Lesson Three – Standards

All states use the NMLS, and all mortgage loan originators must meet the minimum standards and requirements set forth by the SAFE Act. While some individual state licensing may be stricter than the minimum requirements imposed by the SAFE Act, the licensing system for tracking and registration states use is the NMLS.

The intentions for the implementation of the SAFE Act and the NMLS include the following:

  • Establishment of a uniform system for license applications and reporting requirements for all state-licensed loan originators.
  • Creation and maintenance of a comprehensive licensing and supervisory database for mortgage loan originators.
  • Increased accountability and tracking of loan originator.
  • Greater consumer protection and support for anti-fraud measures.
  • Easily accessible information, offered to consumers at no charge, including the employment history of originators and any disciplinary and enforcement actions against them.
  • Comprehensive training and examination requirements related to subprime mortgage lending.
  • Keeping records of consumer complaints on behalf of state mortgage regulators.
  • Establishing a means by which residential mortgage loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer.



The SAFE Act requires that individuals who originate loans hold a unique identi­fier and, unless they work for a federally-insured depository institution, be registered with the NMLS, and licensed with the state(s) in which they do business. So, this means that a licensed mortgage loan originator in Colorado cannot originate loans in California without holding a California license meeting the requirements for licensure in the state of California.


Minimum Standards for State-licensed Mortgage Loan Originators

According to the SAFE Act, “The minimum standards for licensing and regis­tration as a State-licensed mortgage loan originator shall include the following:

(1) The applicant has never had a loan originator license revoked in any governmental jurisdiction.

(2) The applicant has not been convicted of, or plead guilty or nolo contendere to, a felony in a domestic, foreign, or military court—(A) during the 7-year period preceding the date of application for licensing and registration; or (B) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering. The law, under which an individual is convicted, rather than the state where the individual applies for a license, determines whether a particular crime is classified as a felony.

(3) The applicant has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the loan originator will operate honestly, fairly, and efficiently within the purpose of this title. Each state has established their own standards for meeting financial responsibility.  It is up to each state regulator to independently review the credit information of mortgage loan originator who are licensed in their jurisdiction. There is not an automated standard or minimum credit score enforced by the NMLS. The SAFE Act established the ability for each state to establish its own standard.  It is up to the discretion of each state regulator to develop their own processes and standards for reviewing credit information and determining the financial responsibility of their licensees.


Credit Report Requirements on the NMLS Site:


(4) The applicant has completed the pre-licensing education require­ment described in [section 1505(c) of the SAFE Mortgage Licensing Act of 2008]. *Education requirements will be covered in detail later in this course.

(5) The applicant has passed a written test that meets the test requirement described in [section 1505(c) of the SAFE Mortgage Licensing Act of 2008]. *Testing requirements will be covered in detail later in this course.

(6) The applicant has met either a net worth or surety bond requirement, or paid into a State fund, as required by the State pursuant to section 1508(d). Monies from this fund are to be used to compensate individuals who have suffered damages due to the illegal actions of licensed loan originators. Also, companies that employ more than one loan originator may meet the bonding requirement at the company level without bonding individual loan originators separately.

(7) The applicant must submit to a background check, which includes fin­gerprints, criminal history, and a credit report. The credit report items that pre­clude licensure vary by state. Visit your state licensing organization’s Web site for more information.