MLO Temporary Authority to Operate

MLO temporary authority to operate enables mortgage loan originators to continue to do their job while completing state licensing requirements. This makes it easier for mortgage loan originators to complete continuing education requirements, transition between states or from a federal to a state system.
Here, we’ll discuss the SAFE Mortgage Licensing Act of 2008, what temporary authority to operate means to MLOs, who is eligible, and more. Read on for a detailed explanation on the topic of temporary authority, or use the links below to navigate throughout the post.

What is Temporary Authority?

Temporary authority allows qualified mortgage loan originators to continue originating loans while in the process of completing any state-specific requirements. Temporary authority is available in all states and allows a break in service of no more than 14 calendar days.
Temporary authority is part of the Secure and Fair Enforcement for Mortgage Licensing Act, also known as the SAFE Act, of 2008. The SAFE Act aims to protect consumers by creating a national system for licensing and registering mortgage loan originators. The temporary authority amendment to the SAFE Act was passed in 2018 and took effect in November of 2019.

SAFE Act Mortgage

The SAFE Act makes it illegal for someone to work as a residential mortgage loan originator without first acquiring and retaining the following credentials:

  • Registration as a licensed mortgage loan originator and a unique identifier are required for individuals who work for a covered financial institution (federal registration).
  • A state license and registration as a state-licensor are required for anyone else.

The SAFE Act mandates that federal and state licensing and registration be completed via the Nationwide Mortgage Licensing System and Registry, an online registration system.

The SAFE Act’s goals include:

  • Aggregating and enhancing the flow of information to and between regulators
  • Increasing transparency and monitoring of MLOs
  • Improving consumer protections and promoting anti-fraud measures
  • Providing customers with readily available, no-cost information about the publicly adjudicated disciplinary and compliance actions of an organization.

Authority to Operate

MLO temporary authority was added to the SAFE Act in 2018 to help streamline the MLO licensing system. With temporary authority, a mortgage loan originator can continue to originate loans while they are in the process of fulfilling state licensing and registration requirements.
As its name suggests, temporary authority is a temporary option that allows MLOs to continue working while they’re completing mandated licensing and registration testing and education. With that said, temporary authority ends when the earliest of the following occurs:

  • The MLO withdraws the application
  • The licensing state denies or issues a notice of intent to deny the application
  • The state grants the license
  • 120 days after the application submission if the application is listed on NMLS as incomplete

Who Can Apply for Temporary Authority?

MLOs may apply for authority to operate if one of the following criteria applies:

  • Qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company
  • Qualified state-licensed MLOs seeking licensure in another state

Who is not eligible to use temporary authority?

  • MLOs who have had an MLO license application denied, revoked, or suspended in any state
  • MLOs who have been subject to, or served with, a cease and desist order
  • MLOs who have been convicted of a misdemeanour or felony that would preclude licensing under the law of the application state

The MLO Licensing System

If you’re in the process of fulfilling your MLO state requirements, temporary authority is an important concept to understand. But when might temporary authority come into play? To provide additional context, we’ll take a closer look at the MLO licensing system next.

To become a mortgage loan officer, you must complete these steps:

  1. Register with the Nationwide Multistate Licensing System (NMLS) and Registry. You will create an account and receive an ID number.
  2. Take 20 hours of NMLS-approved prelicensure education courses.
  3. Purchase your licensure exam.
  4. Pass the SAFE MLO Test with an exam score of 75% or better.
  5. Apply for a license with the NMLS.
  6. Agree to a background check and credit report and provide fingerprints.
  7. Find a job with a lender before your NMLS license becomes active.

It is strongly recommended that you read about the NMLS test complexity and what to expect before taking the exam. The Prep2PassTM mobile app is designed to help you plan for the SAFE MLO Test and pass it.
In order to keep your license active, you must renew it every year. You may submit your renewal yourself or have your employer sponsor it, so make sure you know who is responsible for making sure your license is renewed on time.
The good news is, with temporary authority, you may continue to originate loans while going through the renewal process, per the aforementioned guidelines.

Next Steps with Diehl Education

Now that you have a clearer understanding of what to expect when securing and updating your MLO license, you can move forward with your next steps as a mortgage loan originator. As you begin and advance in your career as a mortgage loan originator, keep these pointers in mind. Work with your employer to discuss how temporary authority is established within your state and organization.
Call (317) 272-7600 to learn more about how Diehl Education can help you prepare for testing, fulfill continuing education requirements, and bolster your career as a mortgage loan originator.

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