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The SAFE Act requires loan originators to be licensed. But what does that mean exactly?
Anyone who engages in the business of a loan originator will need to be licensed.
Engaging in the business of loan origination means you:
What does it mean to "take a residential mortgage loan application"?
A person "takes an application" if you receive a residential mortgage loan application for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower.
What does it mean to "offer or negotiate terms of a residential mortgage loan for compensation or gain"?
If you do any of the following, it means you’re offering or negotiating terms:
You are not required to be licensed under the Federal SAFE Act simply for working for a mortgage company, unless you’re performing origination activity, which we’ve described above.
There are many job roles at a mortgage company that, in most states, do not require a license. This generally includes processors, underwriters, and assistants who are not involved in offering or negotiating loans.
Some states, however, have more stringent guidelines regarding who must be licensed, requiring more job functions to hold a license. Check your state's requirements to determine whether you do or do not need to be licensed to work in the mortgage industry.
Mortgage licensing is overseen by the Nationwide Multistate Licensing System, generally referred to as the NMLS. The NMLS issues licenses to prospective MLOs who meet the requirements.
MLOs are required to do the following before obtaining a license:
To be eligible for a loan originator license, there are a number of requirements you must meet. If you have done any of the following, you will not be able to get an MLO license:
If you want to meet all the requirements to renew a loan originator license, you must meet all minimum standards established for initial licensure and complete all required professional NMLS-approved continuing education (CE).
Required CE includes a minimum of eight hours of NMLS-approved CE each year. You may also need to complete additional continuing education hours as required by your individual state.
You are only permitted to receive credit for a continuing education course in the year you take the course. So you may not take a course one year to meet requirements in the next year. You also cannot repeat taking a course to meet minimum requirements. The NMLS also uses a "successive year rule," which means you can't take the same CE course two years in a row.
If you are an instructor of an NMLS-approved course, you can earn credit toward the continuing education requirement. Every one hour of teaching is equivalent to two hours' credit toward that requirement.
Note that if your MLO license lapses and is not renewed for five years or more, your original test results will no longer be valid. This means that you’ll have to take and pass all relevant tests again to regain your MLO license.
To obtain an MLO license, you need to have a sponsor that’s an NMLS-licensed entity. Your sponsor will have access to your profile and bears the responsibility for your actions.
Updating your information with the NMLS is mandatory. If the information on your MU4 form is no longer accurate, you have 30 days to update the information. You must submit your new information via the NMLS.
Your sponsoring entity is not allowed to change your information unless you provide consent. So if they revise your MU4 form, you have to provide an attestation before the info is sent to NMLS.
You shouldn't ignore the disclosure questions on MU4 forms. In fact, many people have had licenses revoked because they provided inaccurate responses to these questions. As we mentioned earlier, revocation in one state means you won’t be allowed to apply for a license in any other state, which means game over!
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