SAFE Act National Test – Update
Choosing A Lender October 22nd, 2009
I have recently taken and passed the new SAFE Act national mortgage loan originator test required of all persons who take a loan application whether mortgage banker, broker or loan officer. Originators who work for a deposit-taking institution (about 15%) are exempt.
Make no mistake, this is a very difficult test. This is especially the case for reverse mortgage loan officers with no forward lending experience since the examination deals heavily in conventional mortgage products, practices and procedures. The regulations and ethics sections certainly do apply to us, but the exam is difficult.
Interestingly, schools that provide the 20 hour pre-licensing course are warning graduates and students not to underestimate the degree of difficulty of this exam. Some broker offices are already reporting high failure rates among well experienced loan officers. Most are missing the passing grade by only a few points – but the benchmark is only 75%. Some 20 year veterans have been embarrassed and will need to retake their exam after a thirty day wait period. They have a total of three chances to retake the test (each after a 30 day wait period) and beyond that they must wait six months before a fourth retake attempt is approved.
Note that these loan originators may not take an application without passing the exam. Few will be solvent enough to remain in the business for up to 9 months without ability to do loan applications and they will need to find a new career. After that many chances, perhaps they should.
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Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant
October 22nd, 2009 at 5:37 pm
Interesting. If someone fails, how would we know? How will it be policed? in other words, what’s to keep someone who failed the test from continuing to accept applications??
October 22nd, 2009 at 6:38 pm
Thank you for your thoughtful question. Consumers might not immediately know that a loan officer has failed the test. However, passing the exam is a requirement (or soon will be) in many states in order to obtain or renew a mortgage originator license. So our ex-loan officer would be unlicensed. Accepting an application without a valid license is a federal offense, carries a fine of up to $25,000 and jail time.
The rogue loan officer will certainly be discovered when the entity he works for (mortgage banker or mortgage broker) is examined by the appropriate licensing authority – usually the state banking commissioner. All files, loan records and employee records may be examined and verified during the audit. Catching an unlicensed loan officer should be a simple task. An elementary first step is to pull some loan files and look at the credentials of loan officers who accepted those applications. I doubt that any intelligent employer would permit an unlicensed loan officer to continue taking applications as it also puts the broker license at risk.
Once the Nationwide Mortgage Licensing System & Registry (NMLS) is opened up to consumers (sometime in 2010) it should be a simple task for anyone to learn if a loan originator is properly and currently licensed. NMLS issues a unique identifier to every loan originator and consumers will be able to locate the record based upon that number or name. The record will indicate current licensing and education credits plus consumer complaints.