WHO NEEDS A LICENSE AS A LOAN ORIGINATOR
According to Arizona Revised Statutes, Title 6, Chapter 9, Article 4 (Arizona Law) that is administered and enforced by the Arizona Department of Financial Institutions (DFI), and according to The Secure and Fair Enforcement for Mortgage Lending Act of 2008 (SAFE Act), every “Loan Originator” (LO) must obtain an LO license from DFI by applying for the license through the Nationwide Mortgage Licensing System and Registry (NMLS).

Loan Originators assist consumers in obtaining or applying to obtain a residential mortgage loan by, among other things, advising borrowers or potential borrowers 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.  A residential mortgage loan is a loan for personal family or household use or is residential real estate on which a dwelling is constructed or intended to be constructed.

Arizona Law, in concurrence with the SAFE Act, defines a “Loan Originator” as:
A natural person who for compensation or gain or in the expectation of compensation or gain does any of the following:

1. Takes a residential mortgage loan application;
2. Offers or negotiates terms of a residential mortgage loan; 
3. On behalf of a borrower, negotiates with a lender or noteholder to obtain a temporary or permanent modification in an existing residential mortgage loan agreement; or
4. A loan processor or underwriter who is an independent contractor.
   

WHAT’S THE DEADLINE
All Loan Originators must be licensed before July 1, 2010.  Anyone who must be licensed by the deadline and fails to do so cannot conduct any part of the business of a mortgage loan originator.

There are exceptions and exemptions so if you are not sure if you fit into any of the above categories that require a loan originator license, please contact DFI at 602-771-2800 or licensing@azdfi.gov.

This is general information and is not meant to be construed as legal advice.

We've all seen the acronyms – SAFE, NMLS, AZDFI, etc. – but do we know what they mean?

Learn more about the legislation and regulatory groups behind mandatory loan originator licensing (all information is from primary source websites with links back to those sites).  

What is the SAFE Act?
On July 30, 2008, the President signed into law the Housing and Economic Recovery Act of 2008. Title V of this Act, entitled The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (“S.A.F.E. Act”), recognizes and builds on states efforts by requiring all mortgage loan originators, regardless of the type of entity they are employed by, to be either state-licensed or federally-registered. All mortgage loan originators must be licensed or registered through the expanded Nationwide Mortgage Licensing System and Registry.

Under the S.A.F.E. Act, all states must implement a mortgage loan originator licensing process that meets certain minimum standards and must license loan originators through NMLS.
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What is NMLS?
The Nationwide Mortgage Licensing System will streamline the licensing process for both regulatory agencies and the mortgage industry by providing a centralized and standardized system for mortgage licensing.  The NMLS initiative was begun by state mortgage regulators in 2004 in response to the increased volume and variety of residential mortgage originators and the need to address these changes with modern tools and authorities.

NMLS was created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).  It is owned and operated by the State Regulatory Registry LLC (SRR), a wholly owned subsidiary of CSBS.  The system has been built and maintained by the Financial Industry Regulatory Authority (FINRA), who operates similar systems in the securities industry.
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NMLS will only process license applications or renewals.  Each state agency (e.g. AZDFI) will retain its regulatory authority to approve, deny, suspend or revoke licenses.
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What is AZDFI?
The Department of Financial Institutions is statutorily charged with the licensing, supervision and regulation of state chartered financial institutions and enterprises. The responsibility is twofold: ensuring the safety and soundness of state chartered financial entities, as well as compliance with applicable state and federal laws. The Department also reviews  complaints that are filed by consumers against licensed entities when violations of state law or rules have been alleged, directing appropriate remedial action if the violations are substantiated. The Department serves approximately 3,600 entities licensed to conduct business in the state, as well as Arizona citizens who receive services from these companies.
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What is CSBS?
Conference of State Bank Supervisors (CSBS) is the national organization for state banking, representing the bank regulators of the 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands, and approximately 6,200 state-chartered financial institutions. The Conference is responsible for defending state authority to determine banking structure and the products and services state-chartered institutions can offer and for improving the quality of state bank supervision by providing the departments with performance evaluation and accreditation programs and supervisory education/training programs for state banking department personnel.
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What is AARMR?
American Association of Residential Mortgage Regulators (AARMR) is the national organization representing state residential mortgage regulators. AARMR's mission is to promote the exchange of information between and among the executives and employees of the various states who are charged with the responsibility for the administration and regulation of residential mortgage lending, servicing and brokering.
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The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires that state-licensed loan originators pass a qualified written test developed by the Nationwide Mortgage Licensing System and Registry (NMLS) and administered by an approved test provider. As required by the SAFE Act, the test is designed to adequately measure an individual's knowledge and comprehension in appropriate areas, to include:

