SAFE Act Proposed Rule - May 2009 - Also Links to Comments sent to other Regulators
1st Farm Credit Services
Barbara Kay Stille
2000 Jacobssen Drive, Normal, IL 61761
Senior Vice President & General Counsel
July 9, 2009
Mr. Gary K. Van Meter
Office of Regulatory Policy
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
RE: Registration of Mortgage Loan Originators
Dear Mr. Van Meter:
Thank you for the opportunity to comment on the Farm Credit Administration’s (FCA) proposed rule regarding registration of residential mortgage loan originators, issued in connection with other “Agency-regulated institutions” in response to the S.A.F.E. Act provisions for a Nationwide Mortgage Licensing System and Registry (Registry) that was published in the June 9, 2009 Federal Register.
1st Farm Credit Services (1st FCS) participated in and supports the System institution comments submitted by the Farm Credit Council. We offer comments in this letter as a supplement to the materials submitted by other System institutions.
1st FCS has a small number of residential loans, consisting of less than 5% of its total portfolio. These residential mortgage loans provide diversification and serve as an alternative, competitive source of credit to rural residents.
Our association is aware that some mortgage originators have engaged in unseemly or fraudulent activities, and we condemn those actions. Further, we understand the need for additional oversight and transparency in mortgage originations among some lenders. While the proposed regulations are designed to target marketplace abuses, some of the provisions place unwarranted burden on smaller mortgage lenders, such as 1st FCS, who offer traditional products and hold those loans through maturity.
We submit for your consideration that a de minimis exception is appropriate to meet the goals of the S.A.F.E. Act, but point out that the threshold set by the proposed regulation impairs the operations of compliant lenders more than it serves the interests of the clients it is designed to protect. In addition, the public disclosure of personal information on mortgage originators may discourage some qualified individuals from entering or remaining in the mortgage business. For some lenders, the cost of compliance may outweigh the benefit of offering residential mortgage loans, resulting in less competition and consumer choice in the residential mortgage marketplace.
In addition to these general comments, we submit the following discussion regarding certain specific provisions:
1. As noted above, the “de minimis” exception in Section 101 is too low. We believe an institution should be exempt from reporting if it does not meet the threshold for reporting for Reg C HMDA compliance. We agree with the Farm Credit Council that loan modifications and assumptions, made after loan closing, should not be included in calculating the number of loans made for purposes of this proposed regulation.
2. The definition of “mortgage loan originator” in Section 102 should be clarified. As currently proposed, the activities described appear inconsistent and will likely create confusion as to who must register. The phrase “taking a loan application” is too broadly defined. While the examples in Appendix A to Part 610 are designed to reduce unnecessary registrations, the result may be that System lenders are forced to artificially segment the job duties of clerical or credit underwriting personnel to meet these guidelines, thereby creating inefficiency in the processing of client loan requests. We therefore support the Farm Credit Council proposal to limit the definition to only those individuals who directly negotiate and make offers to consumers, thus eliminating the need for registration of those involved in credit analysis, document preparation or loan servicing. In addition, some language is necessary to clarify situations in which electronic applications or credit scoring systems are used in the processing of a residential loan request.
3. Section 103 dealing with registration of mortgage loan originations contemplates the collection of an extraordinary amount of personal information. With identity theft on the rise, we express concern that this information can be adequately protected. For this reason, we urge the Agencies to consider collecting the minimum amount of data necessary to adequately meet the goals of the S.A.F.E. Act. We also encourage full disclosure of the safeguards used to prevent disclosure of personal information.
4. The 180 day implementation process for institutions and employees seems reasonable, assuming the system is fully functional and there are no delays in implementation.
5. We express concern that certain operational issues such as fees, data system functionality, fingerprint protocols and security are not yet determined, and therefore we do not have the opportunity to comment on these matters.
Thank you again for the opportunity to provide input on these proposed regulations. If you have questions, or would like additional information on these comments, please contact me.