MLO Licensing Tests: An Overview

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MLO Licensing Tests: An Overview
Article Excerpt

Mortgage loan officers must pass a three-hour, multiple-choice test to get licensed in Texas. Learn more about this test and the information it covers.

Mortgage loan officers in Texas, officially known as mortgage loan originators (MLOs), need a license from the Texas Department of Savings and Mortgage Lending (SML) or the Office of Consumer Credit Commissioner (OCCC). The license requirements are the same in either case. Both agencies use the Nationwide Mortgage Licensing System and Registry (NMLS) to handle license applications.

One of the requirements for the MLO license is the successful completion of a test. MLO license applicants used to have to complete two separate tests, one covering federal law and the other dealing with state law. The NMLS Uniform State Test replaced those tests several years ago. Read on to learn more about what this test covers and how it works.

What is the NMLS Uniform State Test?

The test arose from the subprime mortgage crisis of the late ‘00s. In 2008, Congress passed the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act in order to establish national MLO standards.

US Congressional building

Photo by Harun Tan on Pexels

Two organizations that represent state mortgage and banking regulators, the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR), created the NMLS around the same time to improve communication and cooperation between agencies in different states and territories.

The NMLS provides a national regulatory framework for the residential mortgage industry, including standards for MLO licenses. It developed the Uniform State Test, formally known as the SAFE MLO National Test with Uniform State Content, to provide a streamlined, consistent licensing system.

Who needs to take the test?

Anyone who wants to work as a residential mortgage loan originator in Texas needs to take the test. Texas law defines a residential MLO as anyone who gets paid to “take a residential mortgage loan application” or “offer or negotiate the terms of a residential mortgage loan.”

How long is the test?

According to the MLO Testing Handbook, the test consists of 120 multiple-choice questions, 115 of which are scored. The other five questions are “pre-test questions,” which the NMLS is considering for inclusion in future tests. Test takers will not know which questions are scored and which are not.

Test takers have 190 minutes to complete the test. The total amount of time required for the appointment, however, is 225 minutes. The NMLS states that test takers must complete a tutorial at the beginning of the appointment, and they may complete an optional survey when they have finished the test.

Taking a test with a pencil and scantron

Photo by Andy Barbour on Pexels

What’s on the licensing test for mortgage loan officers?

The test consists of five “content areas,” which include specific laws regulating mortgages, knowledge of the mortgage business and the loan origination process, and ethics.

Federal Mortgage-Related Laws

Federal laws regulating or affecting mortgages account for 24% of the test content. Statutes and regulations covered by the test include the following:

  • Real Estate Settlement Procedures Act (RESPA)

  • Equal Credit Opportunity Act (ECOA)

  • Truth in Lending Act (TILA) and Regulation Z

  • TILA-RESPA Integrated Disclosure Rule (TRID)

  • Home Mortgage Disclosure Act (HMDA)

  • Fair Credit Reporting Act (FCRA)

  • Fair and Accurate Credit Transactions Act (FACTA)

  • Federal Trade Commission Red Flag rules

  • Bank Secrecy Act (BSA) and other anti-money-laundering laws and regulations

  • Regulatory authority of the Consumer Financial Protection Bureau (CFPB) and the Department of Housing and Urban Development (HUD)

Uniform State Content

This part of the test deals with state mortgage laws and accounts for 11% of the test. It covers the SAFE Act and the Model State Law created by the CSBS and the AARMR to help states create their own corresponding laws. Topics include:

  • Purpose and requirements of the SAFE Act

  • Powers and responsibilities of state regulatory agencies like the SML and OCCC

  • Laws and procedures for MLO licenses

  • MLO license compliance, including prohibited acts and penalties

General Mortgage Knowledge

This content area makes up 20% of the test. It may include:

  • Types of mortgages, such as conventional, FHA, VA, jumbo, etc.

  • Fannie Mae and Freddie Mac requirements for conforming loans

  • Types of mortgage products, such as fixed- and adjustable-rate loans, home equity lines of credit, and reverse mortgages

  • Terminology used in the mortgage industry

Mortgage Loan Origination Activities

At 27%, this is the largest content area of the test. It covers all stages of the mortgage lending process, dividing them into three broad categories:

  • Loan Inquiry and Application Process Requirements

  • Qualification: Processing & Underwriting

  • Closing

person taking written portion of test

Photo by Ben Mullins on Unsplash


Finally, ethics account for 18% of the test’s content. Areas that the test may cover include:

  • Prohibited acts, such as redlining and kickbacks

  • Fairness in lending requirements

  • Fraud detection methods

  • Avoidance of predatory lending practices

  • Legal and regulatory compliance

» READ MORE: What Does Equal Housing Mean?

How do you prepare for the test?

Each state requires a minimum amount of Prelicensure Education (PE) before you may take the test. Texas requires 23 PE hours, including 3 hours of state-specific PE. The NMLS maintains a list of approved course providers.

Where do you take the test?

MLO license applicants can schedule a time to take the test at a testing center. The NMLS has at least 24 testing centers located throughout the state. Many large cities have multiple locations. Centers are also located in cities like El Paso, Amarillo, Beaumont, and McAllen. Applicants may also be able to take the test remotely.

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