(a) Ethics;
(b) Federal law and regulation pertaining to mortgage origination;
(c) State law and regulation pertaining to mortgage origination;
(d) Federal and State law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.

The SAFE Test includes two components: a National Component and a Unique State Component.

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The National Component of the S.A.F.E. Mortgage Loan Originator Test consists of a total of 100 test questions: 90 are scored and 10 are not scored. The test time will be 150 minutes with an additional 30 minutes for completing a tutorial and an optional candidate survey.

Each State-Specific Component of the S.A.F.E. Mortgage Loan Originator Test consists of 45 to 55 scored test questions and an additional 10 test questions are not scored. The exact number of scored test questions for each state test is listed in the state's test content outline. The test time will be 90 minutes with an additional 30 minutes for completing a tutorial and an optional candidate survey.

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A Mortgage Loan Originator (MLO) wishing to satisfy the SAFE test requirements for licensure in any given state or jurisdiction, must pass each component with a test score of not less than 75 percent correct answers to questions.

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As prescribed by the S.A.F.E. Mortgage Licensing Act, a waiting period is required prior to the candidate being allowed to retake a failed test component (either National or State). A candidate must request and pay for a separate test enrollment for each attempt to pass a national or state test.

The candidate is subject to a waiting period of thirty (30) calendar days from the previous test date prior to retaking the test. After every fourth failed test, the candidate is subject to a waiting period of one hundred eighty (180) calendar days before they are able to retake the test.

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MLOs wishing to seek licensure in more than one state or jurisdiction, must pass the Unique State Component test in each of those states.

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National Component - $92
Each Unique State Component - $69

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The first group of SAFE Mortgage Loan Originator Test Components (National and State) are now available. Candidates may now enroll and take any of the following components: National, Arizona, Idaho, Iowa, Louisiana, Massachusetts, New Hampshire, North Carolina, Pennsylvania, Rhode Island, Vermont and Washington. (July 30, 2009)

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To learn more about taking a SAFE test, download the MLO Testing Handbook. It is a guide to the entire testing process and aids candidates through the following steps:

1.     Selecting and paying for a test enrollment window
2.     Finding a test center and scheduling a testing appointment 
3.     Preparing for a test and taking a test 
4.     Viewing official test scores in NMLS

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As of 9-21-09, the NMLS website lists test centers in the following cities:

Flagstaff, Goodyear, Mesa, Phoenix (2 locations), Tempe, Tucson (2 locations)

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No, you are not required to take a pre-licensure or continuing education course prior to taking either the National Component or the Unique State Component of the test. However, a course is strongly encouraged as it will help prepare you take and pass the test.  Regardless of whether you choose to complete a preparation course prior to taking a specific test, you are still required to complete the 20 hours of pre-licensure education and/or required to complete 8 hours of annual continuing education. (5/1/09)

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You must bring one form of a current (non-expired) government-issued identification that includes your photograph and signature. (6/26/09)

No personal items are permitted to be brought into the test center. This includes but is not limited to: cell phones, pagers, purses, wallets, coats, hats, etc.  All of these items must be locked in a secure locker upon arrival.  Also, no food or drink is permitted in the test center. (6/26/09)

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The testing center will provide scratch paper and a basic calculator.  (9/1/09)

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