What Should You Expect From the Loan Originator Licensing Process?

If you want to be a mortgage loan originator, what do you need to do to get licensed? What should you expect from the licensing process?

There are several requirements that are common to each state because of the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. These requirements are:

1. Registering with the Nationwide Mortgage Licensing System (NMLS) and applying for a license through the NMLS;
2. Taking 20 hours of pre-licensing education;
3. Passing state and national exams;
4. Submitting fingerprints for a federal background check that cannot show a conviction for a dishonesty crime;
5. A satisfactory credit report (“satisfactory” as defined by the state regulatory agency).

Once you have applied for your license, you may need to send in additional documentation to the state regulatory agency that approves loan originator licenses. Some states have extra documents and other states require an additiona set of fingerprints for a state background check.

Then, you complete the balance of the requirements in any order that you wish. The completion of each requirement must be done through the NMLS, as the regulatory agency will be checking the NMLS to see if you complete your requirements. Likewise, you must monitor your record on the NMLS to see if the state regulator has posted a request for clarification of anything you have sent in or a reminder that you still need to do something.

Once you have completed all of your requirements, you must wait for the regulators to review your license application and approve or deny it. The waiting period varies by state and by time of year. If your state has just transitioned its licenses to the NMLS, then your new application will be reviewed after all the transitioning licenses are reviewed. If you apply for a license during renewal season (November and December), then you will likewise have to wait until all the renewals have been processed. If you are applying for a New York license, they are severely backlogged and you could be waiting for a year to get a decision on your license application.

Check with your state regulator to make sure that he/she has received all of the required elements of your application. You may want to periodically check in to see how much longer you will need to wait for your application decision.

Home Offices - Are Tthey Allowed?

Many of us would like to work from home for many reasons - to save on rent, you like the short commute, or maybe you need to take care of your children. But are you allowed to work from home?

As with most of the questions that come up, the answer is it depends on the state in which you wish to originate or broker loans. Some states absolutely prohibit home offices. Other states permit home offices, so long as certain requirements are met. The usual requirement is that zoning laws permit home offices. Some states allow a home office if it has a separate entrance and you maintain an office separate from the rest of your house.

If your state does allow home offices, remember that regardless of whether the office is either the main office or just one person working from his house, that office location must be licensed. Also remember that anyone working from his home who is originating or brokering loans must be licensed as a loan originator.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!

Be Proactive About NMLS Requirements

A number of states are joining the Nationwide Mortgage License System (NMLS) on January 4, 2010. For all of those states, 20 hours of pre-licensing education and passing an exam with a 75% passing rate is required before you can get approved for a loan originator license.

For some of us, the week before or after Christmas is a slow time in the office. For others of us, January is the time when the phones aren’t ringing so often. During your slow periods, if you are in one of the states that is transitioning to the NMLS in January, 2010, get ahead of the curve and start taking your 20 hours of pre-licensing education. And then sign up for the NMLS tests, both the national component (if you haven’t already taken it for another state) and the state component.

When you sign up for your 20 hours of pre-licensing education, you need to give the course provider your NMLS identification number. If you don’t have one yet, just go to this NMLS web page: https://www.statemortgageregistry.com/Public/Default.aspx and click on “Create an Individual Account.” When you create your account, the NMLS will assign to you a user name, a password, and an NMLS identification number. You will use that same NMLS number for every state in which you will be licensed for as long as the NMLS exists. The password that you receive will be a temporary password and then you can change it to one that you will remember.

Until January 4, 2010, you cannot input the information to create your own MU4 record in the NMLS but if you have the time to get your education hours in and take the test, you will not be scrambling to fulfill those requirements when your pipeline gets full.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!

NMLS Plusses and Minuses

I've written an article for the November 2009 Residential Edition of Scotsman Guide on "NMLS Plusses and Minuses which can be found at http://www.sg-resdigital.com/resdigital/200911re#pg28

Check it out and let me know what plusses and minuses you have found with the NMLS.

What is on the Mortgage Loan Originator Tests?

All loan officers who are required to become licensed as mortgage loan originators in every state in which they wish to do business must pass a state exam. You must also pass a national test in order to get your license. If you want to be licensed in two states, you take the national test once, and the state test in the two states in which you intend to be licensed.

The NMLS has posted the course outlines for some of the states on its website:
http://www.stateregulatoryregistry.org/NMLS/AM/Template.cfm?Section=Testing&Template=/CM/HTMLDisplay.cfm&ContentID=24885


As of September 16, 2009, the following states have posted their test course outlines: Georgia, Maryland, Kentucky, District of Columbia, Wyoming, New Jersey, Virginia, Arizona, Idaho, Iowa, Louisiana, New Hampshire, North Carolina, Pennsylvania, Rhode Island, Vermont, and Washington. The National test course outline is also posted on the NMLS website. Massachusetts has posted its course outline but since the test is being revised, the course outline that is posted on the NMLS may be changed as well.

