The Pass Rate of the New National Loan Originator Exam is 67%. Who is/isn’t passing?
Jillayne Schlicke on 05 3, 2010
I’ve had a chance to meet many loan originators during the past 5 months while teaching the required 20 Hour SAFE Comprehensive Pre-licensing and Exam Prep Course.
Currently, loan originators in WA State who have not been previously licensed are going through the licensing and testing phase which includes the required 20 Hour Course, mandated by the Federal SAFE Act (Secure and Fair Enforcement) Act of 2008.
I have some feedback for folks who are looking at the pass rates of the new national exam (currently 67%) and wondering who is passing and who is not passing the exam. But first some background.
Prior to 2010, loan originators working under a mortgage broker in some states had to become licensed and pass state exams by scoring at least 70%. State exam included state law, federal law, mortgage-related mathematical computations and a few questions on ethics. At the end of 2007 WA State had roughly 14,000 licensed LOs. In 2008 there was a WA state law change in which the definition of the word “lender” at the state level was brought into line with the federal definition which is basically, “the entity with the money to fund the loan.” Licensed mortgage brokers with a correspondent line of credit with one or more banks were told they had to switch their state license to a consumer loan license (CL) instead of a mortgage broker license. Since, at that time, consumer loan companies were not required to license their loan originators, many LOs who worked under a broker that had to switch their license to a CL license let their loan originator license lapse. Why pay money for continuing education and to maintain a license that’s not required? A few months later in the summer of 2008, the SAFE Act passed and it would only be a matter of time before the regulators got busy licensing CL loan originators. Well, two years later here we are. Today WA State has roughly 4,000 licensed loan originators who work under a mortgage broker.
By July 1, 2010, all Washington state loan originators who work under a consumer loan license (correspondent lenders, mortgage bankers, non-depository lenders) must have taken 20 hours of prelicensing education, pass the national and applicable state exams, a background check and submit fingerprints through the Nationwide Mortgage Licensing System. The feds are taking over the bulk of loan originator licensing and education.
For the past 5 months, I have had the pleasure of meeting many loan originators who work under a consumer loan license. I am happy to share with you that the quality of LOs in 2010 is radically different from the LOs I met in 2007. Yes readers, there are many differences between mortgage broker LOs and consumer loan company LOs. But those differences will have to wait for another blog post. Today I’d like to share with you who’s passing the LO exam and who is not passing, and who will need to take the exam more than once and quite possibly more than two times.
Loan originators who have been in the business for at least 11 years
…with no work stoppage time (excluding ordinary parental or other temporary medical leave), entered the industry back in the 1990s, back in the time when the world still believed that federal and state lending laws existed to be followed and we all had managers who cared about the default rates of the loans originated out of their branch. These LOs have seen their share of FHA and VA loans along with sane underwriting guidelines when we actually declined loans. These folks will and are passing the loan originator exam unless they spent the majority of the 2000s at a brokerage (see below.) Their biggest challenge is to learn the difference between their own company’s policies and procedures and what the law says to do. Mortgage lending firms can have tougher guidelines than what state or federal law allow but they can’t go weaker than the law. These LOs just simply need to tease apart the two, and learn THE LAW because the national exam won’t have test questions on any one company’s policies and procedures.
Loan originators who entered the industry during the bubble run up and predatory lending heydays of the 2000s.
Loan originators who worked for a mortgage broker during the bubble run up received little, if any compliance training and very little training on agency product (Agency = the Fs; Fannie, Freddie, FHA). These loan originators will definitely will need to allocate way more study time than a 20 hour course. These LOs can and will pass the exam because they have one thing going for them: Motivation in the form of if they don’t pass, they won’t be able to originate. Fear and anxiety are powerful motivators and LOs can use this as fuel to prompt them to study. This means actually opening a course book and reading it, taking practice quizzes to test for retention, and repeating for each federal law. Beyond the required 20 hour SAFE course, I recommend setting aside an additional 20 hours of study time with no distractions. If LOs are distracted while studying, double that to 40 hours. Go off the grid while studying. Trust me.
Loan originators who are brand new to the industry
Loan originators who have never originated but know something about the industry because they’ve worked in another parallel industry will pass the exam. For example, real estate agents know the lingo but know less than they think they do about federal and state law, everyday activities of loan origination, and lending products. 30 additional hours of study time minimum, beyond the 20 hour class.
