Mississippi’s S.A.F.E. Mortgage Act (“SAFE Act”) was scheduled to be repealed on July 1, 2016. On April 6, 2016, Governor Bryant approved Senate Bill 2504 (“S.B. 2504”), which reenacts the SAFE Act and makes a number of substantive changes to the requirements under the SAFE Act that may be of interest to residential mortgage lenders, originators, brokers, and servicers doing business in Mississippi. These changes are effective July 1, 2016. A summary of some of these changes is provided below.
Reduction in Continuing Education Requirements
S.B. 2504 amends the continuing education requirements under the SAFE Act by (1) reducing the number of hours of education a licensed mortgage loan originator must complete each year from twelve to eight hours and (2) eliminating the requirement that a licensed originator obtain two hours of SAFE Act education each year.
A licensed originator must continue to complete at least the following training each year:
- three hours of federal law and regulations training;
- two hours of ethics training, which must include instruction on fraud, consumer protection, and fair lending issues; and
- two hours of training on nontraditional mortgage product marketplace lending standards.
Change in Advertising Requirements
The SAFE Act currently instructs the Mississippi Department of Banking and Consumer Finance (“Banking Department”) to promulgate regulations governing the advertising of mortgage loans to address certain specific requirements. S.B. 2504 amends the SAFE Act to eliminate one of these requirements. As of July 1, 2016, the SAFE Act will no longer instruct the Banking Department to promulgate regulations prohibiting a licensee from advertising its services in Mississippi in any media disseminated primarily in the state, whether print or electronic, without including the words “Mississippi Licensed Mortgage Company” or, if the initial license was obtained after July 1, 2007, the words “Licensed by the Mississippi Department of Banking and Consumer Finance” (collectively, the “licensing identification disclosure”).
S.B. 2504 also amends the signage requirements under the SAFE Act. The SAFE Act currently requires a permanent sign to be displayed outside each principal place of business and branch office in the state in a manner readily visible to the general public, unless such signage violates local zoning ordinances or restrictive covenants. This sign must currently contain the applicable licensing identification disclosure and the Nationwide Mortgage Licensing System and Registry (“NMLS”) Unique Identifier issued to that licensed location. As of July 1, 2016, the licensing identification disclosure will no longer be required to be included on this signage. The NMLS Unique Identifier must continue to be included on the signage.
New Mailing Address for Mortgage Origination Agreement Disclosure Requirements
S.B. 2504 amends the mortgage origination agreement disclosure requirements under the SAFE Act to change the address that must be disclosed for the Banking Department. All other disclosure requirements remain the same. As of July 1, 2016, mortgage origination agreements must disclose that complaints against a licensee may be made by contacting the Banking Department at the following address:
P.O. Drawer 12129
Jackson, MS 39236-2129
New Fees for Loan Payoffs
The SAFE Act currently requires licensees to provide the loan payoff amount within three business days of an oral or written request from a borrower or third party. Proof of borrower authorization must be submitted for any third party request. S.B. 2504 amends the SAFE Act to add that the payoff statement must be an understandable and accurate statement of the total amount required to pay off the mortgage loan as of a specified date. The SAFE Act, as amended, does not provide a model payoff statement form.
The SAFE Act, as amended, also addresses the assessment of certain fees. The SAFE Act, as amended, provides that a fee may not generally be assessed for informing the borrower of the payoff amount or for providing a payoff statement to the borrower. However, as of July 1, 2016, a licensed mortgage lender may charge a reasonable fee for providing a payoff statement after five or more requests in any calendar year. The SAFE Act, as amended, also prohibits the assessment of a fee for providing a lien release upon payoff.
Change in Timing of Delivery of Notice of Default
S.B. 2504 changes the timing requirements for the mailing of a notice of default to borrowers in non-judicial foreclosure actions. As of July 1, 2016, a notice of default must be mailed to a borrower at least forty-five days prior to the date a power-of-sale foreclosure auction is conducted. The SAFE Act currently requires a mortgage lender to mail a notice of default to the borrower at least forty-five days before the initiation of a foreclosure action. The SAFE Act prescribes specific content requirements for notices of default and these requirements were not changed under S.B. 2504.
New “Bad Acts”
The SAFE Act currently includes a list of activities that a licensee may not engage in, such as fraudulent residential mortgage underwriting practices. S.B. 2504 amends the SAFE Act to add that a licensee may not:
- sign a consumer’s name to a mortgage loan application or mortgage loan documents on behalf of a consumer;
- knowingly falsify income or asset information on a mortgage loan application or mortgage loan documents; or
- discourage a consumer in a mortgage loan transaction from seeking or obtaining independent legal counsel or legal advice.
Change in Registration Requirements
S.B. 2504 eliminates the requirement for mortgage loan originators to be registered through the NMLS. Originators must continue to be licensed through the NMLS.
New Reporting Requirements
S.B. 2504 adds four new types of events and deletes one type of event that must be reported to the NMLS or the Commissioner of the Banking Department. Within fifteen days of the occurrence of any of the following new events, a licensed mortgage company must file any applicable change in the disclosure questions with the NMLS or file a written report with the Commissioner describing the event and its expected impact on the activities of the company in the state:
- expiration, termination, or default, technical or otherwise, of any existing line of credit or warehouse credit agreement;
- suspension or termination of the licensee’s status as an approved seller or seller/servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or Government National Mortgage Association;
- exercise of recourse rights by investors or subsequent assignees of mortgage loans if such loans, in the aggregate, exceed the licensee’s net worth exclusive of real property and fixed assets; or
- existence of negative balances exceeding $100 in any operation account at any time or the return of checks exceeding $100 for insufficient funds.
