S.A.F.E. Act and NMLS Registry Requirements and Standards

Starting this year, individuals in many states who, for compensation or gain, takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan application must be licensed or registered as a Mortgage Loan Originator.

The S.A.F.E. Mortgage Licensing Act of 2008 provides few exceptions to licensing for individuals conducting above activities.

The S.A.F.E. Act requires states adopt minimum licensure standards and see that loan originators meet these standards no later than January 1, 2011. Many states have already passed legislation and will begin enforcing the license exam and prelicense education requirements soon.

Licensing Requirements

Each state will pass its own version of the S.A.F.E. Act but the licensing requirements for a Mortgage Loan Originator will usually include at a minimum:

1. Provide fingerprints for an FBI criminal history background check
2. Provide authorization for NMLS to obtain a credit report
3. Input and maintain their personal Mortgage Loan Originator record in NMLS as their license in each state in which they wish to conduct loan origination activity
4. Pass a national mortgage test
5. Take 20 hours of prelicensure education courses approved by NMLS (this is a minimum- some states are requiring more hours). The education must include:
1. 3 hours of federal law and regulation
2. 3 hours of ethics, which include fraud, consumer protection, and fair lending
3. 2 hours of standards on non-traditional mortgage lending

Licensing Standards

State-licensed Mortgage Loan Originators must typically meet the following standards:

1. Never had a loan originator license revoked; and
2. Has had no felonies in the past seven years; and
3. Never had a felony involving fraud, dishonesty, breach or trust or money laundering; and
4. Demonstrates financial responsibility and general fitness; and
5. Maintain licensure through NMLS
6. Scores 75% or better on a national test created by NMLS. The test will include:
1. Ethics
2. Federal Law and regulation
3. State law and regulation
4. Federal and state law and regulation pertaining to fraud, consumer protection, nontraditional mortgages, and fair lending; and
7. Take eight hours of continuing education annually. The education must include:
1. 3 hours of federal Law and regulation
2. 3 hours of ethics, which must include fraud, consumer protection, and fair lending
3. 2 hours of standards on non-traditional mortgage lending

More Information

NMLS was created by:
The Conference of State Bank Supervisors and The American Association of Residential Mortgage Regulators
http://www.csbs.org/AM/Template.cfm?Section=Mortgage_Licensing
http://www.csbs.org/AM/Template.cfm?Section=SAFE_Act
http://www.aarmr.org/

It is owned and operated by the State Regulatory Registry LLC (SRR):
http://www.stateregulatoryregistry.org/NMLS/AM/Template.cfm?Section=Home3

The system is maintained by the Financial Industry Regulatory Authority (FINRA):
http://www.finra.org/index.htm