studyingMost seniors do not yet know that the SAFE Mortgage Licensing Act of 2008 is coming on stream in many states starting right now.  This is an effort to insure that all mortgage loan originators are registered with the Nationwide Mortgage Licensing System (NMLS).  In addition, mortgage loan originators who do not represent a depository institution such as a bank, credit union, or savings bank (about 85% of originators do not), must complete 20 hours of pre-licensing education and pass a very tough national licensing exam.  Individual states also require a state specific component administered separately from the national exam.  Fingerprinting, credit checks and criminal background checks are also required.  8 hours of continuing education each year is also required by each of the states.

I have recently completed these testing requirements for New Hampshire and I can tell you that the national exam is very tough.  A reverse mortgage specialist will not pass this exam without serious study.  Unfortunately, the exam is totally geared toward forward mortgage lending with almost no actual relevance for reverse mortgage people.  I know of few originators who work both sides of the equation; forward and reverse.  Reverse people, therefore, will need to burn the midnight oil to achieve a satisfactory grade on the national exam.

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State exams are not easy, either. They, too, are an unfair measure of what a reverse specialist needs to know but the additional exam is a requirement in all states effective 2010. New Hampshire is among the first to require it in 2009.

Beneficiaries of SAFE Act implementation are consumers.  At last, consumers should have some guarantee that their loan officer did not enter the business last night.  They have full assurance that the loan originator has not previously been convicted of a felony related to financial matters.  And they have some assurance that the originator is not providing recommendations on financial product options while his own house is in fiscal disaster.  Finally, consumers will have a single source to go to in the event that they want to register a complaint against a specific mortgage loan originator. Beginning in 2010 the Nationwide Mortgage Licensing System (NMLS) will be opened up to consumers for this purpose.

One more thing.  If your loan officer works for a bank or bank subsidiary – he/she is not required to complete the 20 hour pre-licensing course, nor take the national exam nor even the state exam(s).  Presumably, this is because loan officers working for a depository institution or a subsidiary are required to “register” with the federal banking agencies defined in the SAFE Mortgage Licensing Act.  This includes the Federal Reserve System, Comptroller of Currency, Director of Thrift Supervision, National Credit Union Administration, and Federal Deposit Insurance Corporation.  Knowledge testing and/or continuing education are policy mandated for employees of several of the very largest of the national banks.  But employees of smaller banks have told me they have no such education or licensing regulations.  Perhaps this is another good reason for borrowers to seek out an experienced state licensed mortgage broker rather than a bank?

PS – My scores were 85% National Exam and 93% NH State Exam.  I will need to take the MA State Exam in 2010.  ME has not yet joined NMLS but requires licensing.

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Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant