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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2005

Getting Licensed Gets Harder: How to Prepare for State Originator Exams

The licensing environment for residential-mortgage-loan originators is shifting back from its specialized focus to the basics of the mortgage industry as a whole. To conduct business, many originators now are required to complete pre-licensing courses and comprehensive mortgage-lending exams, which require broader knowledge and more preparation than in the past.

The courses are designed to ensure originators are educated in all aspects of the mortgage industry, not just origination. Topics can include federal laws, qualifying borrowers, government loans, servicing, ethics, credit scoring, wholesale lending, the secondary market, reverse mortgages and mortgage insurance — some of which are unfamiliar to mortgage originators.

About half of the states requiring continuing education also require a pre-licensing course, and more than 10 administer mandatory, state-proctored exams. Each year, more states add pre-licensing requirements for originators.

Regulating originators’ knowledge and education is a notable effort considering the attention and focus on predatory lending and ethical issues in the mortgage industry. However, originators must realize that state regulators do not administer exams for specialized fields or niches, such as residential-mortgage-loan origination. States require a broad base of industry knowledge.

Expecting to pass comprehensive state exams with little to no preparation is not realistic for most loan originators. Here are things to know and do successfully to meet education requirements:

  • Know what to study: Find out what is on the test. Download exam outlines and gather materials such as study guides and exam preps specific to your state. Exam outlines are available in states such as Utah, North Carolina and Illinois.

  • Study: Many students say the exams are challenging. Those who say they failed admit they did not study enough, if at all. They believed their extensive experience would get them through any mortgage-related exam.

  • Broaden your knowledge of the industry: Read the state-provided materials and take the practice tests. Request a study guide from your state. Brush up on underwriting guidelines and loan products.

  • Choose a reputable prep-course provider: Several education providers are available. Be sure to select one with experience and a knowledgeable team to ensure your educational experience is worth the time and money. Determine if you prefer live, online or home-study courses.

  • Know how to use a handheld financial calculator: Calculation questions often comprise 10 percent of exam material. Although many office-based originators use their computers exclusively, it is helpful to know how to use a handheld financial calculator for these exams.

It is important to realize that sitting in a lecture-based class for a few hours is not enough preparation to pass new state exams. Even one-day or one-week courses typically will not provide enough information. States require that on average, students attend 60 hours of live training to prepare. State requirements also can range from 90 to 120 live classroom hours.

Some states require exams but do not require prep classes. Many companies in these states bring in outside instructors to conduct their own personalized training classes to ensure the highest success rate for their originators.

Successfully fulfilling state-education requirements can only help your business. Originators establish credibility when they are licensed. Consumer confidence increases when consumers know their originators are state-trained and licensed. Originators become more knowledgeable about different aspects of the industry, which only enhances professional development. By taking these tests, mortgage originators also are preparing themselves for future state exams. 


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