Take steps to swing the odds of passing the licensing test in your favor

Rich Leffler, mortgage education consultant and instructor, Professional Mortgage Consulting

As published in Scotsman Guide's Residential Edition, January 2011.

Every mortgage professional who originates loans for a non-Federal Deposit Insurance Corp.-insured entity must be licensed. And being licensed means having to pass the National Mortgage Licensing System (NMLS) pre-licensing exam.

The exam is relatively standard. It includes 100 computer-generated, multiple-choice questions that must be answered within three hours. Ten of the 100 questions are "test" questions that do not affect your grade. Of the remaining 90 questions, originators must achieve a passing score of 75 percent or better. That's just a little pressure, especially considering that many people who fail do so by only two or three points. And according to the NMLS, between July 30, 2009, and this past Oct. 30, the pass rate for first-time national-component test- takers was 69 percent.

If you fail, you must wait 30 days after each of your first four attempts to retake the test and six months after that. Can your business afford to be sidelined for that long?

Although the deadline for taking the exam has passed in most states, consider the following 16 tips if you are among the originators who must retake the exam or if you are new to the industry and taking it for the first time. They may help you swing the odds of passing the NMLS exam in your favor.

1. Take a live class. As a mortgage professional, your time is valuable. You may wonder why you should "waste" two or three days sitting in a classroom when you can take the class online and simultaneously manage your business. Think about it: What is the likelihood that you'll allow distractions such as the phone, e-mails or visitors while you "watch" the webinar or take the online class? In which setting do you think you'll be less distracted? Sitting at your desk or in a classroom where you are compelled to pay attention?

Taking a live course taught by a skilled instructor with whom you can interact captures your attention far longer than any other format would. And captured attention means greater levels of understanding and retention. By taking a live class, the inconvenience of missing work is clearly justified by passing the exam. After all, if you fail the exam, your hiatus may be longer than just two or three days.

2. Be rested. Although it may sound like common sense, you'd be surprised how many people don't take it seriously. Do yourself a favor and say no to the revelry the night before your 8 a.m. test. Missing one happy hour is certainly worth hitting the ground well-rested and clear-minded the day of your exam.

3. Plan to use all three hours. You may have colleagues who've bragged about how they finished the exam in an hour and a half. That's fine — and maybe you will, too. If you do, you're certainly free to leave. But if you plan to spend only an hour taking it and schedule something for an hour and a half later, you might find yourself squirming should 20 to 25 questions remain when you'd planned to leave. You're afforded three hours, so allot for three hours. Consider getting out any earlier a bonus.

4. Use your tutorial. This test is too important for you to miss a question or two because you didn't know how to access the online calculator or how to go back to review a question. If your test offers a tutorial, take the time to go through it.

5. Read each question twice. The NMLS test questions are frequently tricky, and your eyes and mind often work at different speeds. Imagine the following question: "At what equity position is mortgage insurance automatically removed?"

A) 80 percent
B) 78 percent
C) 22 percent
D) 20 percent

Your mind races — you remember your instructor emphasizing that once the loan-to-value ratio (LTV) reaches 78 percent, mortgage insurance is automatically removed.

So you choose "B," and guess what? You're wrong. The question didn't ask about LTV. It asked about equity position. Clearly, the correct answer was "C," but by reading it quickly, you picked the wrong answer and possibly found yourself waiting to retake the exam.

Do yourself a favor: No matter how simple the questions seem, be sure to read each one at least twice.

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