Will the New National Loan Originator Exam be Too Easy?

I just took a look at the sample questions provided by the National Mortgage Licensing System for the new national loan originator exam and I must say these are so easy why even bother with a test?  Let’s take a look:

If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s
monthly income?
(A) $2,163.20
(B) $2,343.47
(C) $2,379.52
(D) $2,487.68

The requirement for private mortgage insurance is generally discounted when the loan-to-value ratio falls below:
(A) 20%
(B) 50%
(C) 80%
(D) 90%

Which of the following documents itemizes all settlement costs including lender charges?
(A) Agreement of sale
(B) HUD-1 form
(C) Form 1003
(D) Forbearance agreement

A discount point is BEST described as a charge the borrower pays to:
(A) a lender to decrease the interest rate on the mortgage loan
(B) a mortgage broker at the time of application to obtain a favorable rate
(C) the seller as part of the closing costs of a loan
(D) a lender to ensure against foreclosure

Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)?
(A) E-mail
(B) Mailed letter
(C) Telephone
(D) Faxed letter

What does a loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales?
(A) An appraisal
(B) A market survey
(C) An area survey
(D) A cost-benefit analysis

But perhaps I’m being to harsh. We have a vast number of unlicensed loan originators who are working for companies licensed under the Consumer Loan Act. We call these folks “consumer loan lenders,” or “non-depository lenders.”  Rhonda Porter sometimes refers to these folks as “correspondent lenders.”  They differ from a mortgage broker because by definition, a lender is an entity that has the ability to make the loan (fund the loan) and a broker is a middleman who does not make or fund loans, but FINDS the lender for a fee.  Mortgage broker LOs are licensed in WA State but consumer loan company LOs are not.  Yet. 

Consumer loan company LOs can start to take their new national exam beginning July 31, 2009. Their real deadline is July 1, 2010 so it looks like I need to block off May and June 2010 for exam prep classes next year as predict the majority will put it off until the last possible days.

Anyone who has been originating for any length of time need not be afraid if the test questions are going to be this easy.  Once the test launches I will go take it and let you know. 

Perhaps for folks who are brand new to mortgage lending, these test questions might seem a little more challenging. That is the whole purpose of national testing and licensing: To create a minimum barrier to entry.  The regulators at the federal level have put a lot of time and care into the education portion of the new law.  Let’s hope that their chosen test vendor, Pearson Vue (who absorbed Promissor) doesn’t use the same old tired bank of test questions that’s been around for a decade.

Update: Prometric is also a test vendor for the new NMLS exam.  Here’s a link to their website.

National Loan Originator Licensing

The “Federal Housing Finance and Regulatory Reform Act of 2008” is out. Here’s the PDF and here is the summary of the Dodd amendment. There’s a section inside Senator Dodd’s amendment that calls for national loan originator licensing. The first stop is page 34 where the definition of an LO is provided:


The term ‘‘loan originator’’
(i) means an individual who
(I) takes a residential mortgage loan application; and
(II) offers or negotiates terms of a residential mortgage loan for compensation or gain;
(ii) does not include any individual
who is not otherwise described in clause (i) and who performs purely administrative or clerical tasks on behalf of a person who is described in any such clause; and (iii) does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless the person or entity is compensated by a lender, a mortgage broker, or other loan originator or by any agent of such lender, mortgage broker, or other loan originator.

For purposes of this subsection, an individual ‘‘assists a consumer in obtaining or applying to obtain a residential mortgage loan’’ by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.

This broad definition of “loan originator” means that we’ll be licensing LOs no matter where they work: broker, banker, consumer finance company, or credit union. There will be 20 hours of required, pre-licensing education and a national test delivered by the National Mortgage Licensing System and Registry. 75% to pass.

There’s way more to this bill than Nat’l LO licensing. 387 pages more. But that’s a good start.  Here’s the MBAA recap:

WASHINGTON, DC – Senator Chris Dodd (D-CT) and Senator Richard Shelby (R-AL), Chairman and Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, today announced that the Committee passed “The Federal Housing Finance Regulatory Reform Act of 2008,