How to Become a MLO in California (DFPI)
The Department of Financial Protection and Innovation (DFPI) provides protection to consumers and services to businesses engaged in financial transactions. The DFPI oversees the operations of state-licensed financial institutions, including banks, credit unions, money transmitters, issuers of payment instruments and travelers checks, and premium finance companies.
Special Note:
If you currently have a California real estate license and want to originate loans, you will be getting an MLO endorsement under the DRE.
If you don’t have a real estate license, then you will get the MLO license under the DFPI.
What’s the difference?
Both require the same amount of work, and it’s virtually the same process to get it. It is just regulated by a different agency depending based on whether or not you have a real estate license.
- Complete the Pre-Licensure Education (PE)
- Pass the National Exam with Uniform State Content
- Submit your License Application (Includes a background check and credit report)
From start to finish, the entire process takes about 6 weeks to 8 weeks.
Basic Requirements
- You need to be at least 18 years or older.
- Applicant must be a US citizen or lawfully-admitted alien.
- A high school diploma, or equivalent, is required.
1. Complete Pre-Licensure Education (PE)
The DFPI requires you to complete 20 hours of NMLS-approved education.
The subjects must include the following:
- 2 hours – Non-traditional mortgage lending
- 2 hours – California-DFPI Law
- 3 hours – Federal Law
- 3 hours – Ethics (Includes fraud, consumer protection, and fair lending issues)
- 10 hours – Elective topics of your choice
The first assignment that you will get when you start this program is to obtain an NMLS ID#. If you already have one, then you will keep using the same one.
If you don’t, you can get one for free through the NMLS website.
This is important because your course certificates will later be attached to your NMLS ID# and permanently become part of your licensing history.
Be forewarned, there are no shortcuts with this course. The NMLS has put in the effort to make sure you are paying attention in these courses. For instance, online courses will log you out automatically if you are idle for 6 minutes or so.
There are programs that are only 2 days long but it is very intense and rigorous. I personally recommend finding a program that is 7 to 14 days long. That allows your brain time to digest all the information and doesn’t encroach on your regular schedule too much.
2. Pass the National Exam with UST
You can actually schedule to take this exam at any time, even before the 20 hour course. However, I don’t recommend it. The exam is hard enough as it is, and you will learn things in the course that will help you later on the exam.
The National Exam with UST consists of 125 multiple-choice questions. You have 190 minutes to score a 75% or better to pass. The exam fee is $110.
The first step to applying for the National Exam with UST is to enroll on the NMLS website, where you’ll pay the $110 testing fee.
Once you have enrolled, you can schedule an exam online with the national testing company called Prometric. If you want to call instead, their phone number is (877) 671-6657.
You have 6 months to take the exam after you have enrolled on the NMLS website. If you miss that window, then you will have to pay the $110 test fee again.
National Exam with UST Pass Rates
| Tests Taken | Tests Passed | Pass Rate | |
|---|---|---|---|
| 1st Attempt | 61,798 | 35,918 | 58% |
| Subsequent Attempts | 27,110 | 11,570 | 43% |
| Overall | 88,908 | 47,488 | 53% |
The low test scores may seem daunting, but if you know what to study and study hard, then you will be fine.
The National Exam with UST is testing you on the most current laws and regulations. Keep in mind, they change almost every year. That means that in order to successfully pass this test, you will need to be up-to-date on current events.
What used to be the law last year may not apply anymore this year. I recently saw a lot of test-takers struggling because they weren’t caught up on all the changes to the TILA-RESPA Integrated Disclosure (TRID) rule in 2018.
If you don’t pass, you can re-take it but there is a waiting period of 30 days. If you fail Attempt #2, you have to wait another 30 days. If you fail Attempt #3, you have to wait 180 days.
3. Submit Your License Application
The next step will be to apply online on the NMLS website. You will need to fill out the Multistate Uniform Individual License Form (MU4 FORM). This is pretty standard application that asks you for your contact information, employment history, and any financial or criminal disclosures you want to make. The application fee is $300.
Along with your application, you will need to get your fingerprints taken by an approved Live Scan Provider. This is a quick and painless process that only costs $36.25.
They will use this to run a federal criminal background check in the FBI database.
If you had your fingerprints taken with the NMLS within 3 years, then you will not have to do this again.
They are looking for serious felony convictions such as money laundering, breach of trust, or fraud.
You must also authorize the DFPI to run your credit report. The SAFE Act has given each state the broad discretion to determine their own standards of financial responsibility. There is no minimum credit score. They will review your credit history in comprehensive detail to determine if they can trust you to handle other people’s money. The credit report fee is $15.
A good idea I recommend is to check your credit history before they do. You can get your free annual credit report at http://www.annualcreditreport.com. This way, you can resolve any potential disputes with the credit agencies before it holds up the application process.
4. Find a Company to Sponsor You
After they approve your application, you will be issued your license under “Approved-Inactive” status. You will not be authorized to conduct any business yet.
You will need to find a mortgage company that is approved by the DFPI and has submitted their request to be your sponsor. Then, your license status will change to “Approved-Active.”