Press Releases

Washington, DC – U.S. Senators Dianne Feinstein (D-Calif.) and Mel Martinez (R-Fla.) today introduced legislation designed to curb abusive lending practices that have contributed to the sub-prime mortgage crisis.

The Secure and Fair Enforcement in Mortgage Licensing Act would for the first time establish national professional licensing standards for mortgage brokers and lenders. This would ensure that all mortgage professionals are trained in legal aspects of lending, ethics, and consumer protection.

It would also create a national database that consumers can use to verify the credentials of their brokers and lenders.

“Today, there are no national standards for mortgage brokers and lenders,” Senator Feinstein said. “And there is only a thin patchwork of regulation by the states.”

“This has allowed unsavory lenders and brokers to take advantage of borrowers, and contributed to the sub-prime mortgage crisis.

“This legislation would reverse that. It would ensure that every mortgage broker and lender in the United States is trained, licensed, and has no record of impropriety. This will help boost confidence in our lending system and protect consumers.”

“There’s not enough coordination between state regulators to prevent unscrupulous mortgage originators from continuing to ensnare unsuspecting people in sub-prime predatory loans,” said Senator Martinez, a member of the Senate Banking Committee and a former secretary of Housing and Urban Development.

“This sets up a nationwide system to keep track of those who’ve violated the law, had their license revoked, or failed to fulfill appropriate educational requirements.”

Following is a summary of the SAFE Mortgage Licensing Act:

  • Would require that all residential mortgage loan brokers and lenders obtain a state license, and provide fingerprints, a summary of work experience, and consent for a background check to authorities.
  • To obtain licensing an individual must:
    • Have no felony convictions;
    • Have no similar license revoked;
    • Demonstrate a record of financial responsibility;
    • Fulfill education requirements (20 hours of approved courses, to include at least 3 hours related to federal laws, 4 hours on ethics and consumer protection in mortgage lending, and 2 hours on the sub-prime mortgage marketplace); and
    • Pass a written exam (the exam must be at least 100 questions; minimum score of 75% required to pass).
  • Would require the Federal Reserve, Treasury Department, and FDIC to register all residential mortgage loan originators employed by national banks within one year of legislation’s enactment.
  • State regulators must develop a satisfactory licensing system within one year of legislation’s enactment. If this does not occur, the Housing and Urban Development (HUD) Secretary is given discretion to develop the national registry and license, generating revenue for its implementation by charging fees to license applicants.


Sub-prime and exotic mortgages have enabled millions of Americans – including those with weak credit scores – to purchase homes using adjustable-rate mortgages with low initial monthly payments. Many of these mortgages require little or no down payment.

The majority of mortgage lenders and brokers offering these mortgages act responsibly. However, many used predatory lending tactics, resulting in unsuspecting borrowers assuming mortgages they cannot afford.

Most mortgage brokers and non-bank lenders are lightly regulated by state agencies, and standards of accountability have not kept pace with the increasing sophistication of the mortgage industry.

Last year, more than 2.2 million foreclosures were filed in the United States, a jump of 75 percent over 2006, according to data released by RealtyTrac. Foreclosure rates are expected to be high, with 1.8 million adjustable-rate mortgages resetting to higher rates in the next two years.

California and Florida have been especially hard hit:

  • California led the nation in total foreclosure filings and the number of homes in some stage of foreclosure last year, according to RealtyTrac. There were 481,392 filings issued on 249,513 properties last year, more than three times the filings in 2006. Overall, 1.9 percent of all California homes entered some stage of foreclosure last year;
  • Florida had the nation’s second-highest number of homes in some state of foreclosure last year. There were 279,325 filings issued on 165,291 properties last year, a nearly 124 percent increase over the number of filings in 2006. More than 2 percent of Florida households entered some stage of foreclosure last year;
  • Florida’s foreclosure filings in December 2007 were up 275 percent from December 2006, and its fourth quarter total filings were up 211 percent from the fourth quarter of 2006;
  • In California, default notices – the initial step in the foreclosure process – rose to 254,824 in 2007, a 143 percent increase over 2006, according to DataQuick Information Systems;
  • Five of the 10 metropolitan areas with the highest foreclosure rates in the nation are in California, according to RealtyTrac;

The SAFE Mortgage Licensing Act would establish important professional standards for the mortgage industry, and help restore confidence in the American dream of home ownership.

The legislation is similar to H.R. 3012, introduced in the House of Representatives by Representative Spencer Bachus (R-Ala.).  National licensing of loan originators has bipartisan support, and was included in the comprehensive mortgage reform bill which recently passed the House.