Mortgage Loan Originators – FAQs

A residential mortgage loan is any loan primarily for personal, family, or household use that is secured by a mortgage or deed of trust as defined in the federal Truth in Lending Act, or residential real estate upon which is constructed or intended to be constructed a dwelling. Dwelling means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile-home, or trailer, if it is used as a residence.

As of January 4, 2010, the Department of Financial Protection and Innovation began implementing Senate Bill 36 bringing California into conformance with federal law established by the “Safe and Fair Enforcement (S.A.F.E.) for Mortgage Licensing Act of 2008.” A key part of the law is participation in the Nationwide Multistate Licensing System and Registry that was developed by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).

All MLOs employed by finance lenders/brokers under the California Finance Law (CFL) or residential mortgage lenders/servicers under the California Residential Mortgage Lending Act (CRMLA) must be licensed. MLOs may apply for a license by submitting a Form MU4 to the California Department of Financial Protection and Innovation (DFPI) through the Nationwide Multistate Licensing System and Registry (NMLS).The MLO license must be renewed each year between November 1 and December 31. MLOs must continue to meet all criminal, financial and background requirements at all times. FBI checks and credit checks may be required at renewal.

Pre-requisites for License applications

• All applicants must apply for a license through the NMLS by filing a Form MU4 and receiving a sponsorship by a company holding a valid unique identifier with NMLS and which is licensed by the California Department of Financial Protection and Innovation.
• Authorization to provide criminal records information from the FBI through NMLS.
• Authorization to obtain an independent credit report obtained by NMLS from a consumer credit reporting agency.
• An applicant must demonstrate financial responsibility, character and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly and efficiently.
• 20 hours of pre-licensing education including 3 hours of federal law and regulations, 3 hours of ethics, 2 hours of training related to nontraditional mortgage products, 10 hours of elective education, and 2 hours of CA-DFPI Law. All pre-License education must be received from NMLS approved course providers.
• Passing of written tests including both federal and state components. The written tests must be taken through test providers approved by NMLS.
• Coverage by a surety bond provided by the mortgage loan originator’s employer.
  For full details, see the NMLS site.

For full details, see the NMLS site.

You must satisfy one of the following conditions:

1. Passing score on both the National and California State components of the SAFE Test or
2. Passing score on both the National Test Component with Uniform State Content and the California State Component of the SAFE Test.

NMLS must indicate you are compliant with this requirement.

You may take the tests at any time, either together or at separate times. You are not required to complete your pre-licensing education requirements prior to taking either test. An individual who fails a test may retake the test up to two consecutive times with at least 30 days passing between each retesting. An applicant who fails three consecutive tests must wait at least 180 days before retesting. For more information about retesting, please visit the NMLS Website.

You should allow at least 5 days for exam results to be posted in NMLS. Additional information about testing is available on the NMLS Website.

Information about sponsorship is available on the NMLS Website. If I have a DRE MLO active license endorsement how do I include my DFPI licensed company as my sponsor? The NMLS system will not allow a DFPI licensed company to sponsor an MLO holding a DRE MLO license endorsement. In this case DFPI sponsorship by a CFL or CRMLA company is not required. If you would like the DFPI licensed company to be reflected as your sponsor on NMLS, you may apply for a DFPI MLO license in addition to your DRE MLO license endorsement, meet all DFPI licensing requirements and pay the applicable fees.

Once an MLO is sponsored by a CFL or CRMLA licensed company that has an approved license status in NMLS, the MLO becomes covered under the employer’s surety bond.

MLO applicants must submit fingerprint cards to NMLS for an FBI criminal background check (CBC) and authorize NMLS to obtain a credit report for review by the DFPI.

Application

You must apply for the license through the Nationwide Multistate Licensing System and Registry (NMLS). For information on getting started go to: http://mortgage.nationwidelicensingsystem.org/licensees/MLOs/Pages/default.aspx.

New Application Checklist

You must complete your MLO license application within 90 days of filing the application. Failure to complete the application will result in abandonment of the application. If you still wish to be licensed, you will be required to file a new license application through NMLS.

Filing Fees

Applicants for an MLO License must pay all fees to NMLS in order to file the application. Fees may be paid by credit card or ACH transfer. Fees may be paid by the MLO applicant or his/her employer/sponsor at the time of filing the application.

1. MLO Application Fee $300
2. NMLS administrative fee $30
3. NMLS sponsorship fee $30
4. Credit report fee, if a credit report has not been authorized through NMLS in the past 30 days
5. Fingerprint fee $39, if you authorize a criminal background check at time of application

Note: ALL FEES ARE PAID THROUGH NMLS AND ARE NOT REFUNDABLE.

See Fee Schedule

If the Mortgage Loan Originator’s legal name is being changed, this amendment must be filed through the NMLS with supporting documentation provided to the Department of Financial Protection and Innovation.All other amendments must be filed through the NMLS. There are no fees for amendments to the Mortgage Loan Originator license. See MLO Amendment Checklist for full details.

