1.    Q: What is the NC SAFE Mortgage Licensing Act?

A: The North Carolina Secure and Fair Enforcement Mortgage Licensing Act (“NC SAFE Act” S.L. 2009-374; HB 1523) is found in Chapter 53, Article 19B of the North Carolina General Statutes. NC SAFE replaces the former Mortgage Licensing Act, the “MLA”, (previously found in Chapter 53, Article 19A).

NC SAFE was effective July 31, 2009.  However, some parts will not take effect until later for certain individuals or entities licensed and in good standing under the MLA as of July 31, 2009.

2.    Q: What does NC SAFE do?

A:  NC SAFE requires individuals and companies who engage in the mortgage business to be licensed by the Commissioner of Banks. In addition to the requirements that a company engaged in the mortgage business be licensed, all individuals who accept or offer to accept applications must either be licensed by North Carolina as “Mortgage Loan Originator” or be registered as an “MLO” with the Nationwide Mortgage Licensing System & Registry (NMLS).

NC SAFE also imposes duties upon Mortgage Brokers and Mortgage Servicers; prohibits any person from engaging in certain activities, and gives the Commissioner the authority to enact rules, require disgorgement, impose civil money penalties and enforce the Act.

3.    Q: What types of loans are covered under the NC SAFE Act?

A: NC SAFE applies to “residential mortgage loans.”  These are loans made or represented to be made to a natural person or persons primarily for personal, household or family purposes, and secured by a mortgage or other security interest on a dwelling  or residential real estate located in North Carolina.  For purposes of NC SAFE, “residential real estate” is any property upon which a dwelling is constructed or is intended to be constructed or a dwelling itself.

A personal loan secured by real property made to a natural person, primarily for personal, household or family purposes, is a “residential mortgage loan” even in absence of a dwelling presently on the secured property.  A personal loan to a natural person secured by a dwelling, but not by land is also a “residential mortgage loan”.

4.    Q: Can a loan secured by property that is not “owner-occupied” be a “residential mortgage loan” and be subject to NC SAFE?

A. Yes.  If a loan is secured by residential (described in Q. 3 above), made to a natural person and intended for personal, household or family purposes (i.e. to purchase or refinance a vacation home, to provide funds to pay for personal, family or household expenses) then the loan is a residential mortgage loan and subject to NC SAFE. 

Before originating loans on the basis that they are not subject to NC SAFE or other North Carolina or Federal laws because the loans are “investment” or “commercial” loans, a lender or individual should seek legal advice from a competent private attorney to ensure that they are not originating loans subject to NC SAFE or other laws.

5.    Q: For what sort of activities involving residential mortgages does NC SAFE require a license?

A: Companies which engage in the mortgage business as a mortgage lender, a mortgage broker, or mortgage servicer are required to obtain a license.  Individuals who take, solicit or accept residential mortgage loan applications, negotiate mortgage terms or issue loan commitments or interest rate guarantee agreements to prospective borrowers are required to obtain a license as a “mortgage loan originator.”

As a general rule, any person who is communicating, by phone, email, mail or other means with prospective borrowers about a residential mortgage loan must be licensed under NC SAFE, and a current W-2 employee of a licensed mortgage lender or broker.

6.    Q: Are there any companies who are exempt from NC SAFE’s licensure requirements?

A: Yes.  NC SAFE exempts the following types of companies from licensure requirements.

a.    Depository institutions;

b.    Subsidiaries owned and controlled by depository institutions if regulated by a federal banking agency;

c.    Institutions regulated by the Farm Credit Administration; and

d.    State and Federally Chartered Credit Unions

Employees of these entities who are registered with the Nationwide mortgage licensing system as “Registered Mortgage Loan Originators” are also exempt from NC SAFE’s licensure requirements.

7.    Q. Are any individuals exempt from NC SAFE’s licensure requirements for certain transactions?

A: Yes, NC SAFE allows for some transaction specific exemptions in the following circumstances:

a.    Family member loans – where an individual offers or negotiates the terms of a residential mortgage loan with or on behalf of their spouse, or their or their spouse’s child, sibling, parent, grandparent, grandchild.

b.    Selling your own home – an individual who is selling his or her own personal residence may the home a residential loan secured by that dwelling to the purchaser.

c.    Attorneys – Licensed Attorneys who, incidental to their representation of the client and on their client’s behalf, negotiate the terms of a residential mortgage loan.  Attorneys may not hold themselves out as engaged in the mortgage business, nor may they be compensated by a mortgage lender, broker or loan originator when negotiating mortgage terms.

d.    Seller-Financing – a person who in one calendar receives no more than five residential mortgage loans as security for all or part of a purchase of a dwelling.  This exemption is subject to a determination by the Department of Housing and Urban Development which may require these individuals become licensed.

 Rev. 2/15/2010