Loan originators who are brand new with no prior experience in the industry will likely fail the exam the first time with some minor exceptions. Let’s tackle the exceptions first. LO candidates with a Bachelors or Masters degree in finance, economics, philosophy, soc/psych, or accounting will do fine on the exam because they understand how to study for exams dealing with complex questions. In fact, they might feel like the exam was too easy, but they’re going to study anyways because they’re academically mature enough to have learned that studying actually works. This exception does not apply to anyone with an MBA. Folks who have taken other difficult licensing exams will also understand how to study in order to pass. These include people who hold a securities license or an insurance license.
That’s all the exceptions.
Now let’s talk about why brand new LOs will likely fail the first time. 20 hours is not nearly enough classroom time needed to teach all new LO candidates everything they need to learn in order to pass the exam. I know what you’re thinking, “Jillayne and those educators, they just want more classroom time required so they can make more money.” Yeah, I know it sounds self-serving. But honestly, it is extremely grueling work bringing someone from zero knowledge of mortgage lending to a point where they can go forth and prosper. Loan originators reading this, think about how long it took you to really get your sea legs. I’m not talking about how long it took you to close your first sucker on the phone spoon-fed to you via a radio commercial during a refi boom. I’m talking about how many days, weeks, months until you felt like you knew enough to be dangerous. Maybe a couple of weeks? Maybe you’re humble enough to say you’ll never be finished learning about mortgage lending because guidelines never stay static. 20 hours might be the minimum required but a brand new LO is going to be in training mode for a while. Ask any loan processor. They’re the ones who end up training new LOs.
Currently the 20 hour pre-licensing courses are filled with experienced LOs from the consumer loan companies. A baby LO with no experience is left with having to decode TILA, RESPA, ECOA, FCRA, SAFE, and re-insert the meaning of these laws into case study context very quickly because there is so much to cover during that 20 hour class. It’s extremely difficult to teach a course filled with a mix of experienced LOs and new LOs. Both need to learn the same concepts but the baby LO is at a disadvantage. Not all course providers are skilled at identifying when students need something different from their educator.
The SAFE Act will eventually be changed to require more hours of pre-licensing education but for now 20 hours is fine because we need to bring the current crop of unlicensed consumer loan company (also known as non-depository mortgage banker) LOs into the system. But those 20 hours fly by leaving baby LOs in the dust. New LO candidates might need to retake their 20 hour course again, and those who have report that the second time around, they retained way more course content.
Loan originators who have not taken a test since high school
If the loan originator falls into the category of a person who has been originating loans pre-2000, these loan originators are going to do fine as long as they study and brush up on their federal laws. Their mantra ought be “anxiety is my friend.” LOs: Embrace the anxiety and block off downtime to study beyond the 20 hour class.
Loan originators who fell out of the industry during the hell that was 2008 and are now back
Loan originators who ONLY originated subprime, entered during the boom, never met a Realtor they liked because “Realtors are so demanding” who live only for the refi and are now trying to get juiced to pass the new exam will likely fail the first time. The test is much more difficult than you imagine and tougher than previous state LO exams. LOs reading this, if you fall into this category, follow my recommendations for “brand new LOs” above.
Loan originators who use to be wholesale reps
Chances are quite high that former wholesale reps with very little experience originating will fail the exam the first time. LOs reading this, if you fall into this category, follow my recommendation for “brand new LOs” above.
English-learning loan originators
English learning loan originators will pass the exam. It might take them more than once or twice but they will definitely pass. These students are highly motivated and usually quite extroverted. They ask for what they need and get it. For example, sometimes my ESL students ask for the reading material 2 to 3 weeks ahead of time and…bonus! They actually read the material and come prepared with a list of highly detailed questions. I love having ESL LOs as students because in my experience, they learn English very fast and now we have more bi-lingual LOs who are an asset for the industry as well as the consumer. ESL loan originators allocate way more study time before their exam and do it without complaining. ESL loan originators actually read the state and federal laws. This is why they will pass the exam.
Loan originators who do not hold a high school diploma or GED
You might be thinking, “Jillayne, are you nuts? Who could do the job of a loan originator without having at least a high school diploma?” Surprisingly, a high school diploma is not currently required at the federal level to receive a loan originator license. That will change someday. But for today, yes readers, this is not a requirement for holding a license to assist Americans finance what will probably be the biggest credit decision of a consumer’s life. As we wait patiently for this law to change, educators are busy helping these students pass their LO exam.
Let’s jump in the Hot Tub Time Machine and visit the 1970s or 80s. Kids with learning disabilities or emotional problems at home that manifested their way into the classroom may have been passed from grade to grade or even put in a special ed class with hell knows what kind of instruction. Today in the glorious 2010s we have para-educators all over public schools assigned to kids with special needs (at least until the next round of budget cuts hit.) But back then, people who weren’t book-smart or chose to drop out of school for other reasons could easily get a job in many industries and work their way up. This includes the mortgage lending industry.
