The Loan Officer Exam

Loan officers are a group of professionals who mediate the financial assessment, borrowing, lending and entire process of financial loans. They may work in three different specialties including commercial, consumer and mortgage loan officers. Loan officers working with businesses or consumers may not need to pass an examination for employment, although their counterparts in mortgage must be nationally registered to practice. The loan officer examination has two parts, including both a state-level test (for those states requiring licensure) and a national examination. Check with your state board of commerce or real estate to determine if you must pass the loan officer examination to legally practice within your state of residence, as the requirements vary.

There are states that do not mandate or license the practice of loan officers. Although getting licensed as a loan officer will make you more competitive within the field and prove your professionalism, it is not required in all 50 states at this time. Check with the American Bankers Association and your state department for more information.

At the state level, most loan officer examinations are subsidized out to computerized testing centers, such as Pearson VUE or Prometric. The examination content is outlined by the state, but the facilities sponsor the computerized test and send your score back to the state department for review. Each state has their own cut-off for pass/fail in scoring and some are higher than others. You apply for the state examination through the sponsoring state department – usually commerce or real estate. Appeals, fees and correspondences required will vary by state.

Mortgage loan officers provide financial loans in the real estate market, and are highly regulated professionals. Candidates interested in working within mortgage loan origination, or MLO, must consider both the national and state examinations. The state examination provides you with a licensure to practice within that state, recognizing that you possess the knowledge of state legislature in relation to writing, offering and lending loans. The state loan officer examination is governed at the state department level, usually within the department of finance or real estate. The professional regulations and eligibility to test are specific to each state and are not uniform for the state level testing.

The Nationwide Mortgage Licensing System, or the NMLS, sponsors the national examination for mortgage loan officers. Taking and passing this national examination is the only way to legally practice as an MLO within any of the 50 states, regardless of state practice laws and licensure. Those who pass this examination are registered within the NMLS, receive an NMLS number and gain access to the national database of registered professionals. This practice originated in 2008, with the passage of the Secure and Fair Enforcement for Mortgage Licensing Act, used to decrease unfair lending practices.

You may obtain education for this profession and garner experience for the loan officer examination in a number of ways. Many financial institutions will sponsor their employees and pay for advanced education within the field. You might also want to consider taking the certification courses offered through the American Banker’s Association, which are used to prepare loan officers through the Loan Review Certification Program. Community colleges and vocational schools also provide courses focused on loan officers; check local listings to see what is available.

Loan Officer Careers

Loan Officer CareersThe term loan officer is a broad-spectrum catchall including professionals who help mediate the origination, repayment and offering of financial loans. Loan officers may work for financial institutions, such as a local bank, be certified or solicit loans for organizational profit from lending. This diverse career has much room for advancement and may start with a high school diploma or a bachelor’s in business. If you are considering a career in this financial specialty make sure to contact your state governing boards, as licensure is required for all loan officers working with homeowner loans or mortgages.

There are three basic types of loan officers: commercial, consumer and mortgage. The three types are not interdependent, as many rural loan officers may work in all three capacities, therefore requiring a licensure to practice according to national laws. Whereas some loan officers may help consumers obtain a loan for a car purchase, others may underwrite a loan for a first-time homebuyer. The responsibilities and knowledge of these professionals is great – loan officers ensure that loans can be repaid therefore maintaining the financial stability of their employer.

Loan officer careers are dependent on the market; times of poor economy may adversely affect those who depend on commissions. A loan officer’s pay is greatly determined by their employer and type of work; officers working in a commercial capacity usually bring home more than those working for consumers in the local credit union. The average pay scale for loan officers ranges between $30,000 and $110,000, with variations dependent upon rates for salary, commission and bonuses. Your pay scale is also dependent upon your level of expertise, salesmanship and education.

You may begin your career as a loan officer in a number of ways. Historically, tellers and other long-term bank employees were eventually promoted to loan officers. This trend continues today, with a high school degree or equivalent the basic education needed to start in this job. However, as state licensure and organizational expectations raise the bar, many educational institutions offer associates and bachelor’s degree programs specializing in business, finance or economics. State boards independently regulate the amount of education and experience needed to sit for loan officer state licensure exams.

