Wednesday, September 19, 2012

Angry About Absurd Nature of NMLS Licensing Exam Content?

Who IS the man behind the curtain? Good luck getting a straight answer. The issue of NMLS testing remains one of the most irksome in the new regulatory scheme. While you generally only have to pass through this gauntlet once, a recently post on the NMLS USER FORUM on LinkedIn raised these questions again. Given that we are now in CE season, I thought it would be useful to post.

"Does anyone know who creates the NMLS test questions? Or, how to contact whichever regulator agency created the test?

I've been a registered originator so haven't had to sit through the 20 hour class or test until this week. I've actually got a really good study software that includes 600 practice questions and what's even better is when you get a question wrong they tell you why.

Problem with that is they are now showing that whoever created these test questions is likely not a mortgage professional or has no understanding of underwriting guidelines. At least two of the questions I got "wrong", THEIR answer was actually 100% incorrect and that is based on underwriting guidelines.

Many of their other questions are simply trick questions. Frankly, I'm sick of these kinds of tests where they are written specifically to try and make the test-taker fail and I'm ready to make an official complaint.

I have no problem being tested on my industry knowledge, but I have a huge problem with the way these are being asked."

The Answers

There is a committee which writes and approves questions and answers. It's true that not all of the authors are "mortgage industry pro's", but on the committee there are several mortgage professionals. Several thoughts:

Right and Wrong:

1.) Reading the questions again, often you realize that the question is a "trick", or what learning industry professionals call a "distractor", that is designed to make you think the question is about something else. I'm with you - dirty pool. But when I go back and look at it I slap my forehead - technically, the question is requiring the correct answer and it's not the one I chose.

2.) Some of the questions that you get wrong are "test questions". There are usually 5 or 10 (no more than 10%) in any test and they are used to try new questions out on the public to see how they work, whether they are too hard, or whether the content is appropriate. They don't count in your total score. Unfortunately, you don't know which of these are "test questions" and which count, so you leave the exam scratching your head...

It is specifically prohibited (and it can get you banned from the NMLS) to discuss specific questions you saw on a test with someone else, or to publish or re-distribute that information. Be careful how you share your vitriol on this matter.

I had the same experience AND I'M A PE/CE INSTRUCTOR!!!! You would expect me to get 100% (I did) so I was surprised when I barely passed (87%). I did better on the state exam which was more straight-forward.

If you want to have something to be cynical about consider this: The authors tweak the exams regularly to make them "harder" or "easier" based on the percentage of people who are passing/failing. If I recall, they are targeting an 80% pass rate (there is a citation of the exact amount somewhere, but I don't have time to look it up, so forgive me if I'm incorrect on the number - the point is the same regardless), and will review a pool of pass-fails on a monthly or quarterly basis. If there are too many people failing, they make the test easier because they don't want it to be impossible to get a license. Take the example of the NEVADA test in 2010 when it was rolled out. Most people taking it were failing - like 70-80%. The NMLS and the State HAD to change it.

Philosophically, it comes down to the same problem with all regulation of knowledge - it re-enforces the status quo, allows the regulator to place a barrier to entry, but it does not achieve an end. People who pass the test and get their license aren't necessarily equipped to do the job. AND a 20 hour Pre-licensing education class cannot prepare you to do a job which most people report takes 6-24 months to achieve proficiency. Many people who are very good at the job can't pass the test or meet the licensing requirement. One of the reasons I got out of the PE/CE business is that we FUNDAMENTALLY DISAGREE on the principals of mortgage education SO MUCH that I no longer wanted to subject myself to having to defend every vocational principal in my programs - programs that had been proven to have the most successful outcomes of any in the industry.

My recommendation for the industry is a system of tutelage similar to that of the trades - you work as an apprentice for several years before you can do the job on your own.

I SO SO SO agree with you on your feelings on this matter, but it sounds like you passed, too. Let it go, Don Quixote!