There are many different learning styles; auditory, visual, kinesthetic, the whole body learner, the emotional learner, and so forth. Way back then, our teachers stood up in the front of the class and lectured and we were supposed to just “know” the material from that lecture. People with a bad experience in school may have simply needed to try learning in a different way or perhaps they had an undiagnosed learning disability.
I have now met 5 LOs who have only finished 8th grade. All are successful, accomplished LOs. There are enablers around them doing the reading and writing and math for them. These LOs were able to pass any previously required state exam for two reasons: The passing grade was only 70% (it’s now 75%) and there were study guides available with upwards of 750 Q&As. These LOs just simply memorized all the Q&As. There is no magic book with all the possible Q&As this time around.
These loan originators will be able to pass the new national loan originator exam but will need way more support than what’s available out there in the form of a 20 hour course. This could include seeking out other tutoring from a test prep center that might be able to diagnose a learning disability.
LOs with verifiable learning disabilities can request more time to take the national exam. See chapter 6 of the NMLS Test Candidate Handbook.
Past experience in the industry originating is not going to help because even though these LOs know how to originate and know the federal laws, they way test writers write test questions is confusing for them. They know the right answer if asked to explain verbally but a complex written question with four possible answers (!) invokes fear of failing and they end up taking an emotional journey back to school when they weren’t able to comprehend middle or secondary school complex test questions. The majority of course instructors are likely not qualified to deliver therapeutic emotional support.
Repetitive learning in a supportive environment will help build confidence for these LO students and re-taking the 20 hour course is highly recommended along with seeking out supplemental reading material and practice exams. LOs reading this: If this describes you, you are capable of passing the exam. It might take you more than one, two, or even three tries. Follow the recommendation for “New LOs” above. And if this blog post inspires you to get that GED, locate a community college near you. They often have evening or online courses for working adults.
In 2008 I attended an Edmonds Community College graduation ceremony for my nephew, an aspie, who was receiving his A.A. At the same time, about 50 people of many ages were receiving their GED. I’ve never seen so much pride and happiness in one place than the looks on the faces of everyone receiving their GED.
Loan originators: The national LO exam will never be easier than it is right now. Over time the exam will get tougher.
About the Author: Jillayne Schlicke
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“Since, at that time, consumer loan companies were not required to license their loan originators, many LOs who worked under a broker that had to switch their license to a CL license let their loan originator license lapse”
Not all LOs who were forced to register as a CLA let their licenses lapse… I didn’t, Jillayne, and I don’t think I’m alone. I continued to take c/e courses and maintain my license even though I didn’t have to.
As far as the difference between CLAs and Mortgage Broker originators…I hope you’re thoughtful when you write about that. I think there’s huge differences between various CLAs and mortgage brokers. Whenever somebody classify a group of individuals with a broad brush, it really concerns me.
Is Mortgage Master the same as a someone like Paramont? NO!
How about banks who don’t even have to be licensed? Last night I reviewed a “rate worksheet” from a LO who works for a bank where they’re offering a 3% credit if you work with the builder’s lender; there is no APR with the rate quoted and the rate he/she is quoting cost 0.75% more in discount points than what I would charge for the same rate…yet they’re offering 3% credit if they work w/this lender. Are all bank LO’s (who will not be licensed with the NMLS–only “registered”) bad or uneducated? NO!
It will be interesting to me to see if you’re able to find out what the difference is–because I think it’s more than the type of licensing we were required to have.
I think the NMLS licensing is a great step in the right direction–it’s unfortunate it excludes mortgage bankers instead of including ALL originators who take a residential loan application…we can thank our Congress for allowing bank LOs to skate on this.
“LOs can and will pass the exam because they have one thing going for them: Motivation in the form of if they don’t pass, they won’t be able to originate.”
Jillayne, I think it’s more correct to say that the LO will not be able to originate as a LICENCED mortgage originator. Those LOs who do not pass the national exam or who do not want to take the exam will have little problems getting hired on by a bank or credit union, where their LO’s are only required to be “registered”‘ and not licensed.
What the SAFE Act has done is created two classes of mortgage originators: licensed and registered (unlicensed) where the requirements of each are quite different.
Amazing! When I was a NCARB National Architects License Examiner, the pass rate was 10%. JG
Hi Jerry. Two questions:
!) How long does a person attend college/school to become an architect?
