Posts Tagged ‘mortgage loan originator’

New licensing requirements

March 9, 2010

With the passing and implementation of the SAFE Act (Secure and Fair Enforcement of Mortgage Licensing Act of 2008), I am often asked about the licensing requirements prior to the SAFE Act. The answer is actually kind of frightening…

There was no test (federal or state)… there were no educational requirements… individuals only needed a pulse, pass a background check, and work under a licensed mortgage broker or bank. Anyone could transition from being a cook, mechanic, insurance agent, car sales, etc. and move into the mortgage business the next day! (this is not THE reason for the current real estate and mortgage environment, but it certainly didn’t help)

The SAFE Act is designed to set a minimum standard for the mortgage industry and to reduce fraud by requiring loan originators to be individually licensed by completing 20 hours of pre-licensing education, passing a federal test, passing a state-specific test, and passing a back ground check. Anyone looking to move into the mortgage industry must complete the same requirements.

The deadline to complete and apply for an individual MLO License (Mortgage Loan Originator) is March 31, 2010. NMLS (National Mortgage Licensing System and Registry) will not have the entire process/paperwork complete by that date, but will grant a temporary license to loan originators who have completed all requirements by March 31st. This will allow responsible loan originators to continue helping borrowers buy and refinance homes.

Never one to wait until the last minute, I have completed the 20 hours of pre-licensing educational classes, passed the federal and state specific exams, authorized a back ground check AND officially applied for my individual license! It is a relief to know I will avoid any last minute headaches, but that will not be the case for everyone.

If someone fails the test (and one-third of loan originators are failing), they have to wait 30 days before taking it again. Anyone failing the test in March will not make the March 31st deadline and won’t be granted a temporary license. That doesn’t mean those individuals are permanently banned from the mortgage industry. However, it means they won’t receive a temporary license and will either have to wait until the entire process is complete (possibly several months) OR work for a bank.

No joke. Bank employed loan originators are not currently required to be licensed. That could be an interesting development…