Housing counselors in Texas have a new reason to celebrate. As of March 17, 2010, many housing counselors employed by HUD-approved agencies will no longer be subject to the registration and licensing requirements included in the Texas Secure and Fair Enforcement for Mortgage Licensing (“SAFE”) Act.

The Federal SAFE Act of 2008 requires that every state set up a licensing plan to regulate mortgage loan originators. Although the statute does not specifically cover counselors employed by HUD-approved agencies, states are free to enact their laws more broadly. Until now, it was unclear whether the Texas SAFE Act licensing requirements would apply to loan originators or housing counselors who work for non-profit groups.

The announcement followed a meeting between members of the Texas Foreclosure Prevention Task Force, housing counseling representatives, and Mortgage Lending Commissioner Douglas Foster of the Texas Department of Savings. They confirmed that employees of HUD-approved tax-exempt counseling agencies are exempt from the new licensing requirements when they are engaged in any the following activities:

  • Foreclosure prevention counseling;
  • Pre-purchase counseling;
  • Reverse mortgage counseling.

However, employees or volunteers who conduct loan origination activities must be licensed under the Texas SAFE Act.

Effective dates for new licensing requirements vary by state, but generally will be no later than July 31, 2010. Transition requirements also vary by state and are often staggered depending on the number of changes to pre-existing requirements and the types of licenses being issued. Companies and persons holding licenses under the prior statutes may be required to apply for a new license or registration.

The Texas decision could have a powerful impact on HUD and other state regulators in the process of implementing their own mortgage origination licensing requirements. Housing counselors should embrace the decision – it could discourage other states from taking positions that hinder efforts to assist homeowners and homebuyers.

For additional information about the HUD rulemaking see the Venable article available at http://www.venable.com/hud-seeks-comment-on-safe-mortgage-licensing-act-responsibilities-housing-counselors-in-the-crosshairs-12-22-2009/.