SAFE Act, NMLS & Licensing: practice questions

Which of these applicants does NOT qualify for temporary authority to originate under the SAFE Act?

1. One who was registered at a bank for the preceding 11 months
2. One who was licensed in another state until last week
3. One whose license application was denied in another state ✓
4. One whose former employer was a federally chartered bank

Why: Every route to temporary authority in 12 U.S.C. 5117 requires that the individual has not had an application for a loan originator license denied, or a license revoked or suspended, in any governmental jurisdiction (5117(b)(1)(A), applied to interstate moves by 5117(c)(1)(A)). Eleven months at a bank falls within the one-year look-back, and a license held until last week falls within the 30-day window.

Source: 12 U.S.C. 5117(b)(1)(A), (c)(1)(A)

What is the minimum pre-licensing education a state-licensed loan originator must complete?

1. 20 hours, with 3 federal law, 2 ethics and 2 nontraditional
2. 8 hours, with 3 federal law, 2 ethics and 2 nontraditional
3. 20 hours, with 3 federal law, 3 ethics and 2 nontraditional ✓
4. 24 hours, with 8 federal law, 4 ethics and 4 nontraditional

Why: 12 U.S.C. 5104(c)(1), repeated in Regulation H at 12 CFR 1008.105(d), requires at least 20 hours of NMLS-approved education including at least 3 hours of federal law and regulations, 3 hours of ethics and 2 hours on lending standards for the nontraditional mortgage product marketplace. Eight hours with only 2 of ethics is the annual continuing education requirement in 5105(b).

Source: 12 U.S.C. 5104(c)(1); 12 CFR 1008.105(d)

When is the annual renewal period for a registered mortgage loan originator under Regulation G?

1. 1 January through 31 January each year
2. 1 November through 31 December each year ✓
3. The anniversary of the original registration
4. 1 October through 30 November each year

Why: Regulation G defines the annual renewal period as November 1 through December 31 of each year (12 CFR 1007.102), and 1007.103(b)(1)(i) requires the registrant to renew during it. A registration completed less than 6 months before the end of that period need not be renewed that year (1007.103(b)(3)).

Source: 12 CFR 1007.102, 1007.103(b)

Dana works for a mortgage company that is not a bank. She takes loan applications and negotiates rates with borrowers for a commission. What does the SAFE Act require of her before she does this work?

1. A state license, NMLS registration and a unique identifier ✓
2. NMLS registration only, since her employer holds the license
3. A federal registration arranged by her employer's regulator
4. A state license only, with NMLS registration left optional

Why: 12 U.S.C. 5103(a) bars an individual from the business of a loan originator without first obtaining and annually maintaining either a registration as a registered loan originator or a license and registration as a state-licensed loan originator, and obtaining a unique identifier. Because Dana is not employed by a depository institution, 5102(12) puts her in the state-licensed category, which needs the license, the NMLS registration and the identifier together. Federal registration is the route for bank employees.

Source: 12 U.S.C. 5102(12), 5103(a)

Marcus is employed by a national bank and takes residential mortgage applications and quotes loan terms. What does federal law require him to have?

1. A state license from each state where the bank's borrowers live
2. NMLS registration and a unique identifier, with no state license ✓
3. A state license plus separate registration with the OCC
4. Nothing, because bank employees are outside the SAFE Act

Why: Marcus is a registered loan originator: 12 U.S.C. 5102(8) covers a loan originator employed by a depository institution who registers with, and keeps a unique identifier through, the NMLS. Regulation G, 12 CFR 1007.103(a)(1), requires each such employee to register and obtain the identifier. Bank employees are inside the Act; they are simply registered rather than state-licensed.

Source: 12 U.S.C. 5102(8); 12 CFR 1007.103(a)

What annual continuing education does the SAFE Act require of a state-licensed loan originator?

1. 8 hours, with 3 federal law, 3 ethics and 2 nontraditional
2. 20 hours, with 3 federal law, 3 ethics and 2 nontraditional
3. 8 hours, with 3 federal law, 2 ethics and 2 nontraditional ✓
4. 12 hours, with 4 federal law, 4 ethics and 4 nontraditional

Why: 12 U.S.C. 5105(b)(1) and 12 CFR 1008.107(a)(2): at least 8 hours of NMLS-approved education each year, including at least 3 hours of federal law and regulations, 2 hours of ethics and 2 hours on nontraditional lending standards. Note the ethics figure is 2, not the 3 required in pre-licensing education.

Source: 12 U.S.C. 5105(b)(1); 12 CFR 1008.107(a)(2)

Tom has failed the SAFE MLO test on three consecutive attempts. When may he sit it again?

1. After waiting at least 30 days
2. After retaking pre-licensing education
3. After waiting at least 6 months ✓
4. Not until the following calendar year

Why: 12 U.S.C. 5104(d)(3)(C) requires an individual who has failed 3 consecutive tests to wait at least 6 months before testing again; Regulation H, 12 CFR 1008.105(e)(2), is identical. The 30-day wait applies between the initial retests. (NMLS applies the longer wait as 180 calendar days.)

Source: 12 U.S.C. 5104(d)(3)(C); 12 CFR 1008.105(e)(2)

An applicant was convicted of felony drug possession nine years before applying. The offense involved no fraud, dishonesty, breach of trust or money laundering. How does the SAFE Act's felony standard apply?

1. It bars her permanently, because every felony is disqualifying
2. It does not bar her, as the conviction is outside the 7 years ✓
3. It bars her until ten years have passed since the conviction
4. It bars her unless the conviction was later reduced to a fine

Why: Under 12 U.S.C. 5104(b)(2) the bar reaches a felony conviction or plea during the 7 years preceding the application, or at any time if the felony involved fraud, dishonesty, breach of trust or money laundering. A nine-year-old conviction of another kind falls outside both. The state still judges character and fitness under 5104(b)(3), so the conviction is not irrelevant, just not an automatic bar.

Source: 12 U.S.C. 5104(b)(2)-(3)

A licensed loan originator is also an approved instructor and teaches a 3-hour approved continuing education course. How much credit toward her own annual requirement does that teaching earn?

1. 3 hours, at 1 hour of credit for each hour taught
2. 6 hours, at 2 hours of credit for each hour taught ✓
3. None, because instructors must take courses as students
4. 8 hours, since teaching satisfies the whole requirement

Why: 12 U.S.C. 5105(b)(4) and 12 CFR 1008.107(c) let an approved instructor receive credit for her own annual continuing education "at the rate of 2 hours credit for every 1 hour taught". Three hours taught earns six.

Source: 12 U.S.C. 5105(b)(4); 12 CFR 1008.107(c)