On May 20, 2013, the CFPB validated the use of a Uniform State Test (UST) for mortgage origination licensing under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). Under the SAFE Act, Mortgage Loan Originators (MLO) must pass a “qualified written test” that examines an applicant on ethics and federal and state laws regarding mortgage origination, fraud, consumer protection and fair lending issues. By validating the use of a UST, as opposed to requiring MLOs to pass a separate examination for each state that they wished to be licensed in, the CFPB removed any doubt that the UST is a good mechanism for leveling the playing field between licensed and registered mortgage loan originators. 

In April 2013, the Conference of State Bank Supervisors and the Nationwide Mortgage Licensing System and Registry (NMLSR) launched the UST as part of a new National SAFE Act MLO Examination (Examination). Participating jurisdictions have agreed to accept successful UST results for any individual who passes the Examination—instead of requiring those individuals to pass a separate state specific test. Thus, if an individual successfully passes the new Examination, s/he is deemed to have met the minimum applicable state examination requirements in each jurisdiction that has agreed that to the UST. License applicants must still meet all other state-specific criteria, however, in order to be licensed in particular jurisdictions. As of June 7, 2013, 32 regulatory agencies either currently accept Uniform State Test results or have agreed to accept such results in the future. In addition, for a one-year period ending March 31, 2014, mortgage loan originators who passed the old version of the Examination are permitted to take a component of UST that will enable them to take advantage of the reciprocity feature of the new National SAFE Act Mortgage Loan Originator Examination without having to complete the entire Test.

In its bulletin, the CFPB opined that, in order for an examination to be a qualified written test under the SAFE Act, such test must be developed under the NMLSR and include questions covering all required areas, including State laws and regulations.  The CFPB confirms that such requirement may be met through the use of an acceptable UST or through separate, state-specific examinations. The CFPB did not provide guidance as to whether the current UST is “acceptable.” Instead, the CFPB merely stated that “a State may use a UST if it adequately tests required laws and regulations.”

While the CFPB’s qualified endorsement of a UST to satisfy the SAFE Act’s “qualified written test” requirement does not address the current UST, it makes it more likely that other state regulatory agencies will increasingly utilize the UST rather than maintain their own state-specific examinations. This in turn should make the licensing process less burdensome and less expensive for Mortgage Loan Originators.