Lesson Four – State Licensing Requirements 

Prior to Originating a Loan a Mortgage Loan Originators must:

  • Provide fingerprints for an FBI criminal history background check
  • Provide authorization for NMLS to obtain a credit report
  • Input and maintain their personal Mortgage Loan Originator record in NMLS as their license in each state in which they wish to conduct loan origination activity
  • Pass a national and state test
  • Take 20 hours of pre-licensure education courses approved by NMLS as well as any additional state pre-licensure education requirements

 Pre-licensing Education

The minimum standards for licensing and registration as a state-licensed loan originator include a pre-licensing requirement. Applicants must complete at least 20 hours of approved education courses.

20 hours of Pre-licensure education to include:

  • 3 hours Federal law & regulations
  • 3 hours ethics, to include fraud, consumer protection and fair lending issues; and
  • 2 hours training regarding non-traditional loan products.
  • 12 hours elective material

All courses will be reviewed and approved by the NMLS

Several States have additional PE requirements


Depending on the state licensure requirements, the SAFE MLO Test is comprised of one or two components.  For state agencies, which have adopted the Uniform State Test (UST), applicants are required only to take the National Test Component with Uniform State Content. For state agencies which have not adopted the UST, applicants are required to take the National Test Component with Uniform State Content and the State Test Component(s) for the state agency(ies) in which you are seeking licensure.

To help you determine which test you are eligible to take, please see the Test Enrollment Chart at the NMLS site in the link listed.


Refer to the National MLO testing handbook, available through the Nationwide Mortgage Licensing System (NMLS) Web site.


Let’s review what the test will cover.

SAFE Mortgage Loan Originator Test – National Component

Content Outline

(90 scored test questions; 10 un scored test questions)

Federal mortgage-related laws (35%)

General mortgage knowledge (25%)

Mortgage loan origination activities (25%)

Ethics (15%)


Federally Related Laws (35%)
  1. RESPA
  2. Equal Credit Opportunity Act (Reg. B)
  3. Truth-in-Lending Act (Reg. Z and HOEPA)
  4. SAFE Act
  5. Other Federal laws and guidelines
    • Home Mortgage Disclosure Act (HMDA)
    • Fair Credit Reporting Act
    • Privacy protection / Do Not Call
    • FTC Red Flag Rules (Fair and Accurate Credit Transactions Act of 2003)
 General Mortgage Knowledge (25%)
  1. Mortgage programs
    • Conventional/conforming
    • Government (FHA, VA, USDA)
    • Conventional/nonconforming (Jumbo, Alt-A, etc.)
      • Statement on Subprime Lending
      • Guidance on Nontraditional Mortgage Product Risk
  2. Mortgage loan products
    • Fixed
    • Adjustable
    • Balloon
    • Other (home equity [fixed and line of credit], construction, reverse mortgage, interest-only)
  3. Terms used in the operation of the mortgage market
    • Loan terms
    • Disclosure terms
    • Financial terms
    • General terms
Mortgage Loan Origination Activities (25%)
  1. Application information and requirements
    • Application accuracy (truthfulness) and required information (e.g., 1003)
      • Customer
      • Loan originator
      • Verification and documentation
    • Suitability of products and programs
    • Disclosures
      • Accuracy
      • Timing
  2. Qualification: processing and underwriting
    • Borrower analysis
      • Assets
      • Liabilities
      • Income
      • Credit report
      • Qualifying ratios (e.g. housing, debt-to-income, loan-to-value)
  3. Appraisals
    • Title report
    • Insurance: hazard, flood, and mortgage
  4. Specific program guidelines
    • VA, FHA, USDA
    • Fannie Mae, Freddie Mac
    • Other (e.g., Mortgage insurance, HUD)
  5. Closing
    • Title and title insurance
    • Closing agent
    • Explanation of Fees
    • Explanation of Documents
    • Funding
  6. Financial calculations used in mortgage lending
    • Interest per diem
    • Payments (principal, interest, taxes, and insurance; mortgage insurance, if applicable)
    • Down payment
    • Loan-to-value (loan-to-value, combined loan-to-value, total loan-to-value)
    • Debt-to-income Ratios
    • Temporary and Fixed interest rate buy-down (discount points)
    • Closing costs and prepaid items
    • ARMs (eg., fully indexed rate)
 Ethics (15%)
  1. RESPA
  2. Gramm-Leach-Bliley Act
  3. Truth-in-Lending Act
  4. Equal Credit Opportunity Act
  5. Appraisal
  6. Fraud detection, reporting, and prevention
  7. Ethical behavior