It is not likely that you’ve paid much attention to the little number that is below some advertisements and promotional materials for banks and mortgage professionals. Take a look next time and you’re likely to see an NMLS number.
What it is…
The NMLS stands for the National Mortgage Licensing System (& Registry). This was created by the Consumer Finance Protection Bureau around 2008. It is a requirement for every individual and company who communicates and originates home loans for consumers to obtain an identifying number. You will see both companies and individuals display their number. There is no difference in the purpose or process of obtaining the number for either.
One interesting fact of the system is that the numbers are assigned in order. This means the lower the number, the earlier that individual or company volunteered to enroll in the system. Early on it was on a volunteer basis, but now it is one of the first requirements to get into the profession. At this point, the larger the number, the later that individual entered the profession.
This will give you an advantage when selecting a mortgage loan officer that has the experience level you desire. The smaller the number, the more experience that person will have. My NMLS number is 7026. That means there were about 6000 individual registrations submitted before mine. The lowest NMLS number I have ever found is 1031, and currently the NMLS is issuing numbers over 14 million (14,000,000). That is a lot of individual registrations and licenses!
The NMLS system was developed as a site for consumers to view the history of the company or individual they are working with, file complaints, and see if any regulatory actions have occurred. There is a lot of interesting information on the website, which can be found at http://www.nmlsconsumeraccess.org/.
The important details…
The next, and likely the most important fact, is that although the system seems to work the same there are two VERY important differences. This is a registration system, and a licensing system. The least of which is the registration part. EVERY company or individual must register, but ONLY non-depository institutions and the employees who work in those companies are required to also become licensed.
Licensing of mortgage bankers (lenders who do not work for FDIC Insured banks) and brokers (intermediaries, who do not approve, nor actually lend any money themselves) is required and means they have both passed a State administered Federal criminal background check, but they have also completed the required 20 hours of pre-licensure education, passed both a Federal and State competency exam, but also do annual continuing education.
This amount of additional work required in order to work in the profession typically shows consumers that the individual (or individuals owning the company) can display a higher level of competency and knowledge than individuals of FDIC Insured banks.
Registration is a very simply a process of entering your information into the fields on the website and then that person is authorized to originate loans. Licensing on the other hand, is a time consuming, financial commitment to learning and displaying that knowledge through examinations. The exams are extremely difficult, and I have found that less than 50% of the people pass on their first attempt.
I’ve seen competent and incompetent originators both with only a registration and also with a license. The one fact of the system is, that if you have a license, the loan originator CAN display competency in residential finance, where if that individual is holding the number simply as a registration, then you cannot be sure that person is also competent to do the job of closing on your loan.
Next time you are talking with your loan originator, as them what their number is, or better yet, look up their history on the NMLS website. The mortgage loan officer is likely the most important person to your financial health you will ever work with.