Loan officer licensure exams are required to work in real estate and mortgaging; this is a national, not state, requirement. Although the hours of education needed vary by state, all 50 states require a kind of formal education within the specialty as a prerequisite to testing. Loan officers working specifically in mortgage origination are also known as MLOs, or Mortgage Loan Officers or Originators. In accordance with the 2008 Secure and Fair Enforcement for Mortgage Licensing Act, or S.A.F.E., all MLOs must hold a state licensure and pass a national examination before working as a mortgage intermediary.

Likewise, if you are seeking employment as a loan officer in a commercial institution, you will require a state licensure. The loan officer exam content is defined by each state, as are the eligibility requirements. Be prepared to have your own credit assessed, complete a background and fingerprint check during your application for state licensure as a loan officer.

Loan Officer Exam Content

The loan officer exam is mandated by each state, usually through the department of commerce or the department of real estate. If you are working in a commercial or consumer-driven financial institution, you may not need to take and pass the loan officer examination. However, any loan officer working with mortgage loan origination needs to be nationally certified through the NMLS, or the Nationwide Mortgage Licensing System, and may also require state licensure. The loan officer exam must be successfully passed in the majority of states to practice as a mortgage loan officer. This exam is challenging and costly; carefully reviewing your state’s exam content may save you time, frustration and money.

General study preparation for the loan officer exam includes becoming familiar with the test content. Each state provides a test content blueprint – an outline of testable material, usually including a weighing score to tell you which sections contain the most questions. Although the testable material of each exam is state-specific, there is some general testing content that may be included in all of the examinations. Many states have also aligned their loan officer examination with the national standards set forth by the NMLS; check the national website to see if they sponsor your states’ licensure testing. The majority of state-level licensure tests average between 55 to 65 questions and allow 90 minutes for completion. The tests are offered in a computerized format with multiple-choice style questions.

Most loan officer examinations will have a heavily weighted content involving the legislation of borrowing. These laws are put forth to protect borrowers and lenders and the loan officer must be familiar and able to explain the content of each legislative act. Candidates must also be familiar with the state-level laws and titles, which can be found in review manuals or on the state department’s web site. Examples of areas of content may include the Good Faith Estimate, Predatory Lending, Equal Credit Opportunity Act, Secure and Fair Enforcement for Mortgage Licensing Act, Patriot Act, Fair Housing Act and the Mortgage Lending Act.

Content may include sections on qualifying the borrower for loans. These sections might include analyzing, reviewing and weighing the borrowers credit scores across the three federal credit unions. Loan officers must be able to document the rational behind refused loans according to state legislature. You must also demonstrate knowledge of qualifying factors such as equity and home equity, collateral, lines of credit and second mortgages.

You will be tested on your knowledge of the types of loans commonly intermediated including blanket mortgages, bridge and end loans, balloon and adjustable rate mortgages, refinance loans and 15 to 30 year fixed-rate loans. Upon passing the loan officer examination you must be proficient in the myriad types of loans and have the ability to marry the right loan with your client’s credit and collateral.

The loan officer examination may include content on the outlying factors of borrowing including taxes and repayment considerations. Sections may include questions on foreclosure, tax liens, client risk factors, bankruptcy and payment shock.

Loan Officer Exam Eligibility

Regardless of whether you have worked up the chain from bank teller or just graduated with your bachelor’s in finance, if you want to work as a loan officer many states mandate licensure and have laws surrounding practice acts. All 50 states regulate the practice of mortgage loan officers, however basic consumer loan officer practice is only regulated within a little over half of the states. Check with your state department of commerce or real estate to find state-specific examination information. The eligibility requirements will vary from state to state including education, experience and fees for the loan officer exam.

Loan Officer Exam EligibilityThere are many different levels of certification and licensure for loan officers, so the specifics may get a little confusing. The majority of state departments have specific legislation surrounding those who originate, approve and write loans, especially involving real estate and mortgage loans. There are certification courses available to loan officers, however completing these courses results in a certificate, not a state licensure. There is a national examination for mortgage loan officers or originators, known as MLOs, in accordance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or S.A.F.E. This exam, as well as your state exams, must be passed prior to practicing as an MLO.

