The Community Home Lenders Association are asking Consumer Financial Protection Bureau Director Richard Cordray to require consumer disclosures on each and every mortgage loan that indicate whether the mortgage loan originator working with the consumer on that loan is licensed, has passed the SAFE Act test, has completed an independent background check and SAFE Act approved pre-licensing and continuing education courses. 

CHLA also recommended that consumers be told if their loan originator previously failed, and never passed, the SAFE Act test or has ever been denied a state license because they failed a background check.

“The CFPB is carrying out its ‘Know Before You Owe’ initiative, to improve consumer understanding and mortgage disclosures,” the letter said.  “We believe that these objectives of improving consumer disclosures and understanding is incomplete without requiring disclosures related to a major cause of the subprime mortgage crisis – the qualifications of the mortgage loan originator that worked with the consumer on the loan.”

The CHLA letter concluded that consumers were not generally aware of the almost unique exemption bank loan originators enjoy from basic licensing, testing and continuing education requirements, nor are they aware there are 1,415 bank and other depository institution mortgage loan originators that failed the SAFE Act mortgage competency test. 

Last December, CHLA wrote the CFPB urging them to close this gap by requiring all bank mortgage originators to meet these requirements.

Thursday’s letter to CFPB argues that until this is done, the CFPB should at least require disclosures so consumers know the qualifications of the individual helping them get a loan.

The letter included a Model Disclosure form that CHLA members could use, with boxes to show whether the loan originator was licensed or not, and listing those requirements that apply to non-banks, but not banks:

  • Passing the SAFE Act test, a nationally recognized test of knowledge and ethics related to mortgage loans and the mortgage process;
  • Passing an independent credit check and federal criminal background check;
  • Completing 20 hours of SAFE Act approved pre-licensing comprehensive education; and
  • Completing 8 hours annually of SAFE Act approved continuing education courses.