What Does it Take to Pass the NMLS Exam?
Advice from an Experienced Exam Prep Trainer
By SAFE MLO EXAM PREP & Rich Leffler
Let’s face it! There are many more appealing activities in which one can get busy than preparing for an exam, especially the NMLS National MLO Licensing Exam. But,plainly and simply, if you want to originate residential mortgage loans securing properties located throughout the United States and its possessions through a non-depository institution, you are going to have to secure a mortgage loan originator’s license. And, to secure that license, among other things, you will have to pass the NMLS National Mortgage Loan Originator Licensing Exam.
On July 13, 2021, the Conference of State Bank Supervisors (CSBS) reported that the NMLS exam’s overall pass rate is a measly 53%! In other words, slightly less than half of those who sit for this exam never pass it. And that is an astronomically high failure rate for an exam of this caliber. Pass the NMLS exam!
So what makes this such a hard test to pass?First of all, there is, without argument, an exorbitant amount of material that the test candidate must master in order to pass this exam; there’s simply no way around that. To pass this exam, you must learn just about everything that an actively-producing mortgage loan originator must know in order to effectively, appropriately, and compliantly serve their customers and the industry in which they operate. Unless the test candidate is genuinely committed to devoting the appropriate amount of time to adequately and effectively preparing for this exam, they can count on joining the ranks of the 47% left behind in Sulksville.
Lesson number one! DO NOT schedule your NMLS exam immediately after completing your 20-hour course. You still have a lot to learn that the 20-hour course did not cover. Scheduling it too far out, however, might cause you to forget the things that the course taught you. So, when is a good time? Hang on. I’ll actually get to that in a bit!
Another reason for this exam’s comparably-low pass rate involves the 20-hour pre-licensing education course itself. The 20-hour course is the primary means of preparing people for this exam. But,considering that this course requires the effective delivery of approximately 150 hours’ worth of material in a 20-hour time frame, even though there are some exceptional 20-hour course providers executing this course, no 20-hour course provider, however competent and thorough, can effectively deliver 150 hours’ worth of material in a 20-hour time frame. It’s simply not possible. In order for them to finish on time and cover what they’re required to cover, 20-hour course providers find themselves forced to skim over the surface of less than half of what the test candidate needs to know. Consequently, the test candidate is frequently left alone to fill the gaps where the 20-hour course fell short, often with no idea of where to turn or in what direction.
So How Do You Do It?
Passing the NMLS National Licensing Exam comes down to four considerations:
- Practice Exam Proficiency
- Causal Conversation
Knowledge is derived from mastering the material appearing on the NMLS National Test Content Outline. The NMLS National Test Content Outline, available at:
is not only the guideline used by 20-hour course providers to create their courses,but also is what the State Regulatory Registry (SRR)uses in creating and modifying the NMLS exam.
The National Test Content Outline is the resource that every NMLS exam candidate should use to guide him or herself through his or her study regimen. To appropriately benefit from this document, the test candidate should start from the top and work their way down, item by item by item. Learn about the first item and, once you’ve mastered that, check it off, and move down the list. Repeat this process until you’ve reached the end. But don’t panic! The outline contains a decent number of generalizations and redundancy, so even though there is absolutely a lot to learn, its bark is much worse than its bite!
As you progress down the Content Outline, study and learn through utilizing the materials at your disposal including:
- All material that you received from your 20-hour course provider;
- The resources constituting the last two pages of the Content Outline; and
- The Internet
When using the Internet, however, be absolutely certain to vet your sources. It’s critical to ensure that the websites from which you’re studying are valid and reputable sources of information. Unfortunately, there is a plethora of obsolete and inaccurate information easily found on the Internet. Therefore, it is imperative to ensure that anything found on the Internet and from which you study is current and emanates from a reputable source (a government entity versus Bob’s Bank or Julie’s Credit Union).
Although the current version of the National Test Content Outline is the most current version available, there are three regulations with which you should have a general familiarity that it neglects to feature. You will, therefore, want to have a generalized overview of:
- The Community Reinvestment Act (CRA);
- The Housing and Economic Recovery Act (HERA); and
- The Fair Housing Act (FHA)
Practice Exam Proficiency
Quality practice exams are an extremely important part of one’s exam preparation regimen. But I must warn you! Practice exams should never be a test candidate’s sole and primary means of preparing for this exam. You see, no practice exam may ever replicate an actual test question. Doing so would constitute a gross violation of CSBS and American Association of Residential Mortgage Regulators (AARMR) policy.
