Transitional Mortgage License for Registered Mortgage Loan Originators

Let’s explore the requirements for obtaining a transitional mortgage license. In response to the sub-prime mortgage crisis, the Safe Act passed into law in 2008. This law now mandates that individuals who want to originate mortgage loans must acquire a state license as a mortgage loan originator (MLO), unless they are employed by a deposit taking institution. To become a licensee, you must complete a 20 Hour Pre Licensing Course, pass an exam, and fulfill specific criteria during the required background check. The SAFE ACT strictly prohibits the engagement in residential mortgage loan origination without proper registration and the necessary licensing.

Previously, a Federally Registered MLO working for a depository could not transition to a nonbank lender or broker until they obtained a license. Unfortunately, this required completing a 20-hour course, possibly fulfilling additional state-mandated pre-licensing requirements, and passing a test before being eligible to work for their new employer.

To exacerbate the situation, when a current bank MLO finished the necessary education to become a licensed MLO, the NMLS (Nationwide Multistate Licensing System) automatically notified their current employer about the course completion. This created a highly uncomfortable situation for individuals seeking alternative employment.

Thankfully, this has changed! Starting from November 24, 2019, bank MLOs can now exercise their “transitional authority” and seamlessly switch to a nonbank lender or broker while still complying with the rules set by SAFE Act.

Transitional Mortgage License Frequently Asked Questions

How Long can an MLO Operate Under Temporary Authority?

Temporary authority begins when a current Federally Registered Bank MLO, who meets the 1-year experience requirement, submits an application with all the necessary background check information. It concludes when one of the following events occurs:

  • The MLO withdraws the application.
  • The state denies the application.
  • The state grants approval.
  • 120 days pass after the submission of an incomplete application.

Are There Transitional State MLO Licenses for Existing Licensed MLO's?

We have more great news to share! If you currently hold a state license as an MLO and you want to acquire a license in another state, you can now receive temporary authority to originate by submitting an application. This applies as long as you have been licensed for a minimum of 30 days before submitting the application. This development is fantastic because the number of MLOs holding licenses in 10 or more states has experienced rapid growth in recent years. With the transitional authority in place, this trend will continue, allowing MLOs to operate while awaiting the issuance of their new license.

Can an MLO Obtain Temporary Authority in All States?

Yes!  There are no limits to how many states you may operate under temporary authority.

Which Mortgage Jobs Require a License?

  1. MLO working for a mortgage broker;
  2. MLO working for a a mortgage lender;
  3. Mortgage Loan Modifier;
  4. Contract Mortgage Processor or Underwriter;

I am Currently a Bank MLO, How Difficult is the Mortgage License Exam?

The test is extremely diverse and covers the full spectrum of the mortgage industry.  This is why choosing the right provider is so important, even if you have years of mortgage banking experience!  There are many discount courses available through a quick internet search but as the old adage goes, you get what you pay for.  In addition, there are many providers who discount their pricing but do not include their test prep materials needed to help you prepare, its actually sold as an add on which usually ends up costing more than using a Nationwide provider like My Mortgage Trainer, Inc. who will give you all of the study material needed for one reasonable price. You can see thier reviews here.

To see the current NMLS Mortgage Loan Originator test outline, click here

Course Options to Meet the Pre-Licensing Education Requirement

First, there are over 100 approved providers on the NMLS approved list but less than a handful that can actually serve Nationwide.  There are three methods for taking the course however, finding a local live course when you need it is very difficult as there may not be one scheduled when you need one.  Therefore the top two most popular methods for taking the course are as follows:

1.) Live Webinar


Online Instructor-Led (OIL)

The webinar is the best way to learn what is needed to prepare for the exam if your current schedule allows.  The webinar is done over 3 straight days with a live instructor from the comfort of your own home or office.  A webcam is required. Click the video below to get an idea of how the webinar functions:

The Online Instructor Led Option is delivered over a 7 day window and allows for some more flexibility for those who cannot spend 3 straight days in a webinar.  To find out more about this delivery method, please view the video below:

Have Additional Questions on Transitional Mortgage Licenses?

Call us at 317-566-0425!

Or, Fill out Contact Request Form