1.1.2: B. Mortgage Loan Originator (MLO)
- Page ID
- 35509
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)Responsibilities of Mortgage Loan Originators
A mortgage loan originator (MLO) is responsible for finding the loan that best meets the needs of a prospective borrower. The mortgage loan originator works to qualify clients based on their financial picture, assists with loan applications, and provides a loan analysis. The MLO sometimes provides the pre-approval letter and desktop underwriting (DU) that borrowers need. A pre-approval letter from a lender indicates how much a lender is willing to lend based on the buyer's FICO credit score, debt-to-income ratio (DTI), and other factors. Desktop underwriting (DU) is an automated tool that lenders use to reduce risk and create certainty. Real estate agents sometimes request a pre-approval letter from a potential buyer so they can show properties that are within the buyer’s financial capability. Once an offer is accepted and escrow opens, the MLO works behind the scenes to ensure a smooth escrow and loan closing process.
MLO Licensing Requirements and Process
S.A.F.E. Act
The SAFE Act, passed on July 30, 2008, provides consumers with greater protection against unethical loan officers and safeguards against risky loans. Under this Act, Mortgage Loan Originators (MLOs) must adhere to increased training requirements and take a uniform licensing examination. MLOs licensed by California must complete pre-licensing, undergo fingerprinting for an FBI background check, and pass a written examination. MLOs are also required to complete continuing education. The Act also established the Nationwide Multistate Licensing System and Registry (NMLS) as a centralized database and a system to track and register licensing.
Requirements for becoming a Mortgage Loan Originator are listed below. All items must be submitted via the National Mortgage Licensing System.
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PREREQUISITES - These items must be completed prior to the submission of the Individual Form (MU4) |
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CA-DFPI Mortgage Loan Originator License |
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LICENSE FEES - Fees collected through NMLS are NOT REFUNDABLE OR TRANSFERABLE. |
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CA-DFPI Mortgage Loan Originator License |
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NMLS Initial Processing Fee: $30 CA-DFPI Application Fee: $300 Credit Report: $15 FBI Criminal Background Check: $36.25 |
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REQUIREMENTS TO BE COMPLETED IN NMLS: These items must be completed during or after the submission of your Individual Form (MU4). |
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CA-DFPI Mortgage Loan Originator License |
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Submission of Individual Form (MU4): Complete and submit the Individual Form (MU4) in NMLS. This form serves as the application for the license through NMLS. Note: Upon filing the application, the license status will be reflected in NMLS as “Pending – Incomplete.” The “Pending – Incomplete” status will remain until the application is reviewed and the status is changed by the NMLS staff. |
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Criminal Background Check: Authorization for an FBI criminal history background check to be completed in NMLS. After authorizing the FBI criminal history background check through the Individual Form (MU4), the applicant must schedule an appointment to be fingerprinted. See the Completing the Criminal Background Check Process Quick Guide for information. Note: Persons able to “Use Existing Prints” to process the FBI criminal history background check DO NOT have to schedule an appointment. NMLS will submit the fingerprints already on file and the background check will begin to process automatically. |
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Credit Report: Authorization for a credit report must be completed. Upon initial authorization, the applicant is required to complete an Identity Verification Process (IDV) within the Individual Form (MU4). See the Individual (MU4) Credit Report Quick Guide for instructions on completing the IDV. Note: The same credit report may be used for any existing or additional licenses for up to 30 days. |
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Disclosure Questions: Provide an explanation and, if applicable, a supporting document for each “Yes” response. See the Individual Disclosure Explanations Quick Guide and the Disclosure Explanations - Document Upload Quick Guide for instructions. California Penal Code Section 1203.4 states in relevant part that the applicant is not relieved of “… the obligation to disclose [a]… conviction in response to any direct question contained in any questionnaire or application for… licensure by any state or local agency…” even if the felony has been expunged. |
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Company Sponsorship: A sponsorship request must be submitted by the applicant’s employer. CA-DFPI will review and accept or reject the sponsorship request. CA-DFPI offers an “Approved-Inactive” license status. For applicants not currently employed by a mortgage company (or if the employer has not yet requested sponsorship) and who have completed all requirements for this license, the license may be issued as “Approved-Inactive” until the sponsorship is acquired. While in an “Approved-Inactive” status, applicants are NOT authorized to conduct business under the authority of the CA-DFPI Mortgage Loan Originator License. |
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Employment History: The business address listed in the Employment History section of the Individual Form (MU4) must match the address of the registered location in the Company Relationship. |
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REQUIREMENTS/DOCUMENTS UPLOADED IN NMLS |
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CA-DFPI Mortgage Loan Originator License |
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Legal Document for Name Change: Upload legal documentation of legal name or legal status. This may be copies of the divorce decree, marriage certificate, passports, etc. This document should be named “Legal Name Verification.” |
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Status Documentation: California requires appropriate documentation of citizenship or alien status. The Statement of Citizenship, Alienage, and Immigration Status for Application for Department of Financial Protection and Innovation License or Certificate Form must be uploaded to NMLS. See the Individual Document Uploads Quick Guide for more information. This document should be named “Statement of Citizenship.” |
NMLS Licensing System
A Mortgage Loan Originator (MLO) is commonly known as a mortgage lender. An MLO offers mortgage loan products to consumers qualified to purchase real estate with financing or funding sources. MLOs take loan applications and negotiate the terms of loan transactions in return for a fee. To do this, they must be licensed through NMLS (National Mortgage Licensing System) in the state in which they intend to originate loans. They must also obtain a unique identifier from the Nationwide Multistate Licensing System (NMLS), similar to that of a social security number, which follows the licensed MLO from the start to the finish of a career. To become a licensed MLO, the candidate must pass an exam, complete pre-licensing education, pass criminal and credit checks, renew licenses yearly, and complete annual continuing education.
Mortgage Lenders: Mortgage Bankers and Mortgage Brokers
What is the difference between a mortgage banker and a mortgage broker? A mortgage banker works for a bank or credit union that directly loans funds to borrowers. For example, a person who works for Bank of America and only offers Bank of America loans to borrowers is a mortgage banker. On the other hand, a mortgage broker works independently and offers loans to borrowers from many different lending institutions, including insurance companies.
A mortgage banker is able to offer borrowers only a few loan choices, those offered by the one bank, but the bank may be able to close a mortgage loan more quickly. (On occasion, if it benefits the borrower, mortgage bankers will work in the capacity of a mortgage broker, meaning they can offer a loan from an institution other than the one that employs them.) A mortgage broker, on the other hand, can provide borrowers with many more loan choices, but closing the lending process may take longer.