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What is a Safe Mortgage?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 19 April 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Safe mortgages are home and business property loans offered by entities that are properly licensed and registered with local jurisdictions and meet the standards set in place by those jurisdictions. Dealing only with lenders who offer a safe mortgage contract helps to protect the consumer from potential fraud while also ensuring the consumer has legal recourse in the event that the terms of the home loan agreement are not honored by the issuing entity. Many countries have specific legislation that encourages the certification and monitoring of mortgage lenders by local municipalities.

In the United States, the concept of the safe mortgage is defined in the Secure and Fair Enforcement Act, or SAFE. Essentially, SAFE supports and encourages states to draft and pass specific criteria that a lender must meet in order to function within the jurisdiction. In addition to encouraging states to establish rules for operation, the act also calls for the American Association of Residential Mortgage Regulators and the Conference of State Bank Supervisors to participate in licensing system that allows efficient communications between the states regarding the status of various lenders.

In many areas, part of the criteria for certification as a safe mortgage lender will require proof of mortgage training that meets the standards put in place by the state or other community entity. The idea behind requiring specific forms of training is to ensure that anyone offering mortgages on home sales in the jurisdiction are knowledgeable about real estate procedures, laws, and current regulations that would apply to a sale and the extension of credit for the purchase of property. If the potential lender is not able to produce proof of training from what is considered an authoritative source, he or she is not likely to be licensed by the jurisdiction and be allowed to legally offer mortgages.

Part of the benefit of establishing safe mortgage guidelines is to minimize the opportunity for fraud. It is not unusual for unscrupulous individuals and entities to pose as legitimate lenders while operating with questionable policies and procedures. While this type of activity has long been a problem in the finance sector, the advent of Internet lending has served to increase the potential for people who need help in purchasing a home to get involved with less than ethical lenders.

Before seeking a first mortgage or attempting to refinance an existing mortgage, it is a good idea to investigate the credentials of any potential lender. Taking the time to check with the local jurisdiction to ensure you are dealing with a safe mortgage lender will mean you are much more likely to be offered equitable mortgage rates, have a contract that is in keeping with current regulations and standards, and be able to seek legal recourse if any problems develop at a later date.

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nony
Post 2

@David09 - I agree. I think we definitely need safe mortgage companies—this is just one area that can be too rife with abuse.

I actually surprised my mortgage company when I bought my house, when they saw I actually read every word of the contract. To me, it’s too big of an investment not to know what I’m getting into.

David09
Post 1

I think that the SAFE Mortgage Licensing Act of 2008 is a good idea—long overdue. I realize it has put some first-time home buyers in a bind, as many lenders are insisting on 20% down payment for home mortgages. However, what is a “safe” mortgage by definition if it’s not one where the buyer demonstrates the financial means to buy the house? If you haven’t saved enough money to put 20% down, how will you afford the monthly payments?

Anyway, that’s just my opinion, but housing is one area where the government needs to provide us with a safety net, because for most people, their home is their most important investment.

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