When the Nationwide Mortgage Licensing System and Registry (NMLS) final guidelines were announced in 2009, most loan originators were too busy to be overly concerned about the pending changes. Then reality set in—they would have to take state and national exams or stop originating. They began adjusting their plans for the next several months.
For the majority of originators who chose to stay in the lending profession, the exam was a minor interruption, considering they had already faced numerous regulatory and other hurdles. Yet, most of those with whom I talked agreed that the NMLS already has had an impact on the lending industry and their own operations.
A Good Purpose
It is difficult to argue with the primary goal of the NMLS’s—to enhance the overall professionalism of the lending industry and help eliminate those who aren’t qualified to remain in business. “It is actually surprising that uniform licensing wasn’t required before,” said Mark Maimon, director of Sales at Universal Mortgage Inc. in Brooklyn, NY. “I am glad that the requirements were introduced. That’s not because I enjoy taking tests, but rather I knew it would help get rid of people who don’t belong in the industry.” As Maimon noted, it is a small sacrifice to make. “If loan officers are not willing or able to pass a test in order to prove their basic competence, then they really don’t belong in an industry where they are advising clients on such important financial matters as purchasing or refinancing a home. I think this (NMLS) is a good cleansing of our industry.”
Of course, many originators are concerned that the NMLS isn’t universally applied. ”One also needs to ask why the banks aren’t required to participate,” said Bill Haines, an originator with Guild Mortgage, Bellevue, Wash. “We would argue that all loan officers/companies should be held to the same standards and operate on an equal playing field.”
Even the most experienced originators didn’t take the licensing requirements for granted, and realized that test preparation could be an interruption in their normal schedule. James Nesbit Republic Mortgage, Tumwater, Wash., stressed that even veteran originators wanted to be prepared. “I devoted 20 hours to an online course before the test and another 25 hours to study for the exam,” he said. “Even though you think you know the information, you still want to be ready. There was some pressure to do well.”
“I think most originators agree that it could have an impact on their day-to-day business,” added Haines. “It took time to be fingerprinted for the background check, and to prepare for and take the test. So the overall process did interfere with our production.” Haines, licensed in Washington for over 20 years, added that he was surprised that he was required to retake the Washington State exam. “The Washington State Department of Financial Institutions informed me that I would be required to re-take the exam because I had originally taken the test prior to computerization,” he explained.
Some stated that the time requirement wasn’t a major intrusion on their overall production. Maimon had to prepare for the national test and both New York and Connecticut state exams, but said he wasn’t unduly stressed by the process. “Of course, it did take some effort, especially the class required prior to the exam,” he said. “But I spaced the tests out so that I had time and I didn’t procrastinate, which I am sure many people did.”
Unable to Originate
Of course, those who didn’t meet the test deadline or failed the exam one or more times faced a much greater obstacle, a temporary halt on their production. “I know of a few people who didn’t take the exam seriously and had to stop originating while they waited to take it again,” said Nesbit. “One of them took it three times and didn’t pass and is now out of the business. Another originator passed the second time. It’s hard to believe that people wouldn’t take the exam seriously.”
Haines added that the consequences could be even more severe for those who didn’t make the initial grade. “I heard of at least one originator at another company who was terminated because he didn’t pass and the company didn’t want to wait while he prepared for the retake.”
The NMLS exams most likely have helped reduce the overall number of originators nationwide, as some originators used the exam as an excuse to retire or find another profession. An NMLS representative wasn’t available to provide statistics, but some informal benchmark indicates a recent drop in license registrations. For example, Nesbit indicated that he was aware that out of 7,900 originators previously registered in Washington State; only 4,900 had passed the exam and registered by the end of 2010.
The majority of originators won’t have to worry about test taking again, as long as they meet their continuing education requirements. Once the national and state exams are passed by a loan officer, there’s no need to take them again as long as the originator’s license is renewed annually. As Haines pointed out, continuing education requirements vary from state to state. “Originators need to be proactive and contact their respective state(s) to determine the continuing education requirements and get that education completed on time,” he said. Haines noted that most states are not set up to send reminders and licenses often automatically lapse if the education requirements are not met by renewal time.
The National Registry is the other critical component of the NMLS. The Federal Registry was expected to be operational by early February. “It is our hope that all states will see the value of the NMLS and join,” said Haines. “Industry associations should also be proactive in promoting consumers the value of the National Registry.”
While it may be a little too early to determine how popular it will be with consumers, most mortgage professionals probably aren’t concerned that they will be checked by prospective customers. “I have no problem at all with people reviewing my records, assessing the information on the registry,” said Maimon. “Any reputable mortgage professional who has nothing to hide should have no issue with people being able to review their records. In fact, I plan to use my unblemished record as a selling tool to compare to other originators who may have blemishes or complaints on their record.”
David Robinson is associate editor of Broker Banker.