So You Want to Be an MLO…
By Kathy Gyselinck, Executive Vice President of Human Resources and Legal Compliance at Southeast Mortgage
Before the housing bubble burst in 2007, many Mortgage Loan Originators (MLOs) operated on a part-time basis, as it is a commission sales position and they were looking to make a bit of extra money. A lot of people in the industry had other full-time jobs and handled loans on the side.
Today, to work as a MLO, you’ve got to be fully committed to your profession. Due to all of the regulatory reform and licensing requirements, it would be very difficult for any professional originator to try and do the job part time. It takes a tremendous amount of time and knowledge to stay on top of compliance and not only be a successful salesperson but do it in a way that stays compliant with the law.
Looking back at the housing boom that began in the 1990s, hindsight makes it clear where all the parties involved made mistakes. It was easy to access capital; marketing was aggressive and interest-only loans and adjustable rate mortgages allowed almost anyone to purchase a home.
When the housing market collapsed in 2007 and the economy slumped, lawmakers began looking for answers to find a way to prevent it from happening again. The mortgage industry came under scrutiny, and the Secure and Fair Enforcement Mortgage Licensing Act, known as the SAFE Act, passed in 2008 as a part of the Housing and Economic Recovery Act.
The national law required that each state create its own law to comply with the SAFE Act. The SAFE ACT set requirements for individual MLOs and institutions regulated by the mortgage industry and standardized the process of registration and licensing for all MLOs, new and existing, in an effort to enhance consumer protection and reduce fraud. All MLOs, regardless of where they work, must be registered with the Nationwide Mortgage Licensing System. (For more on this topic, please read this previous Thought Leadership column.)
MLOs must also maintain a unique identification number that does not change if and when they switch firms. Agencies must comply with the SAFE Act, employ only those that are fully registered, and have a written policy to ensure their compliance with the SAFE Act. The final deadline for compliance with the SAFE Act was in 2010.
In addition to maintaining their registration, state regulated MLOs are required to take at least 20 hours of pre-license education classes related to mortgage licensing with an NMLS approved education provider. a licensed institution. To maintain their license, they must complete eight hours of continuing education each year. Further, MLOs must pass a federal and state test. They have three chances to pass the test with a score of 75. If they do not pass, they must wait six months to take the test again.
Prospective MLOs must undergo a credit and criminal background check. Each state must submit the fingerprints of all SAFE applicants for an FBI background check. In Georgia, an MLO must be sponsored by an employer when submitting an application for an MLO license.
It takes a tremendous amount of time and knowledge to maintain compliance with the law and be a successful salesperson. Mortgage loan origination is no longer a job you can do on the side or on a part-time basis. You (and the agency you work with) must be dedicated to the work and the customers you serve.