-NV) and Bob Menendez (D-NJ) introduced S.1753, the SAFE Transitional License Act. We are working with the House Financial Services and Senate Banking Committees to forge a path forward for both bills.
  • MBA has conducted multiple calls to action through the Mortgage Action Alliance, generating more than 3,500 letters of support. Additional calls to action will be sent as the bills move forward.

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