Dog is Man’s best friend, they say, but the fact that “Beware of Dog” signs exist seems to sully the truth of that colloquial phrase. Yes, that snarling and vicious guard dog in your neighbor’s backyard might be somebody’s best friend, but it doesn’t seem to be friendly to humankind in general. It wouldn’t take much to provoke that dog into biting you. On the other hand, most well-mannered dogs that people keep as regular pets wouldn’t bite unless the circumstances were extreme. But push them far enough, and bite they will. The point is that even Man’s best friend will bite if you give it reason.
When it comes to the Secure and Fair Enforcement for Mortgage Licensing Act, or SAFE Act, the compliance officer’s best friends are the rule’s exceptions. At least, they can be when used properly. Just like a poorly treated dog, improper compliance with these exceptions and the SAFE Act requirements can come back to bite you. Let’s take a look at what those exceptions are and what potential pitfalls they present.

Small Institution Exception

Someone at your institution is responsible for maintaining the registry of mortgage loan officers (MLOs), but the SAFE Act prohibits institutions from using an MLO to perform this function. This can be a problem for some small institutions, where most or even all of the employees participate in mortgage loan origination.
The agencies recognize this dilemma and have provided an exception to this rule for institutions with “10 or fewer full time or equivalent employees.” In this instance, the person who maintains the registry can also be an MLO.
This raises the question of what constitutes the equivalent of a full-time employee. Let’s say you are a little institution with eight full-time employees and four part-time employees. You have several mortgage loan originators on staff. This makes it difficult to have an administrator who is not an MLO, but you are aware of the exception, so you appoint one MLO to serve as your system administrator because section 1007.103 provides an exemption for small institutions that have 10 full-time employees or less. Your SAFE Act program is compliant, right?
Well maybe it is and maybe it isn’t. Unfortunately, the regulation doesn’t provide us any kind of definition of what constitutes a full-time employee. Because examiners are not typically fans of going outside of explicit regulatory guidelines, it is virtually impossible to postulate what they will consider as a full-time employee. In the absence of guidance specific to this regulation, some institutions have looked elsewhere for guidance. offers a calculator that indicates employees who work more than 30 hours are considered full-time employees, and then totals the number of hours worked by part-time employees divided by 30 to give the number of additional full-time equivalent employees.
So, in the above scenario, if the four part-time employees each worked 20 hours a week, you’d have 10 or fewer full-time employees. But if those four part-timers worked 25 hours a week, you’d have the equivalent of 11 full-time employees, and would therefore not be eligible for this exception.
However, it is important to remember that this full-time equivalent definition is for, not for financial institutions seeking to comply with the SAFE Act, for which there are no precise rules. If you’re near the dividing line at your institution, it would be worthwhile to use your best judgment and build your case.

De Minimis Exception

The regulation offers an exception to any employee of a covered financial institution to the licensing and registration requirements if that person has acted as an MLO for five or fewer residential mortgage loans in a rolling 12-month period. “Rolling” means that it’s not the number of loans originated in a calendar year, but rather the number originated at any time during the last 12 months. And these employees must register before attempting to originate their sixth residential mortgage loan.
Trying to skirt around these requirements is considered a violation of the SAFE Act. You need to explicitly state in your SAFE Act policy whether you intend to use this exemption or not.
So, yes, there are some caveats to applying these exceptions to SAFE Act, but if your institution does qualify, it can certainly make complying with the SAFE Act less of an administrative headache. Just take care to make sure you’re fully complying, to keep these exceptions from coming back to bite you.