How Hard is the NMLS Exam?

by | Jan 10, 2022 | Pass the NMLS Exam

I have good news and I have bad news. I will start with the bad. I am not going to lie. The Nationwide Mortgage Licensing System (NMLS) national mortgage loan originator (MLO) licensing exam is an unquestionably hard exam to pass. According to the NMLS, 48% of those desiring to pass this exam, overall, are never able to do so (Test Performance Information, SAFE MLO Test Pass rate, October 1, 2019 through September 30, 2021). So why are only slightly more than half of those desiring to pass this exam ever able to do so? The two primary reasons contributing to this extraordinarily-high failure rate involve the sheer amount of material that must be mastered along with the inadequacy of the primary means for preparing test candidates for this exam … the 20-hour pre-licensing course.

The NMLS Test Content Outline

When reviewing the NMLS Test Content Outline, the test candidate will encounter everything that he or she must master in order to appropriately prepare for the NMLS exam. Additionally, there are four regulations and rules:

1. The Housing and Economic Recovery Act (HERA);
2. The Fair Housing Act (FHA);
3. The Community Reinvestment Act (CRA); and
4. The Mortgage Assistance Relief Services Rule (MARS)

that are not listed on this outline but are test worthy topics. The test candidate, however, only needs to have a generalized overview of these four topics.

It is completely understandable how, upon first review, the Test Content Outline looks like a daunting conquest to master. But the unavoidable reality is that, in order to pass this exam, there is a lot of material that the test candidate must know. Commitment to passing this exam means committing to taking the time to study and appropriately learn everything appearing on the Content Outline. There is simply no way around that or shortcut to take. If you want to pass the exam, you must learn the material. Period.

You may find comfort, however, in knowing that the Content Outline’s bark is a bit worse than its bite. The outline contains a decent amount of redundancy and generalization. But the bottom line is that everything on it, plus the four other regulations mentioned above, must be learned. If a test candidate is unable or unwilling to take the time and apply the effort to appropriately prepare for this exam, then he or she must resolve in knowing that he or she will not pass it.

The 20-Hour Pre-Licensing Course

Unlike the Real Estate Industry which requires its future licensees to complete extensive pre-licensing training and coursework before taking the licensing exam, the SAFE Act set the Mortgage Industry’s bar much lower. In consideration that the 20-hour course is responsible for effectively delivering approximately 150 hours’ worth of material in a 20-hour timeframe, there is no surprise that test candidates struggle to master the material needing to be mastered in order to pass this exam after simply completing their 20-hour course.

No 20-hour course is able to effectively deliver 150 hours’ worth of material in a 20-hour timeframe. It is simply not possible. As such, even the best of the best 20-hour course providers are forced to skim over the surface of much less than half of what the test candidate needs to know through the established curriculum. I vividly remember teaching 20-hour courses to test candidates who were completely new to the mortgage industry. In doing so, my choices were simple. I could either race through the material, deflecting questions, and finish everything that I was required to finish on time, or I could field questions and only get through a quarter of the coursework. And there was no other way to do it. More times than not, the test candidates were significantly more confused and lost after completing the 20-hour course than they were upon entering it.

And Now the Good News!

The good news is that, with the appropriate study practices, dedication, and commitment, the NMLS exam is passable. But make no bones about it. To pass the exam you must be appropriately dedicated.

Appropriate dedication means committing to significant study. And if your idea of studying consists of reading a couple of pages from your 20-hour course material at night when you first get into bed, or in the morning before work, or on your lunch break, yeah, that’s not going to cut it. Appropriate studying means setting aside definitive time, every day, and studying like it’s your job. Studying like a boss!

Several years ago, I was in Doral, Florida teaching a live, employer-sponsored, 20-hour course. That meant that I had two-and-a-half days to effectively deliver 150 hours’ worth of material. All throughout the time I was teaching this class I kept repeatedly emphasizing, “You need to study. You need to study. You need to study.” The class attendees were so sick and tired of hearing me say this that, upon returning to the class from breaks, before I even got back to the podium, I would hear the students saying, “We know! We know already! We need to study! Stop telling us!”

Half of that class failed the NMLS exam. And, when their employer polled all of the people who failed to ask them why they believe that they failed, every single one of them replied that it was because they did not study enough. Take that or leave it. But the bottom line is that, if you want to pass, you must study.

So Why is the NMLS Exam so Hard?

After the pre-2008 mayhem was eliminated, the Conference of State Bank Supervisors (CSBS), in conjunction with the American Association of Residential Mortgage Regulators (AARMR), needed to demonstrate that they are not admitting just anyone into the Mortgage Industry. Those lucky enough to be admitted earned their way into it and were dedicated to doing whatever was necessary to achieve the status of licensed MLO. As such, the test administrators created a licensing exam that not only required licensing candidates to know a significant amount of material, but they also structured the exam in a fairly tricky format to force successful licensing candidates to be able to critically think.

It is for this reason that understanding the material, and not simply knowing it, is also an extremely critical component to exam success. A reliable gauge of understanding the material is demonstrated when a test candidate can conduct articulate conversations about the knowledge points appearing on the Test Content Outline.

From What Do I Study?

To properly prepare for the NMLS exam, the test candidate should use the materials that he or she received from his or her 20-hour course, the resources listed at the bottom of the Test Content Outline, study groups located through social media such as SAFE MLO Exam Prep, tools secured through test prep companies such as, and the Internet. I would like to offer one caution about researching topics through the Internet though. Since there is a lot of obsolete and incorrect information available through the Internet, test candidates who use the Internet to research test content topics should thoroughly vet the sources of the material that they are encountering. Go directly to the regulator’s or the investor’s website versus studying from John’s Mortgage Company or Bob’s Credit Union.

The key components to passing the NMLS exam are dedication and commitment. By dedicating the time and effort to appropriately preparing for the NMLS exam, you can certainly be one of the celebrating 52%.

Good luck to you!

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