There’s no way around it! If you want to pass the NMLS exam, you must possess a solid grasp of the federal laws on which you should expect to be tested. Even though the NMLS exam’s Federal Mortgage Related Laws component accounts for only 24% of the overall NMLS exam, if the test candidate is not proficient in this area, even if he or she is solidly proficient in the other four test component areas, he or she will fail the NMLS exam. Proficiency in the Federal Mortgage Related Laws component is mandatory for NMLS exam success.
There are nineteen (19) federal laws with which every NMLS test candidate must be familiar. Although the test candidate can expect to be most heavily tested on the:
- Real Estate Settlement Procedures Act (RESPA);
- Equal Credit Opportunity Act (ECOA);
- Truth-in-Lending Act (TILA); and the
- TILA-RESPA Integrated Disclosure Rule (TRID),
he or she should also be well versed on the:
- Home Mortgage Disclosure Act (HMDA);
- Fair Credit Reporting Act (FCRA);
- Federal Trade Commission’s Red Flags Rule (FTC Red Flags);
- Bank Secrecy Act/Anti-Money Laundering Rule (BSA/AML);
- Gramm-Leach-Bliley Act (GLBA);
- Telemarketing Sales Rule/Do Not Call (TSR/DNC);
- Mortgage Acts and Practices Rule (MAPs);
- Electronic Signatures in Global and National Commerce Act (E-Sign);
- USA PATRIOT ACT;
- Homeowners Protection Act (HPA);
- Dodd-Frank Act;
- Housing and Economic Recovery Act (HERA);
- Community Reinvestment Act (CRA);
- Fair Housing Act (FHA); and the
- Mortgage Assistance Relief Services Rule (MARS).
I am sympathetic to the realization that this is a lot to learn. But there’s simply no way around that. Just as a medical student is expected to master an exorbitant amount of material in order to become qualified as a physician, so too must the mortgage loan originator candidate. If the MLO candidate is unwilling or unable to master everything appearing on the NMLS Test Content Outline (including all of the federal laws), then he or she should not expect to satisfy the requirements for licensure as an MLO. It’s plainly and simply as matter-of-fact as that!
In preparing for the Federal Mortgage Related Laws component of the NMLS exam, I would encourage the MLO exam candidate to approach each regulation from the following six (6) study strategies.
The Regulation’s Purpose
The national MLO test candidate should understand the purpose of each regulation being studied. What is the point of having the regulation? What does it do? Who does it protect? What is its corresponding letter (when applicable)? And in what year was it enacted?
The Regulation’s Applications
To what does the regulation apply?
The Regulation’s Exemptions
To what does the regulation not apply?
Each federal regulation is associated with specific regulatory disclosures. To adequately prepare for the NMLS exam’s Federal Law section, the prepared test candidate will be familiar with each associated disclosure as well as with its purpose. Additionally, he or she should be aware of each disclosure’s issuance and, when applicable, reissuance requirements.
In studying the federal laws, the test candidate can expect to encounter concepts and subject matter with which he or she is naturally unfamiliar. It’s important to avoid simply glossing over terms with which the future test taker is unfamiliar. Be certain to research any and all terms that you encounter with which you are unfamiliar. Doing so goes a long way toward ensuring understanding.
Each regulation specifically defines for how long an issuing entity must retain its associated disclosures. It’s important for the test candidate to be fully knowledgeable about what those document retention requirements are.
The NMLS National MLO Licensing Exam candidate who follows the aforementioned six study strategies when preparing for the NMLS exam’s Federal Law component will effectively prepare him or herself for this exam. It’s critical to remember, however, that, although the test candidate must be extremely proficient in understanding and knowledgeable of the federal laws on which he or she can expect to be tested, he or she must also be well versed and prepared to effectively answer test questions included in the exam’s four other modules:
- General Mortgage Knowledge (20%);
- Mortgage Loan Origination Activities (27%);
- Ethics (18%); and
- The Uniform State Content (USC) (11%).