About the License Needed to Be a Loan Officer

A loan officer is a representative of a lending institution who guides the borrower through the process of obtaining a loan and financing large purchases such as homes, cars and an education. In order to keep lending institutions compliant and ethical, state and federal governments require lenders to hold certain licenses.

Significance

Licenses for lenders exist to protect the consumer. Without licenses, lenders would be free to exploit borrowers and use unscrupulous practices without recourse. A license signifies to a prospective borrower that the lending institution is approved by and accountable to the state. Compare a loan or mortgage license to a driver's license: driving is a privilege, not a right. Drive irresponsibility, and you will lose your permission to drive. Similarly, loan officers must lend responsibly or lose their ability to give loans.

Function

A loan officer is a representative of the lending institution who helps you through the loan process. As such, the loan officer is not actually the person lending you the money in the same way a salesman is not the one giving you a car, rather, you are buying it from the dealership. The loan officer is the human face of the bank, credit union or mortgage company from which you receive your loan.

In most states, the loan officer does not need to have her own individual license. Rather, the lending institution must be registered and licensed to give loans.

Types

Lending institutions need different types of licenses, depending on the type of loans they give and the states in which they operate. There are auto loans, home loans (mortgages), student loans, personal loans, business loans and other types of loans. Aside from business loans and commercial loans, most loans are classified as consumer loans.

To learn the licensing requirements for your state, visit your state's department of licenses website (sometimes these departments are called "the Department of Professions and Occupations" or something similar). Ensure that you are at a URL ending with .gov before you proceed. Your state department's website should be able to provide you with all the necessary information for obtaining the appropriate license for your consumer loan company.

Many states confer licenses through a national association. For example, all of Washington state's consumer loan licenses must be filed through the National Mortgage Licensing System. Other national agencies include the Residential Mortgage Licensing System and the American Association of Residential Mortgage Regulators. Note that in spite of the names, these regulators also handle consumer loans other than home mortgages.

Features

Loan officers and/or lending institutions must initially file a Form MU4 with the NMLS. In this filing, individuals must include basic identification information such as address and social security number, as well as provide information about the lending institution they represent. Further, licensees are required to disclose any past or pending criminal or regulatory actions or customer disputes. Disclosures include bankruptcies, felonies, financial service-related misdemeanors and any injunctions or restrictions imposed by a civil court or regulatory agency. The process for filing with other national regulatory agencies is largely the same.

In addition to information and forms for licensing, national lending agencies provide information for further education, loan officer training, conferences and conventions and other useful resources.

Geography

If you operate in several different states, you must be licensed in each state.

One of the advantages of filing through a national agency is the ability to register in several jurisdictions with one form. For example, you can file in Illinois, Iowa and Indiana while surrendering your license in Connecticut--all with the same Form MU4.

Note, however, that not all states utilize the same regulatory agency. As noted above, it is best to check directly with your state's department of licensing and professions in order to get the most up-to-date information.

Resources

• American Association of Residential Mortgage Regulators
• National Morgage Licensing System
• Bureau of Labor Statistics - Loan Officers