SAFE Act / State Transitional Licenses FAQ 1 – What is the Bureau’s guidance regarding state transitional license availability under the SAFE Act?

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Q:  What is the Bureau’s guidance regarding state transitional license availability under the SAFE Act?
 
A:  In 2012, the Bureau issued Bulletin 2012-05 on state transitional licenses in response to several inquiries it received regarding whether states may, consistent with the SAFE Act, permit a level of state reciprocity when granting state loan originator licenses. The Bureau explained that under Regulation H, “a state must require and find, at a minimum, that an individual” has met certain standards before granting an individual a state loan originator license. However, the Bureau stated that where a state is considering a licensing application from an individual who already holds a valid loan originator license from another state, the regulation does not limit the extent to which a new state may consider or rely upon the prior state’s findings when determining an individual’s eligibility under its own licensing laws. The bulletin also noted that the individual needs to meet a net worth or surety bond requirement, or pay into a state fund, as required by the state.  
 
Provided that the individual meets these requirements and that the state is able to make findings that the loan originator meets all of the applicable standards, the SAFE Act permits transitional licensing in this limited sense.
 
However, state transitional licenses are not available in every situation. The Bulletin explained that states are not permitted to provide transitional licenses to Registered Loan Originators (who are not also State-Licensed Loan Originators) applying for a state loan originator license. In addition, not all states offer transitional licenses.  
 
A loan originator applying for a state license must follow the application procedures established by the state, and generally must wait to begin acting as a loan originator until the state grants the application, including in transitional license situations. Loan originators who are eligible for temporary authority, discussed in SAFE Act Types of Loan Originator Question 1 above, may act as a loan originator in the application state while the state is considering their application.
 
Updated Sept. 25, 2019
 
 
The CFPB’s SAFE Act FAQs pertain to compliance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) as of November 24, 2019, the effective date of the 2018 amendments to the statute.  Information may be found here:  https://www.consumerfinance.gov/policy-compliance/guidance/secure-fair-enforcement-for-mortgage-licensing-act/secure-and-fair-enforcement-mortgage-licensing-act-faqs/
 
Reviewing these questions and answers is not a substitute for reviewing the SAFE Act or the Bureau’s Regulation G or Regulation H. The statute and Regulations G and H are the definitive sources of information regarding the requirements. 
 

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