State MLO Licensing Requirements are Unnecessarily Duplicative and Expensive

States should adopt more uniform licensing requirements and permit greater opportunities for movement of qualified licensed professionals among states.


  • The federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008 requires mortgage loan originators (MLOs) employed by non-bank lenders to be licensed by each state where they serve consumers. All states also enacted laws for this purpose.
  • Requirements include pre-licensing/continuing education requirements, testing, and criminal/financial background reviews conducted by each state regulator-these MLOs must also register in the Nationwide Mortgage Licensing System and Registry (NMLS).
  • With few exceptions, an MLO licensed in one state cannot originate mortgages in another state without also going through the full licensing process for the "new" state.
  • By contrast, MLOs working for federally insured depository lenders and their subsidiaries and affiliates (banks and bank affiliates) must only register in the NMLS.
    • Bank and bank affiliate MLOs do not have to meet standardized testing and specific education requirements, regardless of the state(s) in which they serve consumers.
  • Many state policymakers have taken action to improve the asymmetry in state licensing, but all should consider the following actions:
    • Allow transitional licensing and/or reciprocity for qualified and licensed MLOs;
    • Adopt the Uniform State Test (UST) for MLOs;
    • Permit an "approved-inactive" status for federally registered MLOs looking to find employment as a state-licensed MLO, so they may meet a state's education and testing requirements prior to their hiring by a state regulated company; and
    • Ensure that the pre-licensing education and testing of all federally registered MLOs is shielded in the NMLS database, to ensure their job mobility options.


  • Due to the many duplicative and divergent requirements among states, the ability of non-bank lenders to hire/attract well-qualified MLOs that are licensed in another state has been impeded, notwithstanding that these out-of-state MLOs have satisfied background, education, and testing standards-and currently serve borrowers.
  • In addition to these costly disadvantages, delays involved in moving from one state licensing regime to another encourage MLOs to instead work for federally insured depository lenders, where they can serve the same consumers in their new state more immediately and without a state license.

MBA's Position / Next Steps:

  • Uniform State Test: MBA and state associations have campaigned vigorously for UST adoption. Currently 57 regulators in 48 states, DC, Puerto Rico, the Virgin Islands and Guam have adopted the test. The two state regulators that have yet to adopt (Minnesota, and West Virginia) should do so, in order to establish a truly uniform national standard.
  • Approved-Inactive: 29 state regulators in 26 states have approved this "de novo" policy to expand mobility for employees of federally regulated institutions. All remaining regulators should adopt.
  • Transitional Licensing/Reciprocity: MBA and state associations have worked to enact transitional licensing laws in Ohio, New Hampshire, North Carolina, South Carolina and Virginia, and regulatory policy in Colorado and New Mexico. All remaining state regulators should adopt similar provisions.
  • Pre-Licensing Education and Testing: Limiting a federal institution's access to view an MLO's education and testing activity in the NMLS has been NMLS policy since July 23, 2012. However, MLOs working for certain federally regulated institutions, which are also required to be state chartered, are not offered the same confidentiality. MBA urges NMLS to correct this and treat all federally regulated MLOs equally.

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