Mortgage Loan Originator (MLO) Licensing Practice Test

What does Title Five of the Housing and Economic Recovery Act establish?

1. Banking standards

2. Nationwide standards for mortgage interest rates

3. Nationwide standards for licensing of mortgage loan originators

4. National guidelines for loan defaults

The correct answer is: Nationwide standards for licensing of mortgage loan originators

Title Five of the Housing and Economic Recovery Act (HERA) establishes nationwide standards for the licensing of mortgage loan originators. This legislation was enacted to create a more uniform system that enhances consumer protection and ensures that mortgage professionals across the country meet certain qualifications and standards. By setting these standards, HERA aims to improve the quality and accessibility of mortgage loans while also fostering accountability within the industry. In specific terms, the act requires states to implement licensing and registration requirements for MLOs, which include background checks, education, and testing. This national framework was designed to address the issues of varying state regulations that contributed to inconsistencies and potential risks for borrowers, thereby improving the overall integrity of the mortgage industry. The other options relate to aspects that are not directly covered by Title Five of HERA. For instance, while banking standards and loan defaults are important topics in the context of mortgage lending, Title Five specifically targets the licensing of mortgage loan originators as a key measure to enhance consumer protection and establish a baseline of professional conduct throughout the nation.