2) Do architect students constantly ask their professor, “is what you’re covering going to be on the exam because that’s all we care about?”
Thanks.
Hi Rhonda,
I’m afraid consumers, at this point, still don’t really differentiate between how LOs are licensed or unlicensed. The industry will need to start re-educating the public about the difference between the two catagories of LOs.
Unfortunately the industry has done a very good job of teaching consumers to shop LOs based on rates and fees and not on service or experience. This can and will change but the change will happen gradually over time.
Hi Rhonda,
Loan Originators who work for a depository lender regulated by a federal banking agency DO have to register with the NMLS. They will receive a unique ID number that they will use when they originate.
Depository bank LOs will also have to submit a set of fingerprints and go through a background check just like LOs who work for a broker and a consumer loan company.
But that’s where the similarity ends.
Depository bank LOs will be referred to as “registered loan originators.”
Mortgage Broker and Consumer Loan Company LOs will be referred to as “licensed loan originators.”
Bank LOs don’t have to take the educational classes or pass the exam.
Broker/CLA LOs have to take a 20 hour class and pass the exam.
Yes, someone who can’t pass the test could go work for a depository lender, however, in my experience, currently the loan origination industry tends to attract sales-type personalities that don’t particularily like the rules involved with working for a “bank.” They prefer to have more freedom that comes with working for a CLA or broker.
I absolutely DO know of some LOs who kept their loan originator license active even if they didn’t have to….however, to be completely honest, this is a very small number of LOs. Many let their license go….2008 was a rough year for many who couldn’t afford to pay for their CE classes let alone their licensing fee.
Mortgage Masters was one firm where the majority kept their license active. Another one that comes to mind is Cobalt Mortgage.
I think SAFE is good for consumers. However, the educational requirements should be for ALL loan originators. A large percentage of borrowers still prefer to deal directly with a bank or credit union. And they might not be aware that SAFE doesn’t apply to loan originators at banks and credit unions. My concern is whether or not the consumer is getting accurate and relevant advice when dealing with the banks and credit unions. If their loan originators are lacking the educational component, the consumer suffers.
[...] ) The Pass Rate of the New National Loan Originator Exam is 67%. Who is/isn’t passing? – An amazing 33% of lenders are not passing the new [...]
I am all for processes and systems in place to weed out originators. Things have gotten a lot better around here in Chicago as there has been a mass exodus of LOs. Those of us still around are doing very well volume wise, margins are going up, and it “feels” a little more professional.
This is definitely not a business for those that can’t commit themselves to it 125% right now. It is too hard to get business and it takes quite a bit of skill to get these files to closing smoothly. Part timers or those who don’t who don’t want to fully commit themselves cannot keep up with the changes and guidelines.
I still think companies need to step up their hiring models though – college degrees, professional backgrounds, real training, etc. Until the employers raise the bar, the test is only going to do so much. The good thing is that many employers are finding that the hiring by the numbers game winds up costing way more money than it is worth. Much better to have one solid producer who can close $10+ Mill at least annually versus three or four part timers who do the same in aggregate.
The Feds and States model just seems to be more of a “Let’s generate revenue and also make it such a pain in the ass to be an originator that only those with a lot to lose business wise are going to stick around”
“The Feds and States model just seems to be more of a “Let’s generate revenue and also make it such a pain in the ass to be an originator that only those with a lot to lose business wise are going to stick around”’
Very true–WA State DFI just made me register my blog with the NMLS as a trade name, even though I clearly have that all over my blog where I’m employed and my NMLS license #… I’ll give you one guess who gets the $$ it cost to register Mortgage Porter?
We had to get re-fingerprinted too…even though mine are all ready on record… more $$ for the state…as if my prints have changed.
Hi Rhonda,
I’m pretty sure all the money for the new set of fingerprints goes to the fingerprinting company and not to the state.
You’ll have to write a blog post about DFI making you register your domain as a trade name. that sets a precident for other LOs in WA State having to do the same.
Jillayne, we don’t pay the fingerprint company, it’s processed through the NMLS. It’s my understanding that the state is collecting a portion of this revenue… do fingerprints change that much in 3 years?
I prepared a written response which I’m told Marilyn Porter, President of Mortgage Master Service Corporation, has submitted. DFI also didn’t like that sometimes MMSC has abbreviated their name (ex. Mortgage Master Service Corp.) on some of our documents, like loan applications…so now MMSC is figuring out how to cram it all in on 1003s with the DBAs. Ya’d think Corp. and Corporation would be the same…but…nope.