The state licensure loan officer exam is controlled at the state government level – they decide the length, content and passing rate for licensure. The rationale behind this is simple; you must have state legislative knowledge to practice as a loan officer within that jurisdiction. The eligibility requirements, therefore, are also arranged at the state level. You should contact your state’s department of finance or real estate for more specific information, however there are a number of basic eligibility requirements.

Your level of education and experience may vary greatly from that of your peers. Some states, such as Michigan, mandate at least one to two years within the business prior to sitting for the loan officer exam, whereas others do not require employment experience. Regardless of whether or not it is state mandated, you may need experience within the field to increase your chances of passing the loan officer examination. This examination covers a broad-range of principles and may be harrowing to the newcomer. For more information on studying for your exam, see the article titled, “Loan Officer Examination Preparation.”

State licensure examinations will require proof of residency, citizenship and a clear criminal background. You must be able to prove residency, perhaps with a driver’s license or utilities bill record, as well as citizenship with a social security card or birth certificate. Fingerprinting services are offered through local police departments; check the state requirements prior to getting fingerprinted as there is a fee associated with the service and you want your prints going to the right agency. Criminal background checks are completed on all candidates. Usually misdemeanors prior to age 18 are excluded, however you should not withhold any information or you may be found ineligible to sit for the test. In addition, most states will complete a credit check on their loan officer candidates. Your personal credit should be in good order.

Many states regulate the some coursework prior to sitting for the loan officer examination. Coursework must be completed as directed by the state. For example, the state of Michigan includes a list of courses totaling 24 hours of education needed prior to sitting for the test, whereas North Carolina only mandates eight hours of education. Check with your state department and make sure that you only sign up for classes offered through state accredited organizations.

Loan Officer Exam Preparation

Depending on your state of residence, you may need to pass a state licensure examination to practice as a loan officer. Loan officers work in a variety of settings, with the most common being financial institutions. These professionals mediate the exchange of loans and advocate for those borrowing and loaning the money, ensuring that fair lending practices are enacted. If you are considering taking the Loan Officer Examination you will need to develop a study plan as your test date approaches. Taking the test is not free, and the state board can collect application and retesting fees for each additional attempt if you should fail.

The Loan Officer Examination is called by many names and content, eligibility and application processes vary from state to state. Passing this comprehensive test will grant you a license to practice as a loan officer within that state. Each state department governs their testing content, administration and the pass/fail rate. There are only a few remaining states who do not mandate the practice of loan officers within the state; if you are practicing in a state that advocates licensure you must pass the loan officer examination to practice in accordance with state law.

Preparing for the Loan Officer Examination should start with getting familiar with the test content. Out of the states that mandate licensure, some of them have turned over testing authority to the Nationwide Mortgage Licensing System, or NMLS. If you cannot find the licensing information within your state department’s website, the information may be found on the NMLS web site. Familiarizing yourself with the blueprint of the test content will help you streamline your studies; pay attention to the weighing of each section’s content. Whereas some states focus heavily on state legislature and real estate law, another state may place the majority of focus on home equity loans and legislature surrounding borrowing.

Community colleges and vocational schools offer courses for potential loan officers. Some of these courses will award you with a certificate upon completion and may help you prepare for the Loan Officer Examination. If you are currently working for a financial institution, check with your administration as many banks and credit unions will finance their employees’ continuing education within the field. You may also want to check the American Banker’s Association web site; there are plenty of financial courses available both online and in person for test review.

Study materials can be purchased on your own and may help you prepare for the exam. However, most states do not advocate such material. Select your materials from reliable sources, perhaps by discussing preparation methods and study tools with peers or professionals within the business. Exam study reference books, flashcards and interactive programs are available from third-party merchants for the Loan Officer Examination preparation.

This test is given in a computerized testing format. People who are not familiar or comfortable with computerized tests may wish to take a practice computer exam. Both Pearson VUE and Prometric, two large computer-testing companies, offer practice exams that you can download onto your PC. However, take note that the actual Loan Officer Examination cannot be taken in the comfort of your own home.