Training and accountability have been two of the most serious mortgage industry requirements since the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) was enacted in 2008. The SAFE Act represented the United States Government’s initiative to overcome the years of regulatory apathy that rendered the fox completely free to guard the henhouse. Now don’t get me wrong, ethical and honorable mortgage professionals existed prior to 2008. But, for every ethical and honorable mortgage loan originator, there were two to three others who left much to be desired.
Prior to 2008, the unwritten rule was, “Say anything. Do anything” and, as long as the loan originator did not get caught and ultimately got paid, whatever he or she said or did was perfectly acceptable. And who was there to catch the unscrupulous loan originator and hold him or her accountable? Nobody. Because most of the laws that were in force, were rarely if ever, enforced.
Yes, the mortgage industry was all about profit. The customer was seen as little else than a means to the end of getting paid. And, if after all was said and done, the customer was left smoldering in the ashes, that was a perfectly-acceptable outcome … as long as the loan originator got paid.
When the U.S. economy tanked due to, among other things, the unscrupulous activities of mortgage lenders, brokers, investors, and loan originators, the government had no choice other than to finally inject much-needed accountability into the mortgage industry. This occurring after the industry made it more than clear that it was not interested in policing and unwilling to appropriately police itself. Furthermore, with the toxic housing crisis acting as an anchor sinking the U.S. economy, Congress had to act. In doing so, the Housing and Economic Recovery Act of 2008 was implemented, with Title V being the SAFE Act.
The SAFE Act injected accountability into an industry that had been acting like the wild, wild west. The SAFE act forced compliance, training, and accountability and, for the first time ever, the customer was placed at the top of the totem pole.
In order to hold mortgage loan originators accountable, the requirement for licensure was implemented on any mortgage loan originator who did not work for a depository institution regulated by a federal banking regulator or the Farm Credit Administration (FCA). And don’t even get me started on why the banks were exempt from these requirements. Let’s just leave it at when lobbyists have money, lobbyists get what they want. Anyway, one of the prerequisites to licensure established through the SAFE Act was that, in order to become licensed, the MLO licensing candidate had to, among other things, take and pass the Nationwide Mortgage Licensing System (NMLS) National Licensing Examination.
According to the NMLS, effective January 1, 2022, the NMLS exam’s overall pass rate was a measly 52%. Yes, you read that correctly. Of the 161,324 exams taken between January 1, 2020 and December 31, 2021, just slightly less than half of all of those test takers were unable to pass it. That is a staggeringly-high overall failure rate for an exam of this caliber.
There are several reasons why relatively so few people are ultimately able to pass this exam. The most significant reason is that when you have an exam, the sole and primary preparatory resource for which is a 20-hour course, and this 20-hour course is responsible for the effective delivery of approximately 150 hours’ worth of material (thanks again, lobbyists), no 20-hour course can ever appropriately prepare someone for this exam. So that’s why I’m now offering you the following tips.
The NMLS exam is relatively standard. One hundred and twenty, computer-generated, multiple-choice questions, offering four answer options each that must be completed within a window of slightly more than three hours. Of the 120 questions, five are “test” test questions that do not affect your grade. Of the 115 questions that do count, the student must achieve a passing score of 75% or higher. And here’s a fun fact! The majority of those who fail do so by only one to five points. Ok. So you fail. Just take it again, right? Well, it’s true that you can re-take the exam, but only after paying for it again each time and waiting 30 days between the first three attempts and six months for the fourth. Can your business afford to be sidelined for that long? Oh! And originating under someone else’s license is both a federal and a state crime!
The following four tips will help swing the odds of passing in your favor:
1. Live Classes Are Best!
With a 52% overall pass rate, can you really afford to sidestep the understanding you’ll acquire through a live class taught by a competent instructor? Taking the mandatory 20-hour pre-licensing course is not simply satisfying another licensing criterion. Yes, it is required. But there’s a reason for it. A quality live course more successfully arms the student with the information needed to navigate through the exam than does a course offered through any other modality. As a mortgage professional, your time is valuable. Why “waste” two or three days sitting in a classroom when you can take the class online and simultaneously manage your business? Why? Because, not only is no 20-hour course able to effectively prepare anyone for this exam, given the opportunity to take an online course, what’s the likelihood that you’ll encounter distractions while watching the webinar or taking the online class? The course is already inadequate. So why take it through a modality that would likely contribute to you missing out on the information that it does provide? In which setting do you think you’ll be less distracted? Sitting at your desk or in a classroom compelled to pay attention? As an NMLS-course instructor, I can personally attest to how the live class prepares students in ways that the online or webinar versions simply cannot. Taking the live course taught by a skilled and charismatic instructor with whom one can interact, more effectively captures the participant’s attention and contributes to material retention far longer than through any other format. By taking a live class, the inconvenience of missing work and the potential incurrence of travel expenses is clearly justified bypassing the first time. After all, if you fail the exam, your hiatus may be quite longer than two or three days. They may be challenging to find now, but, if you can, you would be best served by taking the 20-hour PE course live.
2. Be Well Rested and Clear Minded!
Even though this sounds like common sense, you’d be surprised how many people don’t take this seriously. Do yourself a favor and say no to the revelry the night before your 8:00 a.m. test. Missing one happy hour or going to bed early is certainly worth hitting the ground well rested and clear-minded the next morning. Additionally, considering the tricky nature of this exam, if you’re in any other state of mind, you’re practically guaranteed to incorrectly answer questions that you would have correctly answered had you been in a better and more-rested state of mind.
3. You Get Three Hours. Use Them!
You may have colleagues bragging about how they finished the exam in an hour and a half. Ok. That’s fine. And maybe you will too. If you do, you’re certainly free to leave. But if you only plan to spend an hour taking it, and schedule something for an hour and a half later, you might find yourself squirming should 30 – 35 questions remain when the limo pulls up! You’re afforded three hours. Allot for three hours. Consider getting out any earlier a bonus.
4. Use Your Tutorial!
Maybe you’ve taken a hundred similar exams. Maybe you’re a pro. Know what? This test is much too important for you to miss a question or two because you didn’t know how to access the online calculator or go back to review a question. Your test will offer a tutorial. Although you technically can skip it, I encourage you to take the time to go through it. Plus, the clock on your exam does not start ticking for ten minutes past the time when you begin the tutorial, and you can finish it in less than ten minutes.
Be certain to visit www.nmlstraining.com again next week for Part II in this four-part series to give you the tools and edge to pass the NMLS Exam on your first attempt.[/et_pb_text]