The SAFE Act was enacted into law almost two years ago. Since that time, MHI has fought for the proper implementation of the SAFE Act so that the provisions and the intent of the law properly apply to the sales and lending activities that occur in our industry.

The SAFE Act was designed to enhance consumer protection and reduce fraud by establishing minimum standards for the licensing of mortgage loan originators (MLOs). Each state was required by Congress to use these minimum standards to enact their own law. Each state has adopted their own version of the SAFE Act. Under the federal SAFE Act, Congress did not intend to classify individuals performing administrative or clerical tasks as loan originators. The federal law specifically excludes those performing purely clerical tasks from being defined as a loan originator. Unless compensated by a lender, mortgage broker or loan originator, the law also does not consider those performing real estate brokerage activities and who are registered/licensed under existing state law as loan originators.

While not directed by Congress, the national association representing the state bank regulators drafted a model law to assist states in enacting SAFE Act compliant laws. The model law disregards legislative intent and removes the exclusion Congress intended for those performing administrative or clerical tasks.

This overreach by the state banking regulators, which is in conflict with federal intent of the law, has understandably created substantial confusion among state regulators in applying the SAFE Act to manufactured home salespersons and retailers, a majority of whom only perform purely administrative or clerical tasks during the home sales process.

Additionally, lenders already holding state-mandated licenses may be forced to obtain additional lending licenses for business activity in which they are not involved. This results in redundant disclosures requirements, conflicts between rates and charges and, in many instances, duplicative examinations from multiple state agencies in order to conduct identical transactions.

MHI Action

In an effort to alleviate the burdens of the SAFE Act, particularly for retailers and community owners, MHI has taken the following steps over the past year to provide the industry with as much clarification and protection from the SAFE Act as possible. MHI has:

1) Retained expert legal counsel on the SAFE Act to guide our position and legal assistance has been made available to state associations and members upon request;

2) Submitted detailed comments in response to proposed federal enforcement regulations outlining our concerns on the proposed SAFE Act rule last year (click here). Among several points, MHI’s comments seek clear definitions on what home retailers can do without triggering SAFE Act requirements, and recommends HUD consider a de minimis exemption for individuals who originate five or fewer loans each;

3) Held a series of meetings with the banking regulators and HUD during the comment period to push the industry’s positions found in our comments and seek their support;

4) Sought Congressional support on the impact the SAFE Act will have on our industry. MHI also has urged Congress, HUD, and the state banking regulators to remove any additional lending licenses being required for personal property lending activities;

5) Obtained an exemption for our industry from the newly created Bureau of Consumer Protection. Retail sellers are exempt from the jurisdiction of the Bureau as long as the retailer limits its activities to traditional sales activities. If exempt from the jurisdiction of the Bureau, it is our opinion that retail sellers are also exempt from the SAFE Act because the Bureau does not have the power to interpret the SAFE Act to apply to retail sellers engaging solely in these traditional sales activities. Click here for a summary.

6) Sought additional protection for retail sellers who engage in traditional sales activities, prepare residential loan packages, and collect information on behalf of the consumer as it relates to the Truth in Lending Act. MHI made sure that retail sellers, as defined by Truth in Lending, are not mortgage originators and will not be subject to the new consumer protection provisions of Truth in Lending.

7) Introduced legislation “HR 5369- Manufactured Housing Licensing and Clarification Act (H.R. 5369)” which specifies that manufactured housing retail activities are exempt from SAFE Act requirements as administrative or clerical and to allows personal property lenders to operate under existing state licenses without a requirement to obtain mortgage lenders licenses.

MHI will continue to work aggressively on resolving issues and the uncertainty regarding the SAFE Act for its members, and we will seek member guidance and input.