| Unless you've been selling real estate on Mars for the | | | | fingerprints for a criminal background check and |
| past few years, you've heard about the Secure and | | | | personal history and experience. Minimum standards |
| Fair Enforcement for Mortgage Licensing Act of 2008 | | | | for license issuance includes: |
| (called the SAFE Mortgage Licensing Act of 2008). | | | | * Never having had a revocation of loan originator |
| The SAFE Act mandates increased federal regulation | | | | license; * Never having had a felony conviction involving |
| of the mortgage lending industry, enhanced licensing | | | | an act of fraud, dishonesty, or a breach of trust, or |
| requirements, and professional liability for mortgage | | | | money laundering (no other types of felonies seven |
| loan originators (MLOs) who fail to comply. So if digging | | | | years prior to application); * Demonstration of financial |
| your way out of the recession were not challenging | | | | responsibility; * Completing pre-licensing education |
| enough, now you have additional federal and state | | | | reviewed, and approved by the NMLS (at least 20 |
| hurdles to clear. | | | | hours); * Passing a written test developed and |
| How did this happen? In response to the foreclosure | | | | administered by the NMLS (at least 75 percent correct |
| epidemic and the global economic crisis that erupted in | | | | answers out of minimum 100 questions). * States must |
| 2008, devastating the real estate markets and forcing | | | | include a minimum net worth requirement or surety |
| banking institutions to cut lending or even close their | | | | bond requirement for applicants, or have had the |
| doors, Congress passed legislation to establish more | | | | applicant pay into a state fund. |
| government oversight of individual mortgage loan | | | | The SAFE Mortgage Loan Originator Test |
| originators, with the outcome of increased consumer | | | | Some requirements (such as no felony conviction and |
| protection. Primarily, the law set forth objectives for a | | | | no license revocation) are straightforward: either you |
| Nationwide Mortgage Licensing System (NMLS) for | | | | can comply, or you can't. What's bringing fear and |
| the residential mortgage industry. The SAFE Act | | | | trembling to the hearts of MLOs nationwide is the |
| requires that all residential mortgage loan originators | | | | SAFE Mortgage Loan Originator Test. All MLOs must |
| must be either federally registered or state-licensed. A | | | | pass the test, which is comprised of two components: |
| mortgage loan originator employed by a federally | | | | a state component and a national component. MLOs |
| insured depository institution or any credit union or an | | | | must pass each component with a score of 75 |
| owned and controlled subsidiary that is federally | | | | percent or higher prior to renewal for 2011. The SAFE |
| supervised must be federally registered. All other | | | | Act exam covers topics including federal law and |
| mortgage loan originators, without exception, must be | | | | regulation, fair lending issues, consumer protection, |
| state licensed. | | | | instruction on fraud, ethics, and the nontraditional |
| All state licensed and federally registered mortgage | | | | marketplace. |
| loan originators must be registered with the NMLS, | | | | To date, industry sources place the failure rate at |
| which is maintained by the Conference of State Bank | | | | anywhere from 30 percent to a whopping 70 percent |
| Supervisors and the American Association of | | | | for first-time takers. As part of the SAFE Act licensing |
| Residential Mortgage Regulators. | | | | requirements, the Act requires that all new mortgage |
| Striving for Uniformity Among the 50 States | | | | loan originator applicants must complete 20 hours of |
| At the time of the law's passage, state systems | | | | NMLS-approved Pre-licensure Education (PE) and |
| varied greatly. The SAFE Act required the states to | | | | annual Continuing Education (CE). You'd think that 20 |
| have a licensing and registration system in place by | | | | hours of instruction should make the test a breeze. |
| either July 31, 2009 (for states whose legislatures meet | | | | Apparently results depend upon the quality of the |
| annually) or July 31, 2010 (for states whose legislatures | | | | program. |
| meet biennially). For either of these deadlines, the U.S. | | | | Getting the Training You Need |
| Department of Housing and Urban Development (HUD) | | | | Fortunately, mortgage industry education organizations |
| offered to extend the deadline if HUD determined that | | | | are gearing up for the challenge. |
| a state is making a good faith effort to establish a | | | | LoanOfficerSchool.com, a California-based company |
| state licensing law that meets the minimum | | | | that has been in the MLO education business since |
| requirements of the SAFE Act. | | | | 1987, recently unveiled a set of education programs |
| By January 2010, 43 states, the District of Columbia, | | | | designed specifically for SAFE Act test training. |
| and Puerto Rico had adopted NMLS. But HUD | | | | "When the SAFE Act was passed by Congress in |
| recognizes that in many states, individuals currently | | | | 2008," says LoanOfficerSchool's founder David |
| performing loan originations may not be able to meet | | | | Reinholtz, "We saw a huge unmet need for affordable |
| the educational, testing, and background check | | | | and effective MLO education programs. Too many |
| requirements by the time required regulations become | | | | loan officers are unprepared for this new and added |
| effective. In addition, HUD is aware that some states | | | | challenge to their professional lives. We put our twenty |
| already require licensure of loan originators. | | | | years' of experience to work and created a program |
| In those states that have adopted NMLS all individuals | | | | that can give the MLO confidence and knowledge. We |
| acting as a residential mortgage loan originator (RMLO) | | | | can't guarantee that everyone will pass the test, but |
| must create an account in NMLS, and have filed or file | | | | we don't think that a better program exists." |
| a Form MU42 through NMLS with the state regulatory | | | | David, who is also member of the advisory board of |
| agency. Filing deadlines depend on the type of license | | | | industry leader MortgageCurrentcy.com, says that is |
| required. | | | | gearing up for extensive rollout of program venues. "I |
| NMLS Requirements and Your Responsibilities | | | | encourage every loan officer who is facing SAFE Act |
| What do you have to do? In addition to certain other | | | | licensure to check out a program in a city or town |
| requirements, all MLOs need to file a Form MU4 | | | | near you. With the right training, you'll have confidence |
| through NMLS with the their state's Division of Banking. | | | | and peace of mind when you sit down to take the |
| The applicant as a state-licensed loan originator must | | | | SAFE act test. |
| furnish certain information to the NMLS including | | | | |