Only ‘Handful’ of Holdouts on Mortgage Loan Originator Standard Test

Advocates of the Uniform State Test for state-licensed Mortgage Loan Originators, including the Mortgage Bankers Association, scored a major victory this week when the largest state holdout, Florida, said it would adopt the UST beginning this January.

With the announcement from its Office of Financial Regulation, Florida becomes the 53rd state mortgage banking regulator to adopt the National SAFE MLO Test Component with Uniform State Content. Forty-six states (several with multiple regulating agencies), Guam, Puerto Rico, the Virgin Islands and the District of Columbia have now adopted the UST (http://mortgage.nationwidelicensingsystem.org/profreq/testing/Documents/UST Adoption Table and Map.pdf).

Only six regulators have yet to adopt the UST: the Arkansas Securities Department; the Minnesota Department of Commerce; South Carolina (Board of Financial Institutions and Department of Consumer Affairs); the Utah Division of Real Estate; and the West Virginia Division of Financial Institutions.

On April 1, 2013 the Nationwide Mortgage Licensing System and Registry launched the UST, representing the first major change to SAFE MLO Test requirements since MLO tests launched in July 2009.

The UST is a new domain or section in the National Test. This new domain includes 25 questions which brings the length of the National Test Component with Uniform State Content to 125 questions, of which 115 are scored and 10 are unscored. The UST material tests applicants on their knowledge of high level state-related content that is based on the SAFE Act and the Conference of State Bank Supervisors/American Association of Residential Mortgage Regulators Model State Law, which nearly all states used to implement the SAFE Act.

The UST replaces state-specific tests for the states that adopt it. Therefore, a passing result on the National Test with Uniform State Content satisfies the testing requirements for licensure in those adopting states, and in any states that adopt in the future.

William Kooper, MBA vice president of state government affairs and industry relations, said remaining agencies have held out for “various reasons,” such as already being invested in their own licensing requirements. But he said momentum has “clearly shifted” in the past few years and from a population standpoint, the holdout agencies represent a tiny minority of affected mortgage loan originators.

“MBA has long advocated for the UST, as it addresses industry concerns without diminishing consumer protections,” Kooper said.

“Streamlining testing requirements brings greater symmetry to the state-licensing system, in turn allowing for more parity with the federally regulated side of the industry,” Kooper said. “Importantly, though, embrace of the UST does not compromise the important consumer protection and business knowledge goals of licensing. In many states, UST adoption has led to an increased focus on state law during preliminary and continuing education.”

Kooper said the UST has not generated “any negative feedback from any state regulator” since adoption. “More MLOs studying for, and taking and passing the UST is good for consumers, as this will significantly increase the probability that the MLO a consumer works with has passed a test, gone on to obtain a state license and works under the supervision of a state regulator.”

Kooper said MBA will continue to push for UST adoption among the remaining regulators. “Our goal is to have every agency under the UST umbrella,” he said.