If you are just joining the world of licensed MLO's, get ready to feel the pain of 8 hours of Continuing Education representing EXACTLY the same content that you have taken for the last 10 years...

Tuesday, June 5, 2012

New Products! MortgageManuals Now Offering Individual Policies/Procedures, which is also known as Mortgage Management Systems, has announced that it will begin selling individual policies and procedures in addition to modular packages of complete operational procedures.  The company is extracting the individual policies from its complete packages.

If the company already has a comprehensive set of loan production policies and procedures and simply needs to fill a gap, these represent the perfect solutions.  The policies will cost approximately $145 to $245, depending on the depth and scope of the product.  They are designed to provide an affordable alternative to some publishers who are charging as much as $895 for individual policies. 

We want our customers to ascribe to the value of having a complete set of policies and procedures in place.  That is our value proposition.  For the cost of a single policy from some other providers, you can purchase an entire set of operating procedures which include compliance, policy, operating procedures, forms, training instructions and other organizational material.  If you purchase a less expensive single policy, you can upgrade to the entire package at a later date and receive credit for your purchase.  

Visit the individual policies page at

Saturday, May 26, 2012

CFPB (Consumer Financial Protection Bureau) Examination Matrix

There has been much talk and many questions about whether or how our products help our customers manage the risks associated with a CFPB examination.  Although the risks of an examination by the CFPB in the near future are low, state regulators and FDIC examiners are also using the CFPB examination guide. 

To assist you in

1.)    evaluating whether your current procedures are sufficient, and
2.)    providing your examiner a reference tool to review your procedures

we have compiled a CFPB Examination matrix which you should keep as part of your Quality Control Plan documents.  It should be referenced in examination preparation. 

For your reference, we have included a copy of this on our Consumer Financial Protection Bureau page at 

For Document Management Customers

If you have the live template, this update has already been uploaded to Quality Control/Forms.  See your available downloads at

Saturday, April 28, 2012

AML/SAR Updates now available

AML/SAR Policy and Procedures

We have posted a draft AML/SARs policy to be included in your policies and procedures.  It cover the enhanced file review for money-laundering, self-employed businesses and the SAR reporting matrix and procedure.  Remember that our procedures already covered reviewing for fraud - this expands that review to cover the new mandate.  

Go to Mortgage Manuals Download Site to check your subscription status and download the policy. 

We have provided an update to the Quality Control Plan which addresses enhanced guidance for review of deposits and self-employed borrowers in money businesses, and provides the reporting procedures for ALL suspicious activity. 

Fraud Red Flags

It is important to note that the mortgage industry already reviews for Fraud Red Flags, and if you are a Mortgage Manuals customer, you have 95% of this in place.  This update enhances guidance for reviewing deposit Red Flags (by adding several items to the production quality control checklist).  It enhances the review of Self-Employed borrowers for transactions and structures that lend themselves to Money Laundering. 

SAR Procedures

Non-currency businesses were not previously required to report. This policy updates the QC plan by memorializing

  • The process for identifying Reportable Events
  • The process for reporting SARs
  • Using FINCEN Reports in your own reporting

Training Programs

We were developing an AML SAR Reporting Training Program, until we realized that many of our customers already have this in place, either through the Bank AML procedures or through Continuing Education programs.  If you require a generic AML Program, please do not hesitate to contact us directly at 202-550-5626.

Thursday, January 26, 2012

CFPB's Cordray: "If you stay away from pretty outrageous practices, you should be safe."

Only 48 Examinations Planned for this Year

"I don't think there is a lot of uncertainty here. I think it's very clear in the statute for something to be an abusive practice it would have to be a pretty outrageous practice," Cordray said. "If you stay away from pretty outrageous practices, you should be safe." 

This was Cordray's testimony on Capital Hill as he worked to justify the build up of the regulatory agency's staff from 800 to an expected 1500 employees.  The $500 Million dollar budget was written into law as part of Dodd-Frank.