MLO License Criteria FAQs

MORTGAGE LOAN ORIGINATOR

FREQUENTLY ASKED QUESTIONS

Criteria Used to Issue Licenses

These questions and answers constitute informal guidelines only and do not constitute legal advice or rules by DFI.  Any interpretations of Chapter 454F are specific to the facts and circumstances in each particular situation.  Questions and answers will be updated and supplemented as DFI develops additional guidance.  Additional answers can be found using the NMLS Resource Center.

If additional guidance is required on a unique situation in your company or for yourself, you may send your inquiryvia letter or email  to:

Division of Financial Institutions
Department of Commerce and Consumer Affairs
P.O. Box 2054
Honolulu, HI 96805

or

dfi-NMLS@dcca.hawaii.gov

 

What criteria must be met for the issuance of license? 

In order to be issued a license, an applicant must be able to show, and the Commissioner must find the following:

a)      No former revocation of license.  An applicant cannot be licensed if the individual or, in the case of an applicant that is not an individual, each of the applicant’s control persons, executive officers, directors, general partners, and managing members ever had an MLO or MLOC license revoked in another jurisdiction.  (A subsequent formal vacation of a revocation will not be deemed a revocation).

b)      No conviction of (1) any felony in past seven years or (2) any felony at any time prior to the application if it involves an act of fraud, dishonesty, breach of trust, or money laundering (the pardon of a conviction is not a conviction) for the individual or, if the applicant is not an individual, each of the applicant’s control persons, executive officers, directors, general partners, and managing members.

c)      Financial responsibility, character, general fitness of the individual or, if the applicant is not an individual,each of a company’s control persons, executive officers, directors, general partners, and managing members. This determination may be based on the following:

·        No current outstanding judgments (except judgments solely from medical expenses)

·        No current outstanding tax liens or other government liens and filings

·        No foreclosures in the past three years

·        No pattern of seriously delinquent accounts in the past three years

d)      No conviction of any misdemeanor involving an act of fraud, dishonesty, breach of trust, or money laundering of the individual or, if the applicant is not an individual, each of the company’s control persons, executive officers, directors, general partners, and managing members.

e)      Pre-licensing education completed for individual MLOs.

f)        Passing score on the national and State components of the written test for individual MLOs.

g)      Mortgage Loan Recovery Fund fees are paid upon licensure.

Authorization given to Commissioner to conduct background checks in other states where applicant has conducted business.

DETERMINING FINANCIAL RESPONSIBILITY

How does DFI determine whether an applicant is “financially responsible”?

Financial responsibility may be determined by a number of factors.  HRS § 454F-5(3) provides in part:

A person is not financially responsible when the person has shown a disregard in the management of the person’s financial condition.  A determination that a person has not shown financial responsibility may be based on:

(A)       Current outstanding judgments, except judgments solely as a result of medical expenses;

(B)       Current outstanding tax liens or other government liens and filings;

(C)       Foreclosures within the past three years; and

(D)       A pattern of seriously delinquent accounts within the past three years.

While DFI is bound by the language of the statute, DFI makes licensing determinations based on the totality of the circumstances, as to whether the applicant has demonstrated that he or she possesses the character, general fitness, and financial responsibility to operate honestly, fairly, and efficiently.  In evaluating applicants, DFI may expand the scope of its review to determine financial responsibility, character, and general fitness by considering the following information, in addition to the statutory criteria:

1. The applicant’s entire credit history as reflected in the credit report. The following negative factors, in addition to those cited in HRS § 454F-5 (3), may result in disapproval of the application under review:

•        Personal bankruptcy within the previous year. In considering the totality of the circumstances, the fact that an applicant has been a debtor in a bankruptcy shall not be the sole basis of DFI’s determination to deny the issuance of a license.

•        Bankruptcy within the previous year of any organization based on events that occurred while the relevant person was a control person.  In considering the totality of the circumstances, the fact that an applicant has been the control person of a bankrupt organization shall not be the sole basis of DFI’s determination to deny the issuance of a license.

•        Outstanding judgment based upon grounds of fraud, embezzlement, misrepresentation, or deceit.

•        Open collection account or account that is actively assigned to a collection agency.

•        Any account that has been “charged off” within the previous 3 years and remains unpaid.

2. Responses contained in the license application.

3. Previous licensing history with any state or federal regulatory authority or other governmental entity including whether the applicant was named in any supervisory, enforcement or administrative action.

4. Other information that reflects upon an applicant’s character, general fitness, or financial responsibility.

Outstanding tax liens, judgments, collections, and charge-offs would clearly be negative factors for an applicant.  A specific payment plan to erase the debt, however, would certainly be considered.  DFI will review the details of an applicant’s entire credit history as part of the decision-making process and make a determination, based on all extenuating and mitigating circumstances, as to whether the applicant is qualified for licensure.

Will company owners need to have their credit checked?

Yes.  Every control person, executive officer, director, general partner, and managing member of an organization must be “financially responsible” in order for the company applicant to obtain a license.

For purposes of the NMLS, control persons include “any person that (i) is a general partner or executive officer, including Chief Executive, Chief Financial Officer, Chief Operations Officer, Chief Legal Officer, Chief Credit Officer, Chief Compliance Officer, Director, and individuals occupying similar positions or performing similar functions; (ii) directly or indirectly has the right to vote 10% or more of a class of a voting security or has the power to sell or direct the sale of 10% or more of a class of voting securities; or (iii) in the case of a partnership, has the right to receive upon dissolution, or has contributed, 10% or more of the capital . . .”

 

PRE-LICENSING EDUCATION

How much pre-licensing education is required?

20 hours. This must include 3 hours of federal law and regulations; 3 hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and 2 hours of training related to lending standards for the nontraditional mortgage product marketplace.  Pre-licensing education courses must be approved by the NMLS.  Please see HRS § 454F-6 and the NMLS website for more information and for procedures for completing this before licensure.

 

TESTING

When and how do I take the written test? 

The national and state components of the written test are administered at testing centers throughout the United States.  An individual will first need to create his/her record in NMLS and then request information relating to test dates and locations.  Scheduling to take a test must be done through the NMLS website.

Are there test centers on Hawaii’s Neighbor Islands?

No.  All state SAFE compliant MLO tests are administered on behalf of the Nationwide Mortgage licensing System by third party test providers – in Hawaii these are Prometric and Pearson VUE.  At the present time the testing centers are located only on Oahu.   DFI has requested that additional test centers be located on the Neighbor Islands and continues to vigorously follow up on this issue.  We have also brought the lack of Neighbor Island test centers to the attention of the NMLS administrators in Washington, D.C.