Test candidates who prepare solely by taking practice exams typically end up memorizing the questions and their answers without understanding the meanings behind them. And these are questions that they will never see on the actual exam. So, when the test taker enters their exam brimming with confidence because they’ve memorized all of the questions on numerous practice exams, they’re immensely disheartened when they find themselves floundering to answer the questions that they’re actually presented,only to fail the NMLS exam miserably.
Instead of simply memorizing practice exam questions and answers, NMLS exam candidates should focus on understanding the questions presented through quality practice exams, their answers, and the explanations that the practice exams provide. Once the test candidate is consistently scoring in the mid-to-high 90’s on quality practice exams, he or she is well on his or her way to success.
High-quality practice exams, at an extremely-reasonable price, may be acquired through www.safemloexam.com.
There’s a difference between knowledge and understanding. Anyone can memorize facts. It’s of vital importance, therefore, to study and prepare for this exam by focusing on understanding instead of simple knowledge. Consider joining networking groups through social media platforms and other venues in order to conduct discussions with other test candidates about the topics you’re learning. This way, not only will you continue to learn through each other, you’ll reinforce your own knowledge and understanding while identifying areas in which you may be able to improve your understanding. Understanding allows the individual to apply that knowledge in various contexts. Little reinforces knowledge more than being able to conduct an articulate discussion about the particular subject matter.
There’s no question about it; this exam is tricky. After all, the SRR wants to ensure that those who enter the mortgage industry earn their way into it. In addition to mastering the required material, the successful exam taker must be able to effectively navigate the tricky nature of this exam. The following strategies should help you accomplish just that.
Number One – STUDY!
You and only you determine whether or not you pass the NMLS exam. Whether you ultimately travel down the pathway of passing or the pathway of failing is solely and completely at your discretion. The one and only way to travel down the pathway of passing, however, is to study! There’s no need to mince words here. Not studying or studying inadequately means not passing. And, if your idea of studying consists of reading a few pages from your 20-hour course material at night when you get into bed before you fall asleep, or in the morning when you first wake up before heading off to work, or on your lunch break, yeah, that’s not going to cut it! Appropriate studying consists of setting aside definitive time, every day, and studying like it’s your job. Studying like a boss.
Several years ago, I found myself in Doral, Florida teaching a live, 20-hour course. That meant that I had two-and-a-half days to effectively deliver one hundred and fifty hours’ worth of material. All throughout the time when I was there, I would repeatedly emphasize to the students, “You need to study! You need to study! You need to study!” They were so tired of hearing me say that that, when I would reenter the classroom after a break and before I could even get back up to the podium, I would hear students murmuring, “We know! We know already! You don’t have to tell us anymore! We need to study! We get it!”
Unfortunately, only half of those students ultimately passed the NMLS exam. And, when their employer polled the employees who failed to ask them why it was that they believed that they failed, just about every single one of them replied that it was because they did not study enough. Take that or leave it. But the bottom line is that, if you want to pass this exam, you must appropriately and sufficiently study.
Number Two – Third Time’s The Charm!
One of the most important tips that I can share with you is one of the hardest to follow. But it’s imperative that you do just that! It doesn’t matter how easy the question is. It doesn’t matter if the question is, “What is your name?”Be certain to read every single question and every single answer option no fewer than three times before answering.
Your eyes and your mind tend to work at different speeds. Often your eyes see something that your mind interprets differently. And then, when you proceed with your mind’s interpretation, you get the question wrong. You cannot afford to make mistakes like this on the NMLS exam.
I absolutely forced myself to read every single question and answer option three times before answering when I took the NMLS exam and, although doing so was in no way easy, I caught myself, on several occasions, about to incorrectly answer a question that, had I not read it a second and a third time, I would have incorrectly answered.
Please take a moment to answer this question and please do so without reading the question-and-answer options three times.
“At what equity position is PMI automatically removed assuming that the loan is current”
Now be honest. Did you answer, “A?” The correct answer was “D!” Answer option “A” would have been the correct answer had the question asked, “At what LTV is PMI automatically removed assuming that the loan is current?” But the question didn’t ask about “LTV,” did it? No! It asked about “equity.” If you answered, “A,” chances are that your eyes read, “equity” while your mind thought “LTV.” And when you went with your mind’s interpretation, you got the question wrong. You can afford to commit this error here. You cannot afford to do so on the actual exam. Therefore, please read every single question and every single answer option no fewer than three times before answering.
Number Three – Trust Your Gut!