The course outlines are fairly short and just give you the briefest description of what will be tested. For example, the Maryland test has 55 questions, but only 45 questions will be scored. Five per cent (5%) of the test is on the Department of Labor, Licensing and Regulation, Division of Financial Regulation's structure and function. Ten per cent (10%) of the test is on definitions in the various laws that govern the licensing requirements for Maryland loan originators. Twenty five per cent (25%) of the test is about License Law and Regulations and covers who needs to be licensed (both in-state and out-of-state), the qualifications that the loan originator needs, the ground for denying the application, and what needs to be done to maintain the license (such as continuing education and conduct). Half (50%) of the test is about compliance and which types of activities are prohibited, what kind of advertising is not permitted, and what fees and charges are allowed or not allowed. The final ten per cent (10%) of the test covers the discliplinary process if you are not in compliance.

Each state has a slightly different outline so you need to review your state's outline (and the outline for all other states in which you wish to be licensed) to make sure that you know the information that will be tested. You do not need the take the required 20 hours of pre-licensing edcuation before you take the tests.

Loan Originator Testing Starting Soon

The federal SAFE Act, which requires loan originator pre-licensing education and then passing a test, has been implemented in part by many states. The law requires that the Nationwide Mortgage License System (NMLS) create that test. The test consists of questions on relevant national laws (National Component) and questions which test your knowledge of the state law for the state license for which you are applying (State Component). The earliest states to implement their version of the SAFE Act have now announced that they will start testing loan originators on July 30, 2009. Arizona, Idaho, Iowa, Louisiana, Massachusetts, Michigan, New Hampshire, North Carolina, Pennsylvania, Rhode Island, Vermont, Washington State are the first states to offer their State Component of the required testing. The National Component will become available on July 30, 2009, as well. You must pass the National Component and State Component once. If you wish to become licensed in more than one state, once you have passed the National Component, you only need to sign up and pass the test for the State Component in each state in which you have applied for a license. Certain states may permit you to be exempt from their State Component if you have already passed their state exam.

In order to schedule tests with Pearson Vue, the test delivery vendor, you must register and pay for that test through the NMLS. Starting June 29, 2009, you can enroll for the National Component and the State Component for the 12 states listed above. Testing centers are located throughout the country and you can register for the one closest to you, no matter which State Component you have signed up for. All State Components exams are given at all testing sites. This eliminates the travel requirement to each state that multi-state licensed loan officers had under the current system.

You are not required to take any prep courses before you take the exam. Nor are you required to take the 20 hours of pre-licensing education that the SAFE Act requires before you take the exam. However, even if you pass the both the National and State Component of the exam, you will need to complete the 20 hours of pre-licensing education.

Please feel free to forward this blog post to friends, family, colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@mortgagelicensesolutions.com. Thank you!

Out-of-Date Information

I have been helping mortgage lenders and brokers get their licenses for over 10 years. I’ve been blogging about licensing and compliance for about 2 years. Much of the information that I needed to know when I first starting working with mortgage companies is useless. Even some of the information that I published in my blog back in 2007 is now wrong.

The laws in the mortgage licensing area keep changing to keep up with events that are happening in our country to the financial industry. When I first started working in this area of law, there were a handful of states that did not require licensing at all. I’ve watched as all of the states passed laws to require the licensing of mortgage companies and then loan originators. Although there are some states now that do not require the licensing of loan originators, that will be a memory in about a year, when the federal SAFE Act becomes fully implemented.

If you are going to try to get yourself licensed without any help, you need to know that the information that you are relying upon is the most up-to-date out there. As I become aware of new legislation, new regulations and new compliance requirements, I write a blog entry about the changes so you can stay current. There are companies that you can subscribe to that will send updates to you when there are changes to the law in any state that yo uare interested in. Unfortunately, most of my clients don’t have time to read those updates or don’t understand them. Another way to get information is to read what is on the website of the regulatory agency that is in charge of mortgage lender, broker or loan originator licensing. The agencies go by different names in different states – they may be the Banking Department or the Department of Financial Institutions or the Commissioner of Banks. In California, it is the Department of Corporations (who would have guessed?). And sometimes, even after reading what’s on the website, I still call the agency and ask to speak to the reviewers in the licensing department. They can’t give legal advice (not that I’m asking for any advice) but they can tell me if the information on their website is current and answer questions about what is on their website or about an announcement about a change in their laws that I’ve received in the mail. You should do the same.

Always make sure that the information that you are working with is as up-to-date as it can be. If you are following a law that has been changed, you are not following the correct law and you could be subject to penalties and fines.

Maryland Revises its Licensing Law

Maryland has revised its licensing statute to conform to the federal SAFE Act. The new law requires new license applicants to use the NMLS to apply, starting in early May, 2009. Existing licensees who need to renew their licenses until July 1, 2009 will use the Maryland online system to renew. Existing licensees who do not need to renew their licenses until after July 1, 2009 will be required to transition to the NMLS starting in July, 2009 and will have up to 18 months to transition. If you need to renew your license during the transition period, you will renew on the NMLS. New licenses will be for up to a 1-year period and will expire on December 31st, like all other licenses obtained through the NMLS.