Once they’re done reviewing my response and we’re done with the process (we just went through a planned audit) I will write a post. DFI also touched on other topics w/me regarding social media. As they’re now on Twitter and writing a decent blog…I look forward to their response to my letter.
Hi Russ,
You and I both agreee on a lot of things, especially raising the bar for LOs.
However, I’m also supportive of having many different business models for mortgage lenders.
One type of business model is to hire loan originators who are sales-minded, come from a background of retail sales (cars, big screen TVs, makes no difference) and then create a bullpen environment for lots of phones to ring all day and all evening long via radio or TV ads, or direct mail marketing. These LOs are theoretically worth LESS to a company because the company pays to feed them leads.
A firm can hire green people and justify paying them less if the firm does all the work to procur clients.
LOs with their own set of repeat clients and Realtors is arguably worth a higher commission split. This means a different business model.
Brand new LOs can go to work at a depository lender and receive education and training but they are also worth less because their leads will literally walk in the door.
I’m okay with lots of different ways of doing business.
Regulators will (I’m guessing) not want to raise the bar unless this push comes from the industry because, like Rhonda hinted, regulators like getting lots of licensing fee income each year for their budget. But in all fairness, regulators don’t like seeing consumer complaints about LOs who are breaking state/fed laws and harming consumers either.
The BIG banks won’t necessarily want to get behind a “raising the bar” campaign because….well they prefer to hire green and pay their LOs less. The big mortgage banks with the TV, radio, web, direct mail ads don’t necessarily want their LOs to have college degrees either.
A “raise the bar” push will need to start at the grassroots level with career-type mortgage bankers and mortgage brokers who have experienced first hand the needs for LOs with a different kind of mindset, beyond the “hard close” type of LO.
We have thousands of LOs still left in the industry nationwide who still consider themselves salesmen who work inside a corporation where the corporate culture REWARDS them for acting this way. I meet them every day.
It’s going to take a decade to either 1) rotate these people out of the industry; or, 2) change their mindset.
Or……….maybe……..that Fed Reserve rule will pass and the way LOs are paid will radically change, leading to more dialogue. That would make a good blog post.
Jiillayne, I’ve been thinking about how you’ve categorized the difference between originators based on the type of institution they work for… and really IMO it boils down to the culture of the company they work for. It doesn’t matter what type. Every type of institution has their better or worse examples.
Not all bank LOs are good or bad… we can point to WaMU and we know not all bank LOs are like WaMU–it was their culture that created or enabled those LOs…same with Countrywide.
Hi Laura,
The banks were able to exempt themselves because they told Congress that they already had systems in place to train new LOs.
In my experience, credit union boards are voting to send their LOs to the SAFE class and pass the test even though it’s not required.
someday…someday! Someday bank LOs will be required to pass the new LO exam and take the 20 hr class. Patience.
…you just have to follow the money… if Congress really cared about what’s best for consumers, they would have all LOs held to the same standards (licensed).
WaMU was a bank…we’ve heard their testimony recently about what a cluster it was with the regulators…its an absolute sham and a scandal.
Licensed Loan Originators should be proud of their new designation. The SAFE Act has created two classes of mortgage loan origanators and I plan on making sure consumers I work with know the difference.
Hi Rhonda
“Every type of institution has their better or worse examples.”
Yes, there are outliers in each type of institution.
We do see some generalities that hold true for all catagories of institutions.
For example at most brokerages there was/is very little training (but not all brokerages)
at most large federally chartered banks there is mandatory in-house training for employees (but not all of the training is of high quality)
Some consumer loan companies have fabulous training programs. At other firms training is mostly about how to close the sale. I’ve seen the widest swings in either direction at the CLAs.
I thought of you yesterday while at the “State of the Industry Update” I was at…something that was discussed was the different cultures and how that impacted decisions that were made from the top down of the company. I find this interesting…I remember calling on some mortgage companies and banks as a title rep… they had their own personalities or culture–same is true for many real estate companies too. I believe a companies culture (what is done or believed vs what is said, like a mission statement) made a huge impact on the behaviors of mortgage originators and what type of MLOs they attract and retain.
corporate culture can be very powerful. When a person’s values don’t match up with the corporate culture, often employees leave. Same could be said for when new management comes in and tries to create a new culture, or with mergers.
people who were hired on at subprime firms and were only give sales training, no compliance training, are having a really hard time understanding the transition LOs are in from salesperson to professional.
Management also struggles with these changes. It requires a new business model, a new way of approaching the customer from object (to maximize profit) to client.
