The SAFE Mortgage Licensing Act (Title V of P.L. 110-289, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008) was signed into law in July 2008. It requires every loan originator taking a residential mortgage loan application from a consumer to obtain a mortgage loan originator (MLO) license from the State Agency in which the subject property is located. And the States are required to set certain minimum requirements for obtaining the MLO License. So what are these minimum requirements? How does it affect loan originators in the mortgage business? And how are states implementing this federal mandate?


Twenty (20) hours of education is one of the major requirements. In order to get a license, a mortgage loan originator must complete 20 hours of pre-licensing education that is offered by an approved education provider. Completion of one 20 hour course complies with this requirement for all states. The course will usually cost around $299 to $399. However, some states also require an additional 1 to 5 hours of state-specific education in addition to the federally mandated 20 hour course. Always keep in mind when trying to understand these new requirements, that each state is under a federal mandate to meet certain minimum requirements for licensing MLOs, but the state always has the right to set their standards higher than the federal mandate. Any states where you have done previous education to maintain a loan originator license prior to these new requirements may allow you to certify those past hours to meet this new requirement.

Also, eight (8) hours of continuing education is required each year to renew your license. Completion of one 8 hour course complies with this requirement for all states. However, just like the pre-licensing education, some states require an additional 1 to 5 hours of state-specific education each year as well.


The SAFE Act also requires that MLOs complete a test to obtain a mortgage loan originator license. To comply with this requirement, the states have worked together to make a National Test that covers federal laws and regulations for mortgage origination. This test is only required to be passed once for all states. However, each state has also developed their own state-specific test component. So the National Test and the State Test must be completed to obtain a license. Any states where you have done previous testing to obtain a loan originator license prior to these new requirements may allow you to certify those past tests to meet this new requirement. The National Test would still be required, but you could be exempt from having to take the state test. The National Test costs $92 and the State Tests cost $69 each. The tests only need to be passed once to obtain the license and never need to be taken again. And make sure to study for the tests. Only Sixty-Seven Percent (67%) of applicants are passing the National test.

Criminal Background Check

Each state is required under the SAFE Act to complete a criminal background check on MLO License applicants. To implement this there is a federal fingerprinting that can be paid for when you submit an MLO License application. When fingerprints are taken, they are sent to the FBI and the FBI reviews them and puts together a report of any criminal convictions that match your record. These criminal background check reports are then sent to the state to review. Because the federal fingerprinting only checks the FBI database, some states have decided to also require their own fingerprinting that would check their state criminal database. So you will definitely have to complete the Federal Fingerprinting once, but you also may have to complete a state fingerprinting requirement in some states. The federal fingerprinting costs $39 and the state fingerprinting ranges from $25 to $60.

The minimum requirements under SAFE Act state that no one can obtain a Mortgage Loan Originator (MLO) License if they have had any felonies in the last 7 years or if they have ever had a felony that was financial services related, such as fraud, theft, bribery, check forgery, etc.

Credit Background Check

Under the SAFE Act, each state is required to review a credit report. Unfortunately, unlike the specific nature of the minimum criminal background requirements, the SAFE Act is not specific as to what the minimum credit requirements are.

Mosts states have not released details on what they will be looking at on the credit reports and most states are not reviewing credit reports at this time. Every state that is currently requiring credit reports to be mailed to them is setting different standards, but there are basically 3 different ways I am seeing states handle it.

1. Some states are not telling applicants the minimum credit required, but are declining apps for credit issues (This is the worst situation, because you don’t know if the state will accept the credit until you apply)
2. Some states are telling applicants the minimum credit required. For example they are saying any one with a score lower than 580 must provide a letter of explanation about how they are fixing their credit issues and will be financially stable going forward. (This is still not good, but at least you know if the LO will possibly have an issue if they apply)
3. Some states are just keeping a copy of the credit report in their file, but they are not looking at it.

My hope is that the federal government issues regulations that define what the states need to look at on the credit. Then we will know for sure whether someone meets those standards or not. At this time, most states have not issued any details on what they will be looking at.


States are required to obtain a license application with certain minimum information. All states have a license fee associated with the application that ranges from $50 to $500. Completion of the application is required to be completed through a system called the Nationwide Mortgage Licensing System (NMLS), which now takes us to the final question. How are the states implementing these new requirements?

Nationwide Mortgage Licensing System (NMLS)

This system is a privately owned website that was created for the sole purpose of handling all of the states new mortgage licensing requirements all in one place. Most states have also decided to handle company and branch license applications through this system along with the Mortgage Loan Originator (MLO) License applications. The system is just a website that the states use to receive applications and comply with this new federal mandate under the SAFE Act. The NMLS does not review or approve license applications. The system allows for submitting a license application to a state electronically, it has a function to pay for the National and State Tests, a function to pay for the federal fingerprinting, and will soon also have a function to pay for the credit report to be sent to each state you want to obtain a license in. It also tracks the status of each MLO License and shows when education, test, and fingerprinting have been completed. And the states use the system to post deficiencies for a license when the state needs additional information.


Unfortunately, all of this new licensing is costing companies and mortgage loan originators a lot of money. It is creating a huge burden on mortgage companies that is then mostly being passed down to consumers. The system has had many difficulties in working with states existing laws to transition everyone onto the system. Hopefully, going forward, these new requirements will set accountability in the mortgage industry and benefit consumers. However, we are more likely to see the cost of obtaining a mortgage go up and the amount of oversight by state agencies diminish as the states now have less resources to enforce state laws and instead must focus their attention to all of the complexities of meeting these new licensing requirements. If you are in the mortgage industry, do not wait start the steps to meet these new requirements. It is a long and burdensome process, so start as soon as you can.

05.05.2010. 09:41

Henry on 07.07.2010. 09:21

Does the law apply to nonprofits as well, or only to for profit organizations?

Steven Sheasby, President on 09.22.2011. 15:44

The law generally does not apply to non-profits, but the determination is complex. I recommend reviewing the HUD SAFE Act Final Rule that was published on 6/30/2011. Or call me with any questions. My phone number is (714) 656-3960. HUD SAFE Act Final Rule