Mortgage SAFE Act and MLO Licensing 5 — Questions and Answers
Question 1: A loan originator works exclusively for a nonprofit organization that makes mortgage loans at below-market rates to low-income borrowers. Under the SAFE Act, this individual is:
- Fully exempt from all SAFE Act requirements
- Required to obtain a state MLO license (Correct answer)
- Required only to register with HUD, not NMLS
- Exempt only if the nonprofit is tax-exempt under IRS code 501(c)(3)
Correct answer: Required to obtain a state MLO license
Employees of nonprofit organizations that originate mortgage loans are generally required to obtain state MLO licenses under the SAFE Act, with limited exceptions.
Question 2: Under the SAFE Act, which action by a state would be considered insufficient to comply with the federal minimum standards?
- Requiring 20 hours of pre-licensure education
- Requiring a passing score of 75% on the national test
- Allowing MLOs to skip the credit report requirement if they have a clean criminal record (Correct answer)
- Performing FBI fingerprint-based criminal history checks
Correct answer: Allowing MLOs to skip the credit report requirement if they have a clean criminal record
The SAFE Act mandates both criminal background checks AND credit report reviews; states cannot waive the credit check requirement even for applicants with no criminal history.
Question 3: An MLO's state license is revoked for cause. How does this affect their ability to obtain a license in another state?
- It has no impact because each state's licensing is independent
- The revocation appears in NMLS and other states may deny licensure based on it (Correct answer)
- They may apply in another state after a mandatory 2-year waiting period
- They must obtain a federal waiver before applying in any other state
Correct answer: The revocation appears in NMLS and other states may deny licensure based on it
NMLS records all disciplinary actions including revocations, making this information visible to all state regulators who may use it to deny a new license application.
Question 4: Under the SAFE Act's continuing education requirements, which topic must be included in the mandatory annual 8 hours?
- State-specific tax law
- Federal law and regulation updates (Correct answer)
- Property appraisal methods
- Commercial real estate fundamentals
Correct answer: Federal law and regulation updates
The SAFE Act requires that the annual 8-hour continuing education include at least 3 hours on federal law and regulations.
Question 5: What is the key difference between 'taking a mortgage application' and 'loan processing' under the SAFE Act?
- Loan processing requires a license; taking applications does not
- Taking an application triggers MLO licensing requirements; loan processing generally does not (Correct answer)
- Both activities equally trigger MLO licensing requirements
- Neither activity requires a license if done under lender supervision
Correct answer: Taking an application triggers MLO licensing requirements; loan processing generally does not
Taking a residential mortgage loan application is an activity that requires MLO licensure, while loan processing (gathering documents, verifying information) generally does not.
Question 6: Under the SAFE Act, a mortgage company must maintain records related to MLO activity for a minimum of how many years?
- 2 years
- 3 years (Correct answer)
- 5 years
- 7 years
Correct answer: 3 years
The SAFE Act and related federal regulations generally require mortgage companies to retain records related to MLO activity for a minimum of 3 years.
Question 7: Which statement accurately describes the 'temporary authority to operate' provision added to the SAFE Act by the Economic Growth Act of 2018?
- It allows unlicensed individuals to originate loans in all states for 90 days
- It permits licensed MLOs who change employers or move to a new state to continue originating while their new application is pending (Correct answer)
- It grants temporary licenses to bank employees transitioning to non-bank lenders
- It allows MLOs to originate in any state for 30 days without a license transfer
Correct answer: It permits licensed MLOs who change employers or move to a new state to continue originating while their new application is pending
The 2018 amendment grants temporary authority to originate to MLOs who are already licensed or registered and who apply for licensure in a new state or with a new employer while their application is pending.
Mortgage SAFE Act and MLO Licensing 5
A loan originator works exclusively for a nonprofit organization that makes mortgage loans at below-market rates to low-income borrowers.
Under the SAFE Act, this individual is: