Your License - Chapter 4

Question 1

The Secure and Fair Enforcement Act of 2008 (SAFE)

Answer 1

Created to improve consumer treatment by the mortgage industry through the minimum qualification of its mortgage loan originators.

This improvement was achieved through licensing and registration requirements for originators.

The SAFE Act may also be referred to as Title V of the Housing and Economic Recovery Act (HERA).

Question 2

Title V of the Housing and Economic Recovery Act (HERA)

Answer 2

The SAFE Act

Question 3

The Nationwide Multistate Licensing System and Registry (NMLS)

Answer 3

Created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).

Operated by the State Regulatory Registry (SRR)

Serves as the communication hub and database for the mortgage industry.

Question 4

State Regulatory Registry (SRR)

Answer 4

Works on behalf of the CSBS and AARMR to manage the NMLS, oversee education and testing content, as well as operate the system as a database of information about mortgage loan originators. It also allows for consumers to seek out information regarding MLOs.

Question 5

CSBS

Answer 5

Conference of State Bank Supervisors

Question 6

Conference of State Bank Supervisors (CSBS)

Answer 6

A national organization founded in 1902 to further advance the ideas and professionalism for state banking departments; it acts as the single voice to Congress for state banks and serves as a liaison between state and federal regulators. Involving over 5,000 state-chartered financial institutions, the CSBS and its member state banking departments supervise many financial service providers operating in
their states. These providers include mortgage lenders and originators, money servicers, check cashers, finance companies, and payday lenders.

Question 7

AARMR

Answer 7

The American Association of Residential Mortgage Regulators

Question 8

The American Association of Residential Mortgage Regulators (AARMR)

Answer 8

Established to promote the exchange of information and knowledge between the states regarding residential mortgage lending, servicing, and brokering.

Question 9

What Does The NMLS Do?

Answer 9

The NMLS has a wide range of responsibilities. The following is a list of major tasks that fall into that range:
• Give uniform license applications and reporting requirements for mortgage loan originators
• Provide a comprehensive licensing and supervisory database
• Collect and improve the flow of information to and between regulators
• Provide increased accountability and tracking of mortgage loan originators
• Streamline the licensing process
• Increase consumer protection and support anti-fraud measures
• Provide consumers with information about mortgage loan originators free of charge
• Establish requirements for mortgage loan originators to act in consumers’ best interest
• Ensure responsible behavior in the sub-prime mortgage marketplace
• Provide training and examination requirements related to sub-prime mortgage lending
• Facilitate the collection and disbursement of consumer complaints on behalf of state and federal mortgage regulators

Question 10

Regulation G (SAFE)

Answer 10

Regulation G applies to federally-regulated depository institutions that operate in the mortgage industry. Examples of these companies are banks that are members of the Federal Reserve System as well as insured state non- member banks. Some savings associations and credit unions also fall into this category. For the most part, if the institution has checking and savings accounts and originate mortgages - they probably fall under Regulation G. Loan originators that work for these companies are only required to register with the NMLS and will receive a unique identifier (NMLS ID) for their registry. This registration process includes a background check and 10 years’ previous work history.

Question 11

Regulation H (SAFE)

Answer 11

Regulation H affects non-federally regulated entities that provide mortgage-related services. To make it simple, while Regulation G deals with depository institutions, Regulation H covers companies that do not have checking or savings accounts (i.e., non-depository institutions). A company that only originates mortgage loans is an example of a non-depository institution. Mortgage loan originators governed by Regulation H must also register with the NMLS and receive a unique identifier, and will also need to take the extra step of obtaining a license.

Question 12

MLO Registration Requirements

Answer 12

As part of the registration process, mortgage loan originators are required to fill out and submit a Mortgage Uniform (MU) form.

There are four different types of MU forms: MU1, MU2, MU3, and MU4.

In order to register, MLOs will also need to provide authorization for a credit check, submit fingerprints for a federal background check, and submit a 10 year work history to the NMLS.

Question 13

MU1

Answer 13

The MU1 is also known as the Institution Form. Companies are required to submit an MU1 for company licenses.

Question 14

MU2

Answer 14

The MU2 form is known as the responsible party form and is filled out and submitted by the individual person responsible for a company.

Question 15

MU3

Answer 15

The MU3 form is known as the Branch form and must be submitted for each branch location the company originates mortgages from.

Question 16

MU4

Answer 16

The Individual form is the MU4. The MU4 must be filled out and submitted by YOU as part of your licensing application process.

Question 17

Persons Required To Be Licensed

Answer 17

Mortgage loan originators as well as independent contractors acting as processors or underwriters must register with the NMLS, obtain a unique identifier, and acquire a license for each state in which they do business.

