The demand for licensed Mortgage Loan Originators (MLOs) across Texas remains steady, driven by the state’s population growth and robust housing markets. Aspiring originators must navigate a structured licensing process that meets both federal and state requirements to legally conduct business. This path requires administrative actions, educational commitments, and successful examination results.
Understanding the Mortgage Loan Originator Role and Regulatory Framework
A Mortgage Loan Originator is an individual who, for compensation or gain, takes a residential mortgage loan application or offers and negotiates the terms of a residential mortgage loan. This role involves guiding consumers through securing financing for a one-to-four unit residential property. The fundamental federal statute governing this profession is the Secure and Fair Enforcement for Mortgage Licensing Act, commonly known as the SAFE Act.
The SAFE Act established the Nationwide Multistate Licensing System (NMLS) as the sole system of record for all licensed MLOs nationwide. Every individual engaged in mortgage origination must obtain a unique NMLS ID and maintain their record within this system. State-licensed MLOs work for non-depository institutions and are regulated in Texas by either the Department of Savings and Mortgage Lending (TDSML) or the Department of Banking (TDB).
Completing Pre-Licensure Education Requirements
The initial step involves satisfying the mandatory Pre-Licensure Education (PE) requirements established by the SAFE Act. Federal law requires a minimum of 20 hours of NMLS-approved coursework from an authorized provider. This core curriculum covers major regulatory areas within the mortgage industry.
The 20 hours must include three hours dedicated to Federal law and regulations, three hours covering ethics, and two hours focused on non-traditional mortgage products. Texas requires an additional three hours of state-specific education, bringing the total pre-licensure requirement to 23 hours. This state-specific coursework focuses on Texas laws, such as those governing home equity loans, reverse mortgages, and judicial foreclosure processes. Completing this education is a prerequisite for scheduling the mandatory licensing examination.
NMLS Registration, Background, and Credit Checks
Before applying for the Texas license, an applicant must create an account within the NMLS system and obtain a unique identification number. This administrative step serves as the hub for managing the entire licensing process, including education records and all background submissions. Applicants are required to authorize a federal criminal history background check through the submission of fingerprints.
Fingerprints must be submitted electronically through the NMLS-authorized vendor to be forwarded to the Federal Bureau of Investigation (FBI). Additionally, the applicant must authorize the NMLS to pull a credit report as part of the application for the Texas Department of Savings and Mortgage Lending. The regulatory agency reviews this report to assess the applicant’s financial responsibility, although Texas does not impose a minimum credit score requirement for licensure. The goal of this financial review is to ensure the applicant demonstrates the character and fitness necessary.
Passing the Licensing Examinations
Successfully completing the licensing examination is a mandatory requirement that demonstrates the applicant’s competency. Candidates must pass the National Component with Uniform State Content (National Test) to fulfill the testing requirement. This comprehensive examination consists of 120 multiple-choice questions, and applicants are allotted 190 minutes to complete the test.
A passing score of 75% or higher is required for licensure. If an applicant fails the test, a waiting period is mandated before a retake can be scheduled. After the first and second failed attempts, a 30-day waiting period is imposed. A 180-day waiting period is required if the applicant fails the examination a third time.
Securing Sponsorship and Activating the License
Passing the examination and completing the background checks does not automatically grant an active license to originate loans. The final step is securing a sponsorship from an NMLS-approved entity, such as a mortgage company or mortgage banker. This employing institution must be licensed in Texas and formally request sponsorship of the applicant within the NMLS system.
Once the sponsoring entity initiates the connection, the Texas Department of Savings and Mortgage Lending or the Texas Department of Banking reviews the complete application. Only after the regulatory body approves the sponsorship request and the required fees are paid does the MLO license become active and operational. An individual cannot legally originate residential mortgage loans in Texas until this final step of activation is complete and recorded in the NMLS.
Maintaining Your Texas MLO License
To keep the Texas MLO license active, originators must satisfy annual Continuing Education (CE) requirements and renew their license by the end of the year. The SAFE Act mandates that MLOs complete a minimum of eight hours of NMLS-approved CE coursework annually. This education refreshes knowledge and ensures compliance with regulatory updates.
The eight hours of CE must include three hours of Federal law, two hours of ethics, and two hours related to non-traditional mortgage products, with the remaining hour being a general elective. Texas does not require a state-specific CE component; however, MLOs must adhere to the “Successive Years Rule,” which prohibits taking the exact same course two years in a row. The license renewal deadline is typically December 31st, and all CE must be completed before the renewal application can be submitted through the NMLS.