The SAFE Act 101: A Guide for Mortgage Advertising & Marketing Compliance

Enacted in response to the 2008 financial crisis, The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or SAFE Act, has been a critical piece of legislation within the mortgage industry, aimed at standardizing and safeguarding practices across the board. The SAFE Act introduced comprehensive regulations on the licensing and registration of mortgage loan originators (MLOs), improving transparency and bolstering consumer protection.

For those just starting out in lending, and even those with years of experience, the SAFE Act represents yet another set of regulations that mortgage professionals must carefully navigate. So how does the SAFE Act work and what are the key points you need to know? Below, we will cover some essential SAFE Act elements, with a focus on helping mortgage lenders stay compliant, especially in the marketing and advertising space.

What is the SAFE Act?

The SAFE Act, part of the Housing and Economic Recovery Act, mandates nationwide licensing for MLOs, providing both federal registration and state licensing requirements. One important aspect of the Act is that it set minimum standards for MLOs, including background checks, fingerprinting, and continuing education. This brings us to the primary purposes of the SAFE Act, which are to:

1. Increase transparency by providing consumers with clear, concise information about MLOs' employment histories and disciplinary actions, if applicable.
2. Root out an historically overlooked source of fraud and abuse within the mortgage industry.
3. Create a centralized system – the Nationwide Mortgage Licensing System and Registry (or NMLS) – for registration and licensing.

As a result of the protections put into place by the SAFE Act, mortgage professionals must navigate these standards diligently, ensuring that their practices align with both federal and state regulations.

The Role of the NMLS in Compliance

Under the purview of the SAFE Act, the NMLS plays a critical role by serving as the primary platform for mortgage licensing and tracking. The NMLS requires all MLOs to:

• Obtain a unique identifier that can be searched and tracked by potential customers.
• Complete annual registration and renewals.

The NMLS identifier allows potential borrowers to verify an MLO’s credentials and background, fostering a culture of accountability and a relationship based on trust between lender and customer. For mortgage companies, ensuring that every loan officer includes their NMLS ID in all public-facing materials is an essential compliance step.

Requirements for Mortgage Loan Originators

As you might expect, the stringent rules to remain a licensed MLO also mirror a more rigorous set of rules one must now follow to become a licensed MLO in the first place. Those wishing to successfully navigate the MLO licensure process must meet several SAFE Act requirements, which include:

1. Background Checks: Criminal background checks and credit reports are absolutely mandatory to assess a potential MLO’s history of financial responsibility.
2. Pre-Licensing and Continuing Education: MLOs must complete 20 hours of education covering federal law, ethics, and non-traditional mortgage lending. Additionally, 8 hours of annual continuing education are required.
3. Testing: Candidates must pass the SAFE Mortgage Loan Originator Test with both federal and state components.

For mortgage businesses, ensuring that all loan originators complete these requirements is crucial. Any oversight, whether purposeful or not, can lead to penalties and potential legal issues. And lenders that are found to have unlicensed or fraudulently licensed loan originators on staff are sure to face tremendously severe repercussions.

Staying Compliant in Marketing and Advertising

As the SAFE Act is intimately involved in the loan origination step within the loan journey, it shouldn’t come as a surprise that it has broad implications for the marketing and advertising activities of mortgage professionals. As with other industry regulations, compliance is vitally important, but not unrealistically difficult for those who carefully follow its tenets. Here are some easy tips to follow to help ensure SAFE Act compliance in your promotional efforts:

• Always Display NMLS IDs

Each licensed MLO must prominently display their NMLS ID on all advertising materials and public communications. This includes websites, social media posts, email signatures, and even business cards. This requirement also extends to marketing on social platforms like LinkedIn, Facebook, or Instagram. Transparency is central to the SAFE Act, which allows consumers to research and verify an MLO’s license status at any time.

• Avoid Misleading Claims

Mortgage marketing must always reflect honest and accurate information about any services offered. Misleading statements can be misconstrued as inaccurate or even purposely false loan terms or eligibility, leading to unwanted regulatory scrutiny. For example:

• Avoid using terms like “pre-approved” if no underwriting has occurred. MLOs have no authority to guarantee loan approval if an underwriter has not yet reviewed the file.
• Never use absolutist claims (for example: “we can guarantee the lowest rate in town”) without clear disclaimers that this may not ultimately be possible. Words like ‘guaranteed’ should probably be avoided altogether.