Question 18

Persons Not Required To Be Licensed

Answer 18

• An individual who performs only real estate brokerage activities
• An individual who only extends credit related to timeshare plans
• An individual who performs only administrative, clerical, or support duties (as an employee) under the direction of a mortgage loan originator
• An individual who is NMLS registered and is an employee of a covered financial institution
• An individual who simply forwards a loan application, such as a loan processor, or who decides if a borrower is qualified, such as an underwriter
• An individual who explains loan terminology or steps and arranges the loan closing, such as a closing agent
• An individual who acts completely as a volunteer
• An individual who offers or negotiates terms on behalf of an immediate family member
• An individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence
• A licensed attorney who engages in the business of a mortgage loan originator, if those loan origination activities are all three of the following:
• Considered by the state’s court of last resort to be part of the authorized practice of law within the state
• Carried out within an attorney-client relationship
• Accomplished by the attorney in compliance with all applicable laws, rules, ethics, and standards
• An employee of a government or housing finance agency
• An employee of a bona fide nonprofit organization
• An employee of a non-federally insured credit union

Question 19

Education Requirements - Pre-Licensing

Answer 19

20 Hour pre-licensing education (PE) requirement:
• 3 hours devoted to federal law
and regulations
• a minimum of 3 hours of ethics (including fraud, consumer protection and fair lending issues)
• 2 or more hours of standards related to non-traditional mortgages
• 12 hours of undefined education. The undefined component is usually spread over the three main topic areas

Question 20

Education Requirements - Post-Licensing

Answer 20

8 hours of annual continuing education (CE): (courses must differ from year to year and cannot be repeated)
• 3 hours devoted to federal law
and regulations
• 2 hours of ethics (including fraud, consumer protection and fair lending issues)
• 2 or more hours of standards related to non-traditional mortgages
• 1 remaining hour of undefined education.

Question 21

Testing Requirements - Five Catagories & Percentages

Answer 21

There are five categories of questions on the exam each with a specific percentage of total questions. The five categories are: 
•	Mortgage Loan Origination (MLO): 27%
•	General Mortgage Knowledge (GMK):
20%
•	Federal Law: 24%
•	Ethics: 18%
•	Uniform State Content (USC): 11%

Question 22

Testing Requirements

Answer 22

The UST test itself requires a passing score of 75% (this standard was set as part of the SAFE Act). The current UST exam has a total 120 questions. 5 of these questions are not graded, but are included on the exam for experimental purposes - which means your score is based on 115 questions. If you want to do the math, this means you’ll need to get at least 87 questions correct to pass. Test-takers are allowed a maximum of 190 minutes to complete the exam.

If not passed, must wait 30 days to take test again. Can try 3 times before 180 day waiting period to try again.

Question 23

Common reasons why a state may deny or revoke an individual loan originator’s license:

Answer 23

• Revocation of a loan originator’s license in any governmental jurisdiction
• Conviction of, or plead guilty or nolo contendere (no contest) to any felony in any court within the last 7 years
• Conviction of, or plead guilty or nolo contendere (no contest) to any felony at any time involving fraud, dishonesty, breach of trust, or money laundering
• Lack of financial responsibility and good character
• Failure to complete the necessary pre-licensing education requirement
• Failure to pass the federal or state components of a written exam

Question 24

The following are reasons for license denial specifically related to companies or institutions:

Answer 24

• Failure to meet the net worth and surety bond requirement or pay accordingly into the state fund as required by the state.
• Failure to complete and submit the required NMLS Mortgage Call Report, detailing a loan originator’s activities for the previous year.

Question 25

Loan Originator With Temporary Authority

Answer 25

To be eligible for Temporary Authority MLOs must meet the following two criteria:

21) Employed by a state-licensed mortgage company in the application-state, and
2) Either:
a. Registered in NMLS as an MLO continuously during the one-year period preceding the application submission; or
b. Licensed as an MLO continuously during the 30-day period preceding the date of application.

Temporary Authority begins on the date an eligible MLO submits a license application with the required background check information, which is fingerprints, personal history and experience, and authorization for a credit report.

Question 26

When does Temporary Authority end?

Answer 26

Temporary Authority ends when the earliest of the following occurs:

1. The MLO withdraws the application,
2. The state denies or issues a notice of intent to deny the application,
3. The state grants the license, or
4. 120 days after the application submission if the application is listed on NMLS as incomplete.

Question 27

Surety Bond

Answer 27

A financial guaranty product (insurance) that provides payment to injured parties in case of a violation of the law by an MLO