The new law also requires mortgage loan originators to be individually licensed, which requires the applicant to take 20 hours of pre-licensing education, to pass an exam in order to get licensed, pass a criminal background check and a regulatory background check. A mortgage loan originator will not be approved for a license if he has had a license from another state revoked or if during the prior 7-year period pleaded guilty, nolo contendere or been convicted of a felony. If the felony was for an act involving fraud, dishonesty, breach of trust, or money laundering, the application will be denied no matter how far in the past the conviction or nolo contendere plea was. After licensing is approved, the mortgage loan originator will be required to complete 8 hours of continuing education annually.

Mortgage loan originators who are not employed by a licensee can place their license in a “nonactive” status until re-employed by a different licensee.

Don’t Forget Loan Originators on the NMLS Must Renew Their Licenses

Mortgage companies who are on the NMLS have probably paid attention to their notices to renew the company license through the NMLS. But how many of you have reminded your loan originators to renew their licenses?

Although the renewal process is started on the NMLS, each state has its own follow-up requirements. For instance, in Mississippi, Rhode Island, and Washington, loan originators must submit proof that required continuing education has been completed. In Vermont, loan officers must submit their certification that they do not owe any Vermont taxes and that they do not owe child support. The other states on the NMLS do not require anything from loan officers after they have completed their NMLS renewals.

In order to renew, you must log in to the NMLS, go to Renewals, attest that your record has not changed (did you change employers, did your employer move their offices?), then renew and pay.

Connecticut does not renew until next year and New York is renewing outside the NMLS system. So, check with your state and make sure to renew if it is required.

New Federal Law Affects Loan Originators

On July 30, 2008, President Bush signed into law the S.A.F.E. Mortgage Licensing Act of 2008. It was part of the Housing and Economic Recovery Act which is designed to help homeowners caught in the foreclosure mess. The S.A.F.E. Mortgage Licensing Act is designed to regulate loan originators and start a nationwide scheme of loan officer licensing.

Some of the provisions of the new law are:

1. All loan officers will be part of the Nationwide Mortgage License System (NMLS);
2. The NMLS will create a unique identifying number for each loan officer that permanently identifies the loan officer;
3. All loan officers will have to be registered or licensed in their states and maintain their registration or license in order to originate mortgages;
4. All independent contractor loan officers must be registered or licensed;
5. In order to get licensed, loan officers must submit to the NMLS fingerprints, a personal history and experience report;
6. The NMLS will run criminal background and credit history checks on each loan officer;
7. In order to get a state license, a loan officer must:
a. never have had a license revoked in any jurisdiction, have had no convictions, pled guilty or no contest to a felony in any court for the past 7 years or at any time in the past if the felony involved fraud, dishonesty, money laundering or breach of trust;
b. show good character an financial responsibility;
c. completed 20 hours of pre-licensing education;
d. passed a written test;
e. met a net worth requirement, paid into a state fund or obtained a surety bond.

8. In order to renew a license, loan officers will need to complete at least 8 hours of continuing education credits.

All states are going to have to create new procedures to comply with the new federal law. Stay tuned for more information as the states roll out their implementation requirements.

New Licensing Law in Pennsylvania

A new law was just signed into existence which will completely replace the existing licensing scheme. The new law will take effect on November 4, 2008.

Under the new law, there will not be separate licenses for first and second mortgages. Additionally, all mortgage loan solicitors will be required to get a license. The requirements for loan officers will include 12 hours of pre-exam education, an exam, a criminal background check and continuing education. One officer from each licensee will need to take the pre-licensing education and pass the exam. Lastly, Pennsylvania will join the list of states whose licensing records will be part of the Nationwide Mortgage License System (NMLS). The transition to the NMLS will start on November 1, 2008.

The Pennsylvania Department of Banking will be issuing more information about the specifics of complying with the new law. As the information becomes available, I will write more blog entries on the new law.

Alaska Joins the Licensing Club

The Alaska Mortgage Lending Regulation Act (AMLRA), AS 06.60, requires mortgage lenders, mortgage brokers, and originators operating in Alaska to become licensed, starting July 1, 2008. This new law does not permit anyone to be grandfathered so everyone who is doing mortgage lending or brokering in Alaska needs to get a license.

If you are already doing business as a lender or broker in Alaska (as evidenced by your current business license), you have until March 1, 2009 to get your license. But, if you want to start doing business in Alaska after June 30, 2008, you must be licensed.

The new law does not require a brick-and-mortar presence in Alaska so you can do all of your solicitation of business through the internet, mail, or telephone. Companies get a company license and loan officers each get their own licenses. Loan officers must undergo a background check, pass a test, and will be required to get 24 hours of continuing education every 2 years. A company owner who also originates loans must be licensed as an originator as well as getting the company license. The license fee for originators is $150.

The company must submit the license application, a $25,000 surety bond, and a $250 investigation fee and $500 license fee. All control persons of the mortgage company will have to undergo fingerprinting.

Applications are already available at the Alaska Banking Department website.