Association of Independent Consumer Credit Counseling Agencies

Independent Consumer Credit Advisory Agencies Association

The HUD publishes the definitive SAFE Act rule: impact on residential advisory agencies and other non-profit organisations. Initially this paper was featured in the July 2011 issue of The Independent Counselor, the e-newsletter of the Association of Independent Consumer Credit Counseling Agencies (AICCCA). This final rule codes the minimal standard used to establish whether a state has put in place a system for licencing and registration of mortgages lenders under the SAFE Act.

Under the definitive rules, HUD-approved residential advisory agencies are explicitly designated with several reasons to claim to the State regulatory authorities that their residential advisors should not be obliged to be registered as mortgages lenders under State approval procedures. Compared to the 2009 publication of the HUD Definitive Rules and its previous guidelines, the definitive rules differ drastically in their handling of staff from HUD-approved residential counselling agencies and genuine non-profit organisations.

No. 3 The previous guide had left open the door for states to demand mortgages approval of Housing Consultants and other salaried employee of non-profit organisations. This change in emphasis mirrors HUD's reaction to an unparalleled number of commentaries from residential advisory agencies and their consultants arguing for this kind of treatment, as well as the industry's reach to HUD, major members of Congress, government regulatory agencies and other interest groups.

These are some of the most important explanations in the final rule: Conventional residential advice is not equivalent to mortgages. SECURITY law does not prescribe the authorisation of persons involved in conventional residential advisory services, as these services do not amount to "the activity of a lender" determining whether a person is subject to licensing.

SAFE does not apply to staff of (1) governments and (2) non-profit organisations who act as lenders only in the course of their responsibilities because they are not engaged in the activities of a lender and therefore do not need approval from the States. The final rule states that in relation to non-profit organisations:

As part of the final rule, HUD has incorporated a number of annexes containing instances of persons who should and should be subject to licensing under the SAFE Act. It is a similar approximation to the SAFE Act Final Rule adopted by the Bundesbank agencies for staff of state-regulated banks.

SAFE law sets the threshold for state intervention of lenders. Following the adoption of the SAFE Act on July 30, 2008, states passed or amended legislation to grant licenses to mortgages. Consequently, some of the states have passed legislation or made interpretations that have a wider coverage than the approval requirement of the SAFE Act and the Final Rule standard.

Several of these states have tried to manage residential advice and lending by tax-exempt organisations. As HUD has stated that the residential advisers hired by the residential consultancy agencies authorised by HUD do not come within the SAFE Act, there may be a displacement of the position of these States. Under the SAFE Act, HUD's decision-making power under the Dodd-Frank Wall Street Reform and Consumer Protection Act was delegated to the CFPB on July 21, 2011.

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