Mortgage SAFE Act and MLO Licensing Questions and Answers — Questions and Answers
Question 1: An individual works for a state-licensed mortgage lender. Their primary duties involve collecting and packaging loan application documents for the MLO and communicating with the borrower to request follow-up items like pay stubs and bank statements. They do not offer or negotiate loan rates or terms. According to the SAFE Act, which of the following is true?
- This individual is acting as a loan processor and is not required to be a state-licensed MLO. (Correct answer)
- This individual must be a state-licensed MLO because they communicate with the borrower.
- This individual is exempt from licensing as long as they are a W-2 employee of the lender.
- This individual must obtain a federal registration through the NMLS but not a state license.
Correct answer: This individual is acting as a loan processor and is not required to be a state-licensed MLO.
The SAFE Act defines a mortgage loan originator as someone who, for compensation or gain, takes a residential mortgage loan application or offers or negotiates terms. An individual who performs purely administrative or clerical tasks, such as collecting documentation and communicating to obtain necessary information at the direction of an MLO, is considered a loan processor or underwriter and is not required to be licensed, provided they are not an independent contractor.
Question 2: Which of the following correctly identifies the minimum pre-licensing education (PE) topic requirements for a state-licensed MLO under the SAFE Act?
- 3 hours federal law, 2 hours ethics, 3 hours non-traditional lending, 12 hours electives
- 3 hours federal law, 3 hours ethics, 2 hours non-traditional lending, 12 hours electives (Correct answer)
- 2 hours federal law, 3 hours ethics, 3 hours non-traditional lending, 12 hours electives
- 3 hours federal law, 3 hours ethics, 3 hours non-traditional lending, 11 hours electives
Correct answer: 3 hours federal law, 3 hours ethics, 2 hours non-traditional lending, 12 hours electives
The SAFE Act mandates a minimum of 20 hours of pre-licensing education. This must include at least 3 hours of federal law and regulations; 3 hours of ethics (including fraud, consumer protection, and fair lending); and 2 hours of training related to lending standards for non-traditional mortgage products. The remaining 12 hours are considered electives.
Question 3: A mortgage loan originator has been properly licensed in their state for five consecutive years. For their upcoming annual continuing education (CE), they find a course with the exact same title and NMLS course number as one they completed last year. Which SAFE Act rule applies to this situation?
- The MLO can retake the course since they have been licensed for more than three years.
- The MLO must get special permission from the state regulator to retake the course.
- The MLO is prohibited from taking the same approved course in successive years. (Correct answer)
- The MLO can take the course, but will only receive half of the credit hours.
Correct answer: The MLO is prohibited from taking the same approved course in successive years.
The SAFE Act includes a 'successive years' rule, which prohibits an MLO from meeting their annual CE requirement by taking the same NMLS-approved course in the same or consecutive years. Taking the same course two years in a row will result in the credit not being counted toward license renewal.
Question 4: Under the SAFE Act, which of the following is a key distinction between a state-licensed MLO and a registered MLO?
- Registered MLOs must complete more hours of annual continuing education than state-licensed MLOs.
- State-licensed MLOs work for non-depository institutions, while registered MLOs work for depository institutions like banks or credit unions. (Correct answer)
- Only state-licensed MLOs are required to have a unique identifier through the NMLS.
- Registered MLOs must pass a state-specific component of the national exam, while state-licensed MLOs do not.
Correct answer: State-licensed MLOs work for non-depository institutions, while registered MLOs work for depository institutions like banks or credit unions.
The primary difference lies in the employer type. State-licensed MLOs work for non-depository institutions (e.g., mortgage brokers, mortgage lenders). Registered MLOs are employees of depository institutions (e.g., banks, savings associations, credit unions) or their subsidiaries and are registered with the NMLS but do not hold a state license.
Question 5: A state licensing agency is reviewing an application for a new MLO license. Which of the following findings would be grounds for denying the license under the minimum standards of the SAFE Act?
- A felony conviction for fraud that occurred 5 years ago. (Correct answer)
- A foreclosure on a personal property that was finalized 8 years ago.
- A misdemeanor conviction for a traffic violation last year.
- A collection account on the applicant's credit report.
Correct answer: A felony conviction for fraud that occurred 5 years ago.
The SAFE Act sets minimum standards for licensing, which include prohibiting a license from being issued to an individual who has had a felony conviction in the preceding seven-year period. More specifically, an applicant can never be licensed if they have ever been convicted of a felony involving fraud, dishonesty, a breach of trust, or money laundering.
Question 6: According to the SAFE Act and its implementing regulations, when must a Mortgage Loan Originator provide their NMLS unique identifier to a consumer?
- Only upon the consumer's request.
- Only on the final Closing Disclosure.
- Only on business cards and other advertising materials.
- Upon request, before acting as an MLO, and in their initial written communication with the consumer. (Correct answer)
Correct answer: Upon request, before acting as an MLO, and in their initial written communication with the consumer.
Regulation G and H, which implement the SAFE Act, require an MLO to provide their unique identifier to a consumer (1) upon request, (2) before acting as an MLO, and (3) through the originator's initial written communication with a consumer, whether on paper or electronically. This ensures transparency and allows the consumer to research the MLO on NMLS Consumer Access.
Mortgage SAFE Act and MLO Licensing Questions and Answers
An individual works for a state-licensed mortgage lender.
Their primary duties involve collecting and packaging loan application documents for the MLO and communicating with the borrower to request follow-up items like pay stubs and bank statements.
They do not offer or negotiate loan rates or terms.
According to the SAFE Act, which of the following is true?