The SAFE Act continues to require the reporting of other events, such as a filing for bankruptcy or reorganization of a company. As of July 1, 2016, a licensed mortgage company will no longer be required to report any misdemeanor conviction, in which fraud is an essential element, of any of the company's directors, executive officers, qualifying individual, or loan originators.
Changes to Recordkeeping Requirements
- Maintenance of Separate Mortgage and Personal Loan Records
S.B. 2504 amends the SAFE Act to require licensees to maintain the books, accounts, and records for individual consumer mortgage files separate and apart from any other personal loan files of the same consumer. The SAFE Act continues to require books, accounts, and records to be maintained separate and apart from any other business of the licensee and in a safe and secure location. - Required Journal Entries - Originated and Funded Loans
A SAFE Act licensee must maintain a journal at the licensee’s principal place of business of all Mississippi residential mortgage loans originated and/or funded by the licensee. This journal must be maintained separately from other journals for non-Mississippi loans and include at least the following information:- name of applicant and co-applicant, if applicable;
- date of application; and
- disposition of loan application, indicating date of loan closing, loan denial, or withdrawal, and name of lender, if applicable.
- property address;
- loan amount;
- terms;
- loan program;
- loan originator; and
- loan servicing.
- Loan Servicing
The SAFE Act currently requires licensees to maintain a journal at the licensee’s principal place of business of all Mississippi residential mortgage loans the licensee owns and/or services. This journal must be maintained separately from other journals for non-Mississippi loans and include at least the following information:- the number of mortgage loans the licensee is servicing;
- the type and characteristics of the loans;
- the number of serviced loans in default with a breakdown of thirty-, sixty- and ninety-day delinquencies;
- information on loss mitigation activities, including details on workout arrangements; and
- information on foreclosures initiated by the licensee.
- the number of mortgage loans the licensee is servicing;
- the type and characteristics of the loans;
- the number of serviced loans in default with a breakdown of thirty-, sixty- and ninety-day delinquencies;
- information on loss mitigation activities, including details on workout arrangements and dates that any loss mitigation application was submitted/approved/denied;
- information on foreclosures initiated and completed;
- name of applicant and co-applicant, if applicable; and
- date the loan was on-boarded/de-boarded, if applicable.
- Content of Servicing Files
The SAFE Act, as amended, will now require licensees to maintain certain records in individual servicing files. As of the effective date of the new requirements, a licensee’s individual servicing files must contain at least the following:- a copy of the original initial loan application signed and dated by the licensee;
- a copy of the final loan application signed and dated by the licensee;
- a copy of the signed closing statement as required by HUD or documentation of denial or cancellation of the loan application;
- modification agreements;
- collection/default letters and related documentation;
- addendums, riders, and assigned note, if applicable;
- complete payment history from the time the loan was transferred or on-boarded;
- complete comment/note history from the time the loan was transferred or on-boarded; and
- additional information as required under the SAFE Act rules and regulations.
- Investigation and Examinations
S.B 2504 amends the SAFE Act to provide that no licensee, individual, or person subject to investigation or examination by the Banking Department may knowingly falsify, abandon, or secret any books or records, computer records, or other information. The SAFE Act continues to prevent licensees, individuals, or persons from withholding, abstracting, removing, mutilating, and destroying such records and information.
Enforcement and Civil Penalties
S.B. 2504 adds a number of provisions to the SAFE Act imposing civil penalties for noncompliance and provides the Commissioner of the Banking Department with additional enforcement tools:
- Assessment of Civil Penalty for Failure to Produce Books and Records
S.B. 2504 amends the SAFE Act to impose a civil penalty for the failure to produce books and records requested by the Commissioner of the Banking Department. The SAFE Act continues to require each licensee, individual, or person subject to the SAFE Act to make the books and records relating to the operations of the licensee, individual, or person available to the Commissioner upon request. S.B. 2504 adds that the failure to produce these books and records within sixty days from the date of a request from the Commissioner may be considered a violation of the SAFE Act and result in the assessment of a civil penalty. - Assessment of Civil Penalty for Failure to Respond to Complaint
S.B. 2504 amends the SAFE Act to provide that the failure to respond to a formal complaint submitted by a consumer to the Banking Department may be considered a violation of the SAFE Act and result in the assessment of a civil penalty. The amendments do not, however, prescribe a time period within which licensees must respond to consumer complaints. - Assessment of Civil Penalty for NMLS Filing Failures
S.B. 2504 amends the SAFE Act to provide that the failure to file accurate, timely, and complete reports on the NMLS may be considered a violation of the SAFE Act and result in the assessment of a civil penalty. - Additional Enforcement Tools
S.B. 2504 provides the Commissioner of the Banking Department with additional enforcement tools. As of July 1, 2016, the Commissioner may- rely upon attorneys, accountants, or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations; and
- enter into agreements or relationships with other government officials or regulatory associations, including, but not limited to, joint enforcement action, by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or certain evidence.
Going Forward
The SAFE Act has been amended and reenacted several times since its original enactment in 2000. S.B. 2504 amends and reenacts the SAFE Act through June 2020. The SAFE Act, as amended, will “stand repealed” on July 1, 2020. A complete copy of the text of S.B. 2504 is available here:
This Bulletin is a summary of the changes under S.B. 2504. There may be additional changes of interest to SAFE Act licensees and others.