Bank LO’s vs SAFE Brokers and Lenders… oh my!

Alright, alright, alright…  MOST everyone in Mortgage and Real Estae has heard about the S.A.F.E Act right?  The Secure And Fair Enforcement for Mortgage Licensing Act was passed into law a while back but in last stages of being implemented RIGHT NOW.  There’s a bit of a rush going on right now as its supposed to be completely implemented by January. All originators from coast to coast need to get on the list and registered.  Some LO’s (Loan Originators) will need much more.  There’s 2 distinct groups of LO’s and I’ll try to provide direct clear hyperlinks… (mostly for the LO’s who don’t need education and have to pass tests).

The first group of LO’s (Loan Originators) we call Registered Mortgage Loan Originators or RMLO‘s.  The title pretty much defines what their required to do in this new system called the Nationwide Mortgage Licensing System and Registry. These RMLO‘s are people who originate loans at State and Federal Banks and/or Credit Unions.  The list of things that they need to do according to the final rule of this law is:


But wait.. In fact if you go to the NMLS website to confirm what you need to do… you may see this by CLICKING HERE:

At this time there is no action required in the Nationwide Mortgage Licensing System & Registry (NMLS) of any mortgage loan originator who is an employee of a federally insured depository institution or an owned and controlled subsidiary of such a depository institution that is federally regulated.

Ok… so that means that the rush to get “registered” etc isn’t really for the RMLO‘s… right?  Hmmmmm….

The second group of LO’s we’ll call Mortgage Loan Originators or MLO‘s.  I PERSONALLY think we should call them LMLO for LICENSED MORTGAGE LOAN ORIGINATORS… you’ll see why.

Any LO that works at a Mortgage Broker or Non-Bank Lender will fall under this 2nd group.  A Broker is typically (nowadays) a smaller company that originates loans and is set up with several Banks (think of the big 4 here) or other Mortgage Banks/Lenders and sends those files to that “bank” to underwrite those loans and then “table fund” the loans at the closing table. So if ABC Mortgage Company was a broker and at the closing the funds come from Wells Fargo, Chase or antoher BANK… that’s a broker.  If your originator works for XYX Mortgage Company and the funds are at the closing in the name of XYZ… that means they’re a Correspondent Lender or a Direct Lender.  These Mortgage Lenders have a line (or lines) of credit to fund loans and then sell to Investors in a secondary transaction. The Correspondent Lenders assume more risk not only due to the fact that they are employing the underwriters and closing staff responsible for confirming loans are underwritten and closed correctly but also they have to buy back a loan from an investor if it is does not meet guidelines of that particular investor/bank.

The list of items that these LO’s need to do can be found by clicking HERE.  Essentially its:

  • Register to get a Unique Identifier Number (like above)
  • Individually pay for getting Fingerprinted (kinda like above but I assume the bank will pick up the cost)
  • Individually pay for and complete 20 hours of Pre-Licensing Education
  • Individually pay for, take and pass a National Test with a score of 75% or more
  • Individually pay for, take and pass a State Test with a score of 75% or more. (MN, WI and CA are three states my partners and I are now licensed in)
  • Individually pay for an FBI Criminal Background Check
  • Individually pay for a personal Credit Report
  • Surety Bond required depending on the company’s loan volume.
  • Individually pay for 8 Hours of Continuing Education yearly per state the LMLO originates loans in.

One thing you may have noticed in the list above is that each LMLO (cuz thats what I want to call them from now on)Now… unlike the STOP SIGN you see above for the RMLO‘s, these LMLO‘s need to get their testing done by the first of the year or they cannot continue to originate loans.  I kinda see that if an LMLO doesn’t get their State Test done pretty darn quick… it doesn’t matter WHAT language you say it but YOU’RE GONNA NEED TO STOP!!

The other HUGE point that you may notice here is what the RMLO’s are NOT REQUIRED to do:

  • NOT required to have their personal credit pulled
  • NOT required to have a clean criminal history (any felony or a foreclosures for example)
  • NOT required to take pre-licensing education or yearly CE (that stands for Continuing Education for the RMLO‘s reading this)
  • NOT required to pass National or State tests

To wrap up my rant and get off my soap-box… just look at what the LO’s at banks need to do verses what the LO’s at Brokers/Lenders need to do to remain in this industry. Ask yourself if the educated, driven, career orientated professionals who are as entrepreneurial as any Realtor out there should oblige the LMLO world by explaining this to prospective homebuyers?