Today’s customer is more than just a lead to be “closed”
….and some companies NEVER had a culture like that.
I have never looked at a client as a lead and I’m probably a lousy “sales person” or “closer”…and I can live with that. Companies or LOs who want to “churn” leads or have to buy leads and are not interested in providing a service level where a borrower would want to return to them and refer friends to…consumers should be wary of… just my opinion and I’m very biased since I don’t buy leads and I don’t do “up-calls”.
Good LOs don’t need “leads” which is something that consumers should really take to heart. The best in this business are not quoting around on Zillow, LendingTree trying to drum up business because they don’t have to.
It takes years to build up a referral base of business through being fair, honest, and a lot of hardwork. Most of the LOs still around generally followed the referral model.
Unfortunately, a lot of consumers want to be sold. They are dying to have someone reaffirm they have the lowest rates in town. In a sense, their greed almost blinds them and it makes it easy targets to be taken advantage of. I see this all the time.
Consumers lose sight of how large and complex the transaction of buying a home is and will make decisions based solely on if they are savings a few pennies versus realizing they are putting significant dollars at risk.
I totally agree with you Russ. Sadly I think it often takes a bad experience from one chasing rates or focusing only on what LOs are paid instead of the TOTAL closing costs in relation to rate for a consumer to learn.
I’ve had to rescue several transactions where the LO who quoted low rates and fees could not perform their job.
This is actually one good thing about the GFE–if a LO is quoting low rates on the GFE–they’ll pay the price…but the consumer will have to somehow see the transaction through closing.
Hi all;
Just finished (and passed) the national SAFE test, and wanted to share some observations, as there is a fair amount of biased info out there. Thought I could add my own bias!
From Jillayne’s LO brackets above, I would count as a loan originator entering into origination during the run up, and doomed to 40 hours of intense cramming, according to her. However, I don’t think I am representative of that group, nor do I think my experiences were much like Jillayne describes for that group. Admittedly, Jillayne sees a MUCH wider cross section of LO’s and LO wannabes than I ever will, so perhaps it is a reasonable characterization for the group as a whole.
I was not required to take a 20 hr training course, as I have kept my WA state license current, but in dormancy (my company opted for CLA status). I cannot understand why anyone would do otherwise, but evidently many have. I had already passed the WA state exam twice (once when it was not required by the state, but by my employer). For those in my situation (and I think Rhonda’s is similar), there are lots of ads for training refresher courses.
I decided against taking a refresher course, for 3 reasons.
Taking a refresher course didn’t qualify towards the 8 hrs of continuing ed for 2010. I think that is unfair and stupid. How is it NOT continuing ed to be refreshed on the basics of lending and lending law? Most, if not all of the CE credits out there cover the same material.
I didn’t want to spend the time or money, if it didn’t count.
I figured I could pass this test, based on passing 2 previous and similar tests, and at worst (failing the test), would have to pay for and take the test again.
I get lots of email ads for training and continuing ed surrounding the SAFE Act. Some of them use scare tactics to sell their courses. Here are “scary” sample questions that were not at all like the questions I encountered.
Which year was Truth in Lending Act Enacted?
a) Truth in Lending Act Enacted in 1968
b) Truth in Lending Act Enacted in 1978
c) Truth in Lending Act Enacted in 1958
d) Truth in Lending Act Enacted in 1969
What are the three sections of Gramm-Leach-Bliley Act?
a) The three sections of Gramm-Leach-Bliley Act are: Privacy statement, Wealth disclosure statement and Re-funding statement.
b) The three sections of Gramm-Leach-Bliley Act are: Financial Modernization Act, Mortgage of assets Act and Regulatory Collection Act.
c) The three sections of Gramm-Leach-Bliley Act are: Financial Privacy Rule, Safeguards Rule, and Pretexting provisions.
d) The three sections of Gramm-Leach-Bliley Act are: Prohibition of donations, Withdrawal of deposits and Payment of annual bonus.
What are Modified Tenure reverse mortgage payments?
a) A combination of a new loan refinanced by a government agency and a line of credit.
b) A modified rate structure based on your ability to pay.
c) A combination of a line of credit with monthly payments for as long as you remain in the home.
d) A 20 year term of monthly payments to the surviving owner of the home.
How do you calculate the future value of investment in loan calculation?
a) FV (rate, nper [, pmt] [, pv] [, type])
b) PV/ (pmt, rate)
c) FV (rate/PV, pmt, type)
d) PV (pmt/FV*pmt, type)
Not saying these couldn’t be on the test, but it irked me to only see samples that were so far removed from the ones provided by NMLS. Contrastinly, the 10 sample questions provided on the NMLS are decently representative of the questions encountered, and were adequate predictors of my final score. And no, this was not a Jillayne ad.
