Mortgage loan officers (MLOs) perform a job that comes with a lot of responsibility. As such, the government has measures in place that ensure each of them is accounted for, for the sake of the public good.
An MLO license is a regulatory requirement for mortgage loan officers and other mortgage professionals who help consumers with obtaining residential mortgage loans. It ensures that these professionals meet competency and ethical standards which protect borrowers while also upholding the integrity of the mortgage industry.
So let’s learn more about the MLO license, who needs one, and how to get one.
What is an MLO license?
Known as either a “mortgage loan officer” or “mortgage loan originator,” MLOs are mortgage professionals who help prospective buyers navigate the mortgage process and obtain a home loan. They act as the liaison between borrowers and lenders, evaluating the applicants’ financial status, and ultimately helping them find loan products suitable to their unique needs.
The MLO license is what allows these professionals to operate in such a capacity. Regulated by the Nationwide Multistate Licensing System & Registry (NMLS), the MLO license is mandatory in many countries, including the United States, and can only be obtained after an individual has successfully completed a series background checks, pre-licensing education, and testing.
Who needs an MLO license?
While most people are familiar with the mortgage loan originator (MLO) role, there are a variety of roles in the mortgage industry that require an MLO license. A few common ones include:
1. Mortgage Loan Originators. They take mortgage loan applications, assist borrowers in obtaining loans, or negotiate loan terms.
2. Mortgage Brokers. They act as intermediaries between borrowers and lenders, helping the borrower find a loan product that matches their needs, and submitting the loan application to the lender on the borrower’s behalf.
3. Loan Officers. Loan officers are similar to mortgage loan originators. They work for lenders and financial intuitions to assist borrowers with the home loan application process.
4. Loan Processors. Loan processors are generally the individuals who help organize documents and are the middle people between the MLO and the underwriters. They usually do not directly have a hands-on approach to the origination process, yet many jurisdictions require them to have an MLO license if part of their job includes taking loan applications or offering guidance to borrowers.
Why some roles require MLO licenses, and some don’t.
Driven by consumer protection considerations, the licensing process ensures those involved in the mortgage process have the education, competence, and knowledge of ethical standards which protect the consumers’ interests and uphold the integrity of the industry. Factors that dictate MLO licensing requirements include:
1. Borrower Interaction. Any role where a person is directly interacting with applicants and playing a substantive part in the mortgage process is more likely to require a license. These positions have the greatest ability to influence loan terms, provide guidance, and perform other duties that may influence a borrower’s financial decisions.
2. Origination Activities. Any person who has duties regarding the origination of loans, applications, or the negotiation of loan terms is required to be licensed, as these activities have a direct impact on the borrower.
3. Licensing Laws. Although all MLOs must be licensed through the NMLS, licensing requirements can vary by jurisdiction. Some states will have more stringent guidelines while others may have exemptions for certain roles.
There are also a few positions in the mortgage industry that do not require an MLO license. Generally, they do not play a direct role in origination activities. These roles include:
1. Loan Servicers. An administrative role, loan servicers complete the bulk of their work after loan origination has happened. They perform tasks such as collecting payments, answering non-origination questions from borrowers, and managing escrow accounts.
2. Closers. Loan closers coordinate the last steps of the mortgage loan process. They make sure all documents have the appropriate signatures, the funds have been distributed accurately, and any loose ends have been tied.
3. Underwriters. Although underwriters play a substantial role in whether or not a mortgage loan application gets approved, they are not considered to be directly involved in the origination process, and so may not require an MLO license.
While the licensure requirement is shaped to include positions that directly influence the lending process, remember that licensing rules can vary across local regulatory precedents.
Advantages of having an MLO license.
Acquiring an MLO license has many benefits for mortgage professionals, from enhanced career options to positive changes for the industry. Common benefits include:
1. Credibility. Having an MLO license shows a certain commitment to the profession. You’ve met certain educational and competency standards, passed the regulatory exam, and know lending ethics. This not only increases credibility in the eyes of borrowers, but other stakeholders, as well, such as real estate agents, lenders, and employers.
2. Career Opportunities. Most employers in the mortgage industry require MLO licensing for their MLOs. Having a license allows professionals to diversify their career options, from small mortgage companies to larger financial institutions. And, due to the abundant networking opportunities in the industry, getting an MLO license allows professionals to grow their own portfolio through the relationships they build.
3. Job Stability. While the mortgage industry is known for job security since people will always either be buying or refinancing properties, having a license doesn’t hurt and gives you a leg up on the competition.
4. Earning Potential. In addition to career advancement opportunities, licensed MLOs often have access to more diverse loan products and lenders. This can help increase the volume of loans they close, and result in a higher income.
The process of getting an MLO license.
Getting your MLO license is a multi-step process. First, you’ll want to look up your state’s specific requirements for MLOs. With those in mind, here are the usual next steps:
1. Minimum Requirements. Be at least 18 years of age, hold a high school diploma (or equivalent), and have a clean criminal record.
2. NMLS Registration. Before doing anything else, register on the NMLS’ website. This is a centralized system that manages the licensing process in the United States.
3. Pre-Licensing Education. All prospective MLOs must take 20 hours of pre-licensing education from an NMLS-approved course provider. Topics include mortgage regulations, ethics, different loan types, and other industry knowledge. Keep in mind that the 20 hours is a statutory minimum; different states may have additional requirements.
4. Submit Background Check Information. Applicants must submit background check information, including their criminal record and a credit check. They will also need to submit fingerprints taken at their state’s mandated fingerprinting vendor.
5. Take the Exam. All MLOs must pass the SAFE-MLO exam to become licensed mortgage professionals (a score of 75% is considered passing). The exam can be challenging, and it never hurts to supplement your studying with quality exam prep.
6. Apply for the License. Once you’ve passed the exam, visit the NMLS website to provide proof that you passed, along with verification of your completed pre-licensing education.
7. Pay Fees. Becoming an MLO does involve a few fees, including the background check, your pre-licensing education, taking the exam, and license acquisition fees. Applicants should also check with their state to determine if they ask for state-specific fees.
8. Complete State-Specific Steps. After the NMLS approves the licensing application, some candidates may still have state-specific requirements (e.g., bonding, employer sponsorship) they must submit.
After getting your MLO license (congratulations!), you need to maintain it. Each year, you will be required to take 20 hours of continuing education courses that help you stay abreast of new industry standards.
Key takeaways for MLO licenses.
Holding an MLO license is crucial to most consumer-facing positions in the mortgage industry. It lends credibility to the industry and lets consumers know that the person guiding them through the mortgage loan process is knowledgeable and ethical. An MLO license is also a great resume booster, and can help open doors for career growth.
Although obtaining MLO licensure may seem challenging, the effort is well worth it for those looking to build a lucrative and fulfilling career.
MLO license FAQs.
What is an MLO license?
An MLO license is a requirement for individuals who will play a direct role in the origination of mortgage loans.
Who needs an MLO license?
Mortgage loan originators, loan officers, mortgage brokers, and loan processors are generally required to hold an MLO license.
Why is an MLO license important?
The MLO license ensures that mortgage professionals have attained a level of education and ethics training that will protect both consumers and the mortgage industry at large.
How can I get an MLO license?
There are a series of steps involved in getting your MLO license. Although most steps are federally standardized, each state may also have its own additional requirements. A detailed explanation can be found here.
What does MLO stand for?
MLO is the acronym for mortgage loan originator, often used interchangeably with mortgage loan officer.
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