SAFE Act fix stumbles in N.H. House panel

Lawyers, mortgage brokers and bankers might agree, but the deal to let attorneys advise consumers on how to restructure their loans might not fly. At least that was the upshot of a recent New Hampshire House Commerce Committee work session.The problem is that the language in the bill may be seen as doing too much to appease the federal government, and that may not be to the liking of state lawmakers who don’t care much for anything coming out of Washington these days.Here is the concern. Ever since the passage of the federal SAFE (the Secure and Fair Enforcement for Mortgage Licensing) Act and the state law adopting it, lawyers have been fearful of advising clients about mortgages, because they worry they might be confused with mortgage brokers or originators, and be accused of originating loans without a license.That became even more of a concern after the state Banking Department ordered a Concord attorney to pay more than $300,000 for setting up shop to modify mortgages. The attorney attempted to argue that he was exempted because he was an attorney, but that argument didn’t get very far.House Bill 408 is an attempt to make sure attorneys can still be involved in real estate deals, yet not be actually originating mortgages. The bill would exempt lawyers from the definition of a “mortgage originator” if all the following are true: • They are part of an authorized law practice. • The activities are within an “attorney-client relationship.” • They are “accomplished in compliance with all applicable laws, rules, ethics and standards.”The Banking Department liked that last sentence, because it means that it still be able to go after lawyers who are violating mortgage laws. But the Mortgage Bankers and Brokers Association of New Hampshire’s chief concern is that any exemption not spelled out by the federal government might be considered a violation of the SAFE Act. And if the federal Department of Housing and Urban Development felt the violations were serious enough, HUD might step in and regulate mortgages, meaning that the mortgage industry would not only have the state, but the feds, on its back.In its latest rule, HUD seemed to indicate that the attorney exemption would be OK, but it wasn’t exactly clear.”The new rule says basically I know a mortgage originator when I see it,” explained Rep. Marie Sapienza, R-Hampstead, the sponsor of the bill and an attorney.So the parties agreed to a sentence just in case the agency changes its mind, changes the rules, or simply disagrees with New Hampshire’s interpretation of HUD guidance.It reads: “Provided, however, that the final regulations relating to 12 USC Chapter 51 shall supersede the provisions of this paragraph to the extent such regulations conflict with the provisions of this subsection.”Translated: If our state law doesn’t comply with your federal rules, toss out our law. Your rules rule.This stuck in the craw of Rep. Donna Mauro, R-Windham, who said at a Sept. 20 hearing, “The more power you give the federal government, the less the state has.” She said she wants to pass the exemption without the escape clause.Rep. Jenn Coffey, R-Andover, who chairs the banking subcommittee dealing with the bill, said she was “on the fence.”She said she shared the concerns of the mortgage bankers about “not letting the federal camel’ nose under the tent.” On the other hand, “I’m not in favor of citing any federal regulation, but without the clarity, it would create a monster. I’m in the middle.”As for the entire subcommittee, it was in a muddle about the matter and could not reach a decision. So for now, the deal will have to wait. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW