SAFE Act – CE Forward Inc., dba National Association of Mortgage Fiduciaries

The pass rate of the new national LO exam is 69%. Between July 30, 2009 and November 30, 2009:
10,421 national exams were taken and 7,219 passed the exam. The report PDF is available here.

This means the new national exam is too easy, like I surmised back in June. Or is it?

What would be more helpful to see in future reports from the NMLS is the number of years experience of the test candidates. For example, if the LOs who took the new national exam during this first reporting period had 5 to 10 years of experience originating loans, then a 69% pass rate is actually quite dismal, especially since many states have enacted mandatory testing and education over the past few years. I’d expect it to be higher based on the easy sample test questions NMLS gives us in the candidate handbook.

10,000 exams taken seems high to me, given the number of LOs who have left the industry. But divide 50 states by 10,000 and I can easily see 200 people in each state needing to pass that test. If the candidates who took the test were newer to mortgage lending, then a 69% pass rate seems too high.

From the NMLS: “Title V of P.L. 110-289, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), was passed on July 30, 2008. The new federal law gave states one year to pass legislation requiring the licensure of mortgage loan originators according to national standards and the participation of state agencies on the Nationwide Mortgage Licensing System and Registry (NMLS). The SAFE Act is designed to enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan. Mortgage loan originators who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration, are registered. All other mortgage loan originators licensed by the states.

The SAFE Act requires state-licensed MLOs to pass a written qualified test, to complete pre-licensure education courses, and to take annual continuing education courses. The SAFE Act also requires all MLOs to submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check; and state-licensed MLOs to provide authorization for NMLS to obtain an independent credit report.”

Loan originators who work under a broker or consumer loan company will be referred to as licensed mortgage loan originators. Loan officers who work at a bank (see next paragraph for how SAFE defines a bank) are exempt from testing and education but will still be registered within the Nationwide Mortgage Licensing System and will receive a unique identifier.

LOs who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration, are registered LOs. All other MLOs are to be licensed by the states.

Please note that while the SAFE Act requires NMLS to fulfill certain responsibilities associated with providing educational services or ensuring background checks are completed, it is individual state law that determines when a state-licensed MLO is required to pass the SAFE Mortgage Test, complete pre-licensure or continuing education training, and when state-licensed MLOs are required to complete their background checks. All state info located here.

Read the SAFE Act here.

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Questions
1) The SAFE Act was passed during the height of the 2008 meltdown. Do you believe that if this federal law was in place in 2001, that it would have prevented the current mortgage lending crisis? If yes why, if no, why not? Carefully read the SAFE Act (don’t worry, the act itself is not very long) before writing your reply.
2) Are there things inside this law that don’t belong?
3) Did the government miss anything that should have been inside this law?