Mortgage SAFE Act and MLO Licensing 4 — Questions and Answers
Question 1: Under the SAFE Act, which of the following is TRUE about the pre-licensure education requirement?
- An applicant may teach a pre-licensure course and count the hours toward their own requirement
- Courses must be completed within 3 years before submitting a license application
- Online courses are prohibited; all education must be classroom-based
- An instructor teaching a SAFE Act course may NOT use those hours toward their own education (Correct answer)
Correct answer: An instructor teaching a SAFE Act course may NOT use those hours toward their own education
Under the SAFE Act, an instructor teaching a pre-licensure education course cannot use those hours to satisfy their own pre-licensure or continuing education requirements.
Question 2: A company hires an independent contractor to originate mortgage loans. Under the SAFE Act, this individual must:
- Register as a federal employee under the NMLS registry
- Obtain a state MLO license because independent contractors do not qualify for the depository institution exemption (Correct answer)
- Operate under the sponsoring company's license without their own
- Only register if originating more than 5 loans per year
Correct answer: Obtain a state MLO license because independent contractors do not qualify for the depository institution exemption
Independent contractors must obtain their own state MLO license and cannot rely on an employer's license or the depository institution exemption.
Question 3: The SAFE Act requires the NMLS to function as a repository for MLO information. Which data element is NOT typically stored in NMLS?
- Criminal background check results
- Credit report information
- MLO's personal tax returns (Correct answer)
- Employment history
Correct answer: MLO's personal tax returns
NMLS stores criminal background results, credit reports, and employment history, but personal tax returns are not required to be submitted to or stored in NMLS.
Question 4: An MLO licensed in State A wants to originate a loan for a borrower purchasing property in State B, where the MLO is not licensed. What must the MLO do?
- Proceed under State A's license since the borrower is their client
- Obtain a license in State B before originating the loan (Correct answer)
- Apply for a temporary interstate license waiver from HUD
- Register as a federal MLO to bypass state licensing
Correct answer: Obtain a license in State B before originating the loan
MLOs must be licensed in the state where the property is located, not just the state where they or the borrower reside.
Question 5: Which of the following best describes a 'registered' MLO versus a 'licensed' MLO under the SAFE Act?
- Registered MLOs work at non-bank lenders; licensed MLOs work at banks
- Registered MLOs are employees of federally regulated depository institutions; licensed MLOs work at non-depository institutions (Correct answer)
- Registered MLOs have higher education requirements than licensed MLOs
- Registered MLOs are supervised by state regulators; licensed MLOs by federal regulators
Correct answer: Registered MLOs are employees of federally regulated depository institutions; licensed MLOs work at non-depository institutions
Registered MLOs are employees of federally regulated depository institutions who register through NMLS, while licensed MLOs work at non-depository institutions and must obtain a state license.
Question 6: Under the SAFE Act, what is the minimum passing score on the SAFE Mortgage Loan Originator Test?
- 70%
- 75% (Correct answer)
- 80%
- 85%
Correct answer: 75%
Applicants must achieve a score of at least 75% to pass the SAFE MLO national test component.
Question 7: Which statement about the SAFE Act's background check requirement is CORRECT?
- Only state criminal records are checked; federal records are excluded
- Background checks must be renewed every 2 years
- Applicants must submit fingerprints for an FBI criminal history check through NMLS (Correct answer)
- Background checks are optional if the applicant provides notarized character references
Correct answer: Applicants must submit fingerprints for an FBI criminal history check through NMLS
SAFE Act applicants must submit fingerprints through the NMLS for an FBI criminal history background check as a mandatory part of the licensing process.
Mortgage SAFE Act and MLO Licensing 4
Under the SAFE Act, which of the following is TRUE about the pre-licensure education requirement?