I disagree that it is significantly harder than the WA state exam; it is different, and encompasses some different subject matter, but about the same difficulty.
Unlike the WA State test, the National test did NOT test on calculations of APR, or mortgage payments, possibly because for some strange reason (Jillayne, do you know why?) they did not allow use of a mortgage calculator during the exam. I think that was a bad idea, as we constantly use mortgage calculators to figure out payments, APR, compare loans, etc., and to be unable to demonstrate competency on this very basic Loan Origination tool and analysis is a serious test shortcoming.
However it did have a number of scenarios like “what would you do?”, and of general knowledge of common programs (Fannie Freddie, FHA and VA) that I thought was an improvement over the state test.
I would have liked to see more questions about the legal way to advertise credit terms (a pet peeve of mine…… OK, it’s an irrational obsession).
So, for you LO’s that are still out there and reading this, weigh your options. If you feel you need a refresher, by all means do so, and I’m pretty sure Jillayne’s will be one of the best out there. If you have already passed the WA exam, and are reasonably scholarly and informed, and currently originating loans, you may be able to “audit” the course, and ace the exam.
I’m not complaining about the test, or having the SAFE act. They both do quite a bit to improve the national level of LO’s in general, and specifically help a lot to chase out the worst of the bad actors that used to move around and avoid detection and prosecution.
Just saying, it could be a better test. And that ads for education should be truthful, too
Good luck!
Hi Roger,
Each state is different so speaking ONLY for WA State, there were a certain category of LOs who were allowed to add up their CE to equal 20 hours. If a person was in that category, my Loan Originator Exam Prep class absolutely DID provide state-approved Continuing Ed credits for the class. Whoo hoo!
The vast majority of people taking the SAFE test today are LOs who need the 20 Hour SAFE PRe-licensing course and that class already includes an exam prep component.
LOs who take their 20 hours in 2010 will not need to take any continuing ed classes in 2010.
Roger, if you were state- certified by DFI you will not need CE this year but you WILL need 9 hours next year. 8 according to SAFE and 1 hour of WA State CE.
Thanks for the feedback on the mix of questions.
Advertisements for education are required to accurately reflect what’s being offered if in fact the company advertising is an approved course provider. NMLS now approves all course providers.
I suppose there might be a firm out there who is not offering NMLS-approved courses. that firm would still be held to it’s state consumer protection laws (most states have a law on the books that requires all licensed businesses to be honest in dealing with the public.)
Although I am not privvy as to why the NMLS is not requiring LOs to demonstrate the ability to calculate APR on a financial calculator, I can tell you that I’m sure the vast majority would get the question incorrect because the majority of LOs let computer software do the calculation. Perhaps the NMLS will make the LO exam harder as time goes on.
Thanks so much for stopping by and giving us your feedback!
[...] a great advantage to not have to be held to the same standards as Licensed Mortgage Originators (passing state and national exams, continuing education, financial stability of the LO, etc). Banks probably believe that [...]
Jillayne,
Sorry , but you are a hack!!! You have no clue what you are talkng about, Im guesing you are a Liberal… probably a safe bet!! The test is a joke, totally unfair written by Legislators who dont have a clue to propogate the myth that the mortgage brokers and loan originators caused this mess… preditory lenders..please, how about consumer edjucate yourself!!! The testing material is all over the place, no standards, espacially with the ” accredited edjucation” companies…. havnt even been disceminating the correct material in many cases. How fair is it to give out study materials that dont even comprise the majority of whats on the test. I love the way you make fun of people who are trying to make an honest living, they didnt dissapear because they dont know what they are doing, the industry dissapeared over the last 3 years thatnks to the idiots in Washington trying to fix another problem better left to private industry!!! GET A CLUE
I’m just going to go ahead and leave Rob’s comment to stand as is, with all the typos intact.
Rob, where to start. Well first of all, why does everyone want to assign a political label to a person? Who cares if I’m a liberal or a conservative? Why can’t I be both or neither and still have an opinion about the LO exam?
If the new national LO test was set up to be a joke, then the pass rate would be high, like over 90 percent. Right now the pass rate is at about 71 percent for first time test takers. For people who retake the exam, the pass rate falls to 44 percent. Stats are given to us from the Nationwide Mortgage Licensing System each month.