Regulators routinely and constantly monitor industry advertisements for these types of deceptive practices, so maintaining accurate messaging is mandatory to stay within compliance.

• The Rules Still Apply on Social Media

Social media platforms present inherently unique challenges for the industry. We learned above that the SAFE Act requires an NMLS ID number to be included on all marketing materials. If you guessed that includes online efforts as well, you’d be correct. MLOs must include their NMLS ID on all social media pages, profiles, and posts related to mortgage services. One useful best practice would be to add the ID to your bio as an extra safeguard.

If you’re an MLO just beginning to dip your toes into social media, it would be wise to reach out to your marketing team or a compliance consultant to ensure that each social media profile and post you are involved with remains compliant. Social media accounts should be reviewed for consistency as they pertain to NMLS disclosure, and every post should be reviewed before being published. An extra set of eyes never hurts, especially when it involves a set of regulations as stringent as the lending industry.

Social Media Compliance: Safeguarding Your Brand

Before we step away from the social media sphere, it is important to understand exactly how mortgage companies and MLOs can ensure their digital presence aligns with SAFE Act requirements. After all, aren’t some of these rules just common sense? You may think so, but one person’s common sense might be another’s blind spot. It is imperative that all MLOs and associated employees be given clear direction and guidance to maintain systematic compliance. A few ways to achieve this include:

• Establishing a Social Media Policy: Define guidelines for what MLOs can post about when it comes to mortgage products and company offerings, and what they cannot. This policy should include examples of restricted language that might be deemed misleading, and why.
• Monitoring Employee Activity: Active monitoring ensures that personal profiles of MLOs are not inadvertently posting non-compliant content related to mortgages or financing. Transparency is absolutely imperative in this regard.
• Regular Compliance Training: Offer ongoing training on regulatory updates and best practices for social media compliance under the SAFE Act, so that all employees are always up to date on the ever-shifting regulatory landscape.

Consequences of Non-Compliance

Not adhering to provisions within the SAFE Act can have severe consequences, including fines, license suspension, and reputational harm. The Consumer Financial Protection Bureau (CFPB) has the authority to enforce SAFE Act compliance and may conduct audits or investigations of any lender, particularly if there are signs of misleading public-facing marketing or licensing discrepancies.

Violations can not only result in penalties for both individual MLOs and the mortgage companies they represent, but serious damage to a company’s public reputation as well, leading to decreased consumer trust. Maintaining diligent records of all advertising efforts and social media content related to mortgage services is an effective way to demonstrate enthusiastic compliance during regulatory review.

Key Takeaways for Mortgage Professionals

The SAFE Act has been a foundational building block within mortgage industry compliance since its creation in 2008, helping regulators enforce ethical practices and consumer protection. By adhering to SAFE Act requirements, lenders and mortgage professionals can confidently advertise their services while ensuring a fair customer experience. Remember these essentials:

• Display the NMLS ID on all marketing materials.
• Use transparent, accurate language in all advertising efforts.
• Monitor and update social media profiles regularly to ensure compliance.
• Provide ongoing compliance training for all team members.

Aligning marketing practices with the SAFE Act not only ensures legal protection but also fosters trust with clients, establishing your brand as a reliable and compliant mortgage provider. And by maintaining this clean regulatory bill of health, you protect both your business and your clients, paving the way for long-term success and growth in the mortgage industry.

The SAFE Act is not a draconian set of rules designed to make MLOs’ lives harder – it is in place to protect every customer during what may be the most nerve-wracking financial transaction in their lives. By consistently applying its principles, lenders can uphold the standards of the SAFE Act, protect their customers from unfair practices, and enhance their reputation, positioning themselves as trusted, transparent, and responsible members of the mortgage industry.

To learn more about how you and your company can navigate the SAFE Act – and other industry regulations and rules – reach out to ActiveComply today to find out how we can help!