The MLO license must be renewed each year between November 1 and December 31. MLOs must continue to meet all criminal, financial and background requirements at all times. FBI checks and credit checks may be required at renewal.All licensees must submit a renewal request through NMLS by December 31. You may continue to originate loans while the Department processes your renewal request. If you do not submit a renewal request by December 31, your license will expire on January 1 and you will not be authorized to originate loans. You are permitted to request reinstatement of your license through the last day of February. After that, you must apply for a new license. In addition to meeting all licensing requirements you must complete 8 hours of continuing education for the last year in which you held a license before you will be issued another license.

Educational Requirements

MLOs must complete at least 8 hours of continuing education (CE) each year in order to renew the license, which must include:

• 3 hours of federal law and regulations,
• 2 hours of ethics; and,
• 2 hours of lending standards for nontraditional mortgages,
• 1 hour of CA-DFPI specific education.

All education must be received from NMLS approved course providers.

You should review your NMLS record. If pre-licensing education (PE) was before 2011, continuing education (CE) is required in 2012 to renew the license for 2013. If PE was completed in 2012, no additional CE is required in 2012.

Annual Renewal Fee

All licensees must submit a renewal request through NMLS by December 31. You may continue to originate loans while the Department processes your renewal request. If you do not submit a renewal request by December 31 your license will expire on January 1 and you will not be authorized to originate loans. You are permitted to request reinstatement of your license through the last day of February. After that you must apply for a new license. In addition to meeting all licensing requirements you must complete 8 hours of continuing education for the last year in which you held a license before you will be issued another license.

MLO licensees must pay all fees to NMLS in order to request renewal. Fees may be paid by credit card or ACH transfer. Fees may be paid by the MLO or his/her employer/sponsor at the time of request.

1. MLO annual renewal fee $300; MLO reinstatement fee (late renewal) $100
2. NMLS annual renewal fee $30

Note: ALL FEES ARE PAID THROUGH NMLS AND ARE NOT REFUNDABLE.

See Fee Schedule

The licensee must notify the Department through the NMLS that they intend to surrender the license.

For full details see the Mortgage Loan Originator Surrender Checklist.

An MLO with an ACTIVE DRE MLO license endorsement does not need a DFPI MLO license to work for a CRMLA or CFL company. However, an MLO with an INACTIVE DRE MLO license endorsement must obtain an MLO license from the DFPI to work for a CRMLA or CFL company.

For currently licensed real estate salespersons, holding an ACTIVE DRE MLO license endorsement means that you are employed by (1) a properly licensed real estate broker which holds an active MLO license endorsement as a sole proprietor, or (2) a licensed real estate corporation which holds an active MLO license endorsement. As a salesperson, once your employment with a properly licensed MLO real estate broker is terminated, your MLO status will be changed from active to inactive and you will have to obtain an MLO license from the DFPI in order to continue to work for a CRMLA or CFL company.

For currently licensed real estate brokers, holding an ACTIVE DRE MLO license endorsement means that (1) you hold an active MLO license endorsement as a sole proprietor, or (2) you are employed as a broker associate by a properly licensed real estate broker which holds an active MLO license endorsement as a sole proprietor, or by a licensed real estate corporation which holds an active MLO license endorsement. As a broker associate, once your employment with a properly licensed MLO real estate broker is terminated, your MLO status will be changed from active to inactive and you will have to obtain an MLO license from the DFPI in order to continue to work for a CRMLA or CFL company.

The California Financial Code (CA Fin. Code) allows for certain exemptions from licensing by the Department of Financial Protection and Innovation (DFPI) as a Mortgage Loan Originator (MLO). These exemptions can be found in CA Fin. Code Section 22100(b) for the California Finance Law (CFL) and Section 50002.5(a) for the California Residential Mortgage Lending Act (CRMLA).

An MLO with an ACTIVE registration in the NMLS Federal Registry does not need a DFPI MLO license to work for a CRMLA or CFL company. However, an MLO with an INACTIVE registration must obtain an MLO license from the DFPI to work for a CRMLA or CFL company.A registered mortgage loan originator is an individual who meets all of the following criteria:

• Meets the definition of mortgage loan originator.
• Is an employee of a depository institution, a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration.
• Is registered with, and maintains a unique identifier through the Nationwide Multistate Licensing System and Registry.

Whether an individual is considered to be an MLO is not based on the title or position of the person, but rather whether the activity of the person fits within the definition of MLO. The definition of an MLO can be found in Section 22013(a) of the CFL and Section 50003.5 of the CRMLA, which states in a pertinent part: “Mortgage loan originator” means an individual who, for compensation or gain, or in the expectation of compensation or gain, takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan…”.

Subsection (b)(7)(ii) of Appendix A of HUD’s final rule provides that offering or negotiating terms of a loan does not include offering or negotiating loan terms solely through a third-party licensed loan originator, so long as the nonlicensed individual does not represent to the public that he or she can or will perform covered activities and does not communicate with the borrower or potential borrower. For example, an individual who works solely for a lender, when the individual offers loan terms exclusively to third-party licensed loan originators and not to borrowers or potential borrowers. (Federal Register Vol. 76, No. 126, June 30, 2011)

Therefore, any account executive or person who works solely for a lender that offers or negotiates loan terms solely through third-party licensed mortgage loan originators and not to borrowers or potential borrowers is not required to be licensed as a mortgage loan originator.