The exam is NOT written by the legislature but instead it’s written by exam writers! People with a Ph.D. in psychometrics along with an entire group of people and does not contain one elected politician but instead contains people from within the industry including regulators. I like the idea of regulators being involved in the test-writing process.
Why?
Because the regulators are the folks who go out into the field and visit the mortgage offices and see the compliance problems first hand. They know the most common ways loan originators intentionally or unintentionally violate state and federal laws. These are the exact people we need writing test questions.
Next up: your complaint that the education firms are not giving out good study materials.
Here is why that is so:
The Nationwide Mortgage Licensing folks FORBID anyone who teaches exam prep from taking the exam only for the purpose of sharing what’s on the exam with their students. The ONLY reason anyone can take the test is for the bona fide purpose of becoming a loan originator.
Any education company that says “we know what’s on the exam” would have their NMLS certification yanked, thereby shooting themselves in the foot.
So instead, education companies teach the law. If students learn the basics of each mortgage lending law, they will get their test questions correct.
The MAJORITY of students ask the following question:
“can you just give me the questions that are going to be on the test?”
I bet that’s what you wanted, Rob. You wanted us course providers to just give you the 100 questions.
Well if that were the case then why bother? Then I would be in complete agreement with you: The whole thing would be a joke.
It would be a joke if the course providers just knew what the questions and answers were going to be.
But we don’t.
So that means you’re going to have to S T U D Y.
And not everyone is going to P A S S.
So grow up and stop blaming the “idiots in Washington” for the industry’s mess.
The industry is growing up and maturing. Either get with the plan or go find something else to do to earn a living.
I haven’t yet talked to very many LO’s that have taken the test.
I have, and it is not a joke. I have some quibbles with it, but overall, it is a decent start. Similar to the WA state test, but the scope is slightly different.
It would be useful to be harder, and MORE relevant, but that is asking for quite a bit. Additionally, it would be nice if NMLS would provide a link to a plain English summary of the laws, rather than the original content.
rob, Jillayne is no hack.
Like me, she may occasionally be dull at parties, from being a bit of an obsessive know-it-all, but definitely not a hack. We disagree often, and I’ll be hanged if I could tell you her true political persuasion….(she sometimes seems a bit Libertarian, but then goes all liberal when the rich exploit the poor, and then seems like an old time conservative banker at times). She probably wouldn’t vote for Sarah Palin, but then, a lot of conservative bankers and Libertarians wouldn’t either.
Her facts are quite reliable, her predictions less so, but that kinda goes with the territory, and her opinions are just that, opinions. They are fun to ponder and agree, OR disagree with.
Thankfully for some former loan originators, car loan origination requires no hard tests, just street smarts. And, come to think of it, originating loans out of a bank doesn’t require a test either. Well, at least not the one we are discussing here.
I recently took it and scored an 88. I didn’t find the test to be all that difficult although there were a few questions that were very poorly written. I think a lot of the LOs who fail do so because they failed to study the minutae of some of the regulations.
Looking back on it, I could have passed without studying, but I did put in about 2 solid hours before I took it. I too think it should be a little harder, but actually written by LOs who understand the business and not bureaucrats.
Yeah Russ, come to Seattle, let’s have a few beers and write a better test!
We’d probably quit at 5 questions, (or 5 beers, whichever comes first) and enjoy the evening swapping outrageous loan stories.
For fun, I took the Census test. Now THAT was a good test, useful for measuring stuff you’d actually have to do in taking the census (sorting, following directions and instructions, map reading, etc).
Maybe in a few years, this test will be better.
One question on the test that really irked me went something like this:
“What fee or charge is normally included in prepaid items on the settlement statement”
a) interest adjustment
b) escrow waiver fee
c) title insurance
d) appraisal fee
Immediately, I could eliminate c & d as those items are not prepaid charges. Typically, if you charge an escrow waiver fee, it woudl just show up as an origination fee or some kind in section 800 as the customary .25% to waive escrows. You fund your escrow account in prepaid items, but that isn’t the same thing as an escrow waiver fee. The only other option was A) interest adjustment. There is prepaid interest in the prepaid items section, but what exactly is an interest adjustment??
Very poorly written question and answers imho…
Hi Russ,
A person who has read the Truth in Lending Act will easily be able to select the correct answer. A loan originator with some years of experience should also be able to select the correct answer whether or not he/she has read TILA.
The reason the questions are worded this way is because exam writers take test questions directly from the statute and not from the language we use in everyday life. The reason for this is because the way we talk differs from state to state, from company to company. The most fair way to write a national exam question is to use the language taken right from the law.