Among other things, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “SAFE Act”) requires state-licensed Mortgage Loan Originators (MLOs) to pass a written qualified test which covers federal and state law, to complete pre-licensure education courses, and to take annual continuing education courses. The SAFE Act also requires all MLOs provide fingerprints for submission to the FBI for a criminal background check and authorization for the authorities to obtain an independent credit report concerning those originators. Regulations implementing the SAFE Act were recently promulgated by the Department of Housing and Urban Development (“HUD”).
In the course of their legal work, some lawyers may assist clients obtain a mortgage loan, for example lawyers assisting with loan workouts or renewals. Recognizing this, the American Bar Association worked to get an exemption from HUD’s regulations implementing certain portions of the SAFE Act for lawyers who are (i) providing legal services to clients while (ii) acting consistent with the lawyer’s state law and (iii) the lawyer is behaving consistently with applicable ethical obligations.
Although not necessarily limited to this circumstnace, HUD stated “. . . a licensed attorney who negotiates terms of a residential mortgage loan with a prospective lender on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, mortgage broker, or other mortgage loan originator or by an agent of such lender, mortgage broker, or other loan originator” is not an MLO. Discussing this situation, HUD said “. . . the duties of loyalty, competence, and diligence owed by the attorney to his or her client are significant.” It seems clear that HUD views the SAFE Act's requirements for registration and licensing as not applying to lawyers in this context because of the regulations already covering attorneys who are providing legal services to their clients. See, http://www.hud.gov/offices/hsg/ramh/safe/cmsl.cfm.