Becoming a licensed mortgage loan originator (MLO) can be extremely rewarding. As a licensed MLO, you will play a crucial part in the processes that help make homeownership a reality for thousands of borrowers. To become a mortgage loan originator, you must meet specific MLO license requirements. Licensure criteria are multifaceted and must comply with the SAFE Mortgage Licensing Act.
The Nationwide Multi-state Licensing System (NMLS) is the official system where individuals can apply for a new license once all the licensure steps have been met. It’s essential to ensure all the necessary criteria are complete before applying to be a licensed MLO with the NMLS.
While the MLO license requirements might seem intimidating, the steps are much more accessible than one might think. In fact, in 2020, over 85,000 people started the MLO licensing process1. If you have been considering moving to become a newly licensed mortgage loan originator with the NMLS, here is everything you need to know about the licensure requirements and process.
What is a Mortgage Loan Originator (MLO)?
A mortgage loan originator (MLO) is a licensed professional (or institution) that assists borrowers with completing their residential mortgage application and transaction. They work with loan processors and underwriters to navigate borrowers through the credit approval process.
Mortgage loan originators go by many names, including mortgage brokers, loan officers, and bankers. Regardless of which position you are applying for, all these positions require you to hold a valid mortgage loan originator license.
Mortgage Loan Originator (MLO) Licensing Requirements
The requirements for individuals seeking a mortgage loan originator license were created as a part of the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act).
The SAFE Act was enacted to help establish a standardized registry and licensing system for MLOs while providing consumers more protection throughout the mortgage application process. Its purpose is also to aid in reducing mortgage-related fraud.
The Consumer Financial Protection Bureau (CFPB) has been charged with enforcing the policies outlined in the SAFE Act, working alongside state mortgage regulatory agencies. Effective August 1, 2009, any person who is compensated or has something to gain from a residential mortgage loan application, offers, or negotiates terms for a mortgage must be a licensed MLO and be registered with the NMLS2.
Licensing Requirements
There are several tasks you will need to complete to become a licensed mortgage loan originator, including:
- Provide fingerprints for FBI and other federal government agency for a state and national criminal history background check
- Submit your personal history and experience and complete an authorization form allowing the NMLS to run an independent credit check and obtain a copy of the credit report
- Create and maintain a personal MLO record within the NMLS for each license in each state you conduct loan origination activity
- Take and pass a national SAFE mortgage test (or MLO exam) with a 75% or better score.
- Complete 20 hours of approved pre-licensure education, which must include at a minimum:
- 3 hours of content related to federal law and regulations
- 2 hours of training on the standards for non-traditional mortgage lending
- 3 hours of ethics training on fraud, consumer protection, and fair lending practices
Essential Steps to Obtain Your MLO License
All individuals looking to become mortgage loan originators must meet specific federal licensure requirements. However, states also have their own set of licensure requirements as well.
While most standards overlap with those set forth by the SAFE Act, there can be some additional overlays. You must research your state’s other requirements to ensure you have fully complied with all licensing requirements.
In all cases, states use the Nationwide Mortgage Licensing System (NMLS) to register and track licensed MLOs. This makes applying for your MLO license super easy. Most of the steps needed to obtain your MLO license can be completed online.
Step 1: Create Your NMLS Profile and Account
You will want to start by setting up your NMLS profile and account by kicking off your journey to becoming a licensed mortgage loan originator. You can request an account on the NMLS website, which will also have additional resources for your review, including a checklist outlining your specific state licensing requirements.
When creating your account, ensure all your personal information is correct, including your social security number and date of birth. If you enter these items incorrectly, you may have to call the NMLS support center to have it corrected.
Once you request an account, you will be assigned an NMLS license number. This number will never change and will stay with you as you move throughout the mortgage industry. You will need this critical identifier to sign up for your MLO pre-license education coursework or perform duties as a mortgage loan originator.
Step 2: Complete Your Pre-License Education Coursework
Once you have your NMLS number, you will need to enroll and complete the pre-license education coursework required by your state. These classes will help teach you about mortgage laws, ethics, and standards.
Sign up for one of the many self-paced or instructor-led courses through JPMLO. JPMLO simplifies completing the pre-licensing education requirement by leveraging industry-leading platforms and flexible learning options.
If you will be conducting mortgage loan originator activities in multiple states, it’s essential to understand that you must get licensed for each state. Similarly, each state may have state-specific pre-license education requirements, although all states must comply with the SAFE Act, which requires a minimum of 20 hours.
Step 3 : Pass Your MLO Licensing Exam
Completing and passing your MLO licensing exam is one of the crucial components of becoming a licensed mortgage loan originator.
It’s recommended that you complete the pre-license education coursework so that it can help you prepare for your test. It would be best if you also planned on carving out additional time independent of your pre-licensure coursework to review relevant material to help ensure you receive a passing score.
You have two testing options: taking the test at an approved NMLS testing center or completing a proctored version online. Make sure to review the testing requirements beforehand.
Regardless of the test-taking option you select, you must read and understand the NMLS Rules of Conduct for Test Takers.
A few general rules to be aware of is that you will not be permitted personal items, food, or drink when testing. Also, make sure you have one form of valid, government-issued photo identification ready and available.
Step 4 : Apply for Your MLO License
After you have completed all your MLO pre-license education coursework and passed your MLO exam, you will need to submit a formal application for your MLO license on the NMLS website.
Sometimes, the mortgage company you plan to work for may complete the application on your behalf. It’s essential to check with them before submitting your application to ensure no duplicate records are created with the NMLS.
Step 5: Finger Printing, Background, and Credit Checks
When submitting your mortgage loan originator application on the NMLS website, you must submit authorization for the criminal background and credit check.
Sometimes your employer may also submit this request when completing an application on your behalf. Review the form MU4/MU4R to ensure accuracy and completeness.
After completing these steps, you will be allowed to schedule an appointment for fingerprinting. If you are obtaining a new license but have previously submitted fingerprints in the past, if those previously provided are more than three years old, new fingerprinting is required. Fingerprints must be submitted within 180 days after a new authorization has been provided. Most fingerprinting submissions take 48 hours for the FBI to review and process
Your Key Takeaways Should Be…
Working as a mortgage loan originator (MLO) can be a gratifying career as you will work to help make homeownership a reality for thousands of borrowers.
While obtaining your MLO license may seem a bit daunting, only a few basic steps are necessary to become fully licensed. Most new mortgage loan originators find the pre-licensure education coursework the longest part of the process.
Choosing the right pre-licensing education provider can help expedite your learning and help accelerate the steps needed to get you approved for a new MLO license. JPMLO has helped thousands of originators to complete their license requirements with the NMLS and start new careers as successful mortgage loan originators.
Sources:
1 https://www.csbs.org/sites/default/files/2021-03/2020%20MLO%20Report.pdf