In working with people seeking to pass the NMLS National Licensing Exam, I frequently encounter individuals who are pursuing the coveted win for a second and even third time. When I find myself working with such a test candidate, I typically ask them how often, if at all, during their previous attempts did they change an answer once they answered the question. More times than not, the reply that I receive is that they did so fairly frequently.
We all have an instinct. Call it that,or a sixth-sense, or even intuition that operates on a subconscious level. This instinct is there to protect and serve us. And we should afford it the respect that it deserves. When one changes an answer from one to another in the absence of a definitive reason, more times than not they’re subverting this instinct by self-sabotaging and shooting themself in the foot. More times than not, in the absence of a definitive reason, when one changes the answer after initially answering, he or she is changing a correctly-answered question to an incorrectly-answered one.Plainly and simply, in the absence of a definitive reason, the test candidate is encouraged to resist the urge to change their answer and trust their gut.
In the presence of a definitive reason, however, the test taker should always change their answer appropriately. “Oh! It’s not three times three. It’s three plus three!” Yes! In this case, please change your answer from nine to six. But, in the absence of a definitive reason, you will be best served to resist changing your answer and trust your gut!
Number Four – NEVER Leave an Answer Blank!
If you leave an answer blank, you have a 100% chance of getting the question wrong. At least if you guess, you have a 25% chance of guessing correctly. And if it comes down to guessing, there are even some strategies that you can employ when doing so.
If a question comes down to a guess, try utilizing the process of elimination. If you can definitively eliminate one or two answer options that you know, for a fact, are incorrect, even if you still end up guessing, you dramatically increase the odds of guessing correctly. And please think about this! If you can definitively eliminate three of the answer options that you know, for a fact, are incorrect, even if you have no idea what the remaining answer option means, you correctly answer the question through the process of elimination.
If process of elimination is not an option and you still have to guess, another guessing strategy would be to identify an answer option that acts in the customer’s bests interests over the others. If you can identify such an answer option, go with that one as your guess and you’ve most likely answered this question correctly.
If using the process of elimination and identifying an answer option that acts I the customer’s best interests are not viable options and you still have to guess, the last resort would be to choose between answer options “C” and “D.”
One of the tricky tactics that the test administrators sometimes utilize is to put the trick answer and the close-but-no-cigar answer options in the “A” and “B” positions. I suspect that they do this so that the test taker grabs it, gets the question wrong, and fails the exam. Therefore, if it comes down to a completely blind guess, and, by that I mean that the question and the answer options may as well be written in a language that you do not speak, look at answer options “C’ and “D,” if one of them acts in the customer’s best interests over the other one go with that. Otherwise, take a 50/50 guess between them and move on to the next question.
Number Five – You Must Be Well-Rested and Clear-Minded When You Sit for This Exam
As previously mentioned, the NMLS exam is tricky. And if you go into it tired, not feeling well, hangry, hungry, or otherwise distracted, it will seriously detract from your ability to perform well. So here is what I recommend that you do.
Study, study, study like a fiend up until the day before the day before your exam. If your exam is scheduled for Tuesday, study like a fiend through Sunday. Sunday comes and goes, and you are done. Take the next day, Monday, the day before your exam and make it all about you. Eat your favorite foods. Do your favorite things. Do you like the theatre? Go see a show. Is there a movie that you’ve been wanting to catch? Go catch it! Do you like fishing? Go grab that rod and reel. Is golf your passion? Go hit the links. Go to a spa. Get a massage, a manicure, a pedicure. Pamper yourself. I’ll go so far as to suggest that you check into a hotel close to your testing center … by yourself! Spend the day in bed reading. Sleep the day away. Lounge out by the pool. Eat a healthy and nutritious dinner. Go to bed at a reasonable hour. Turn off that cell phone (hotels still offer free wake-up calls). Get up at a reasonable hour. Go hit the hotel gym if you can. Get the endorphins coursing through your brain. Go eat a healthy and nutritious breakfast and then, because you’re at a hotel that’s close to the testing center, you won’t have to worry about traffic on your way over to the testing center. Do some of that, all of that, or something completely different. But whatever it is that you do end up doing, you must be well-rested and clear-minded when you sit for this exam.
Number Six – Study for Understanding and Not Just Knowledge
When you bring your car to a mechanic, you expect the mechanic to know what a tire is, right? Of course! But I would also venture to say that you would want that mechanic to know what a tire does in relation to a wheel. What the wheel does in relation to the axle. The axle to the drive train, the drive train to the transmission, and the transmission to the engine. You expect your mechanic to know about the parts that make up the car, but he or she should also know how all of those parts fit together to form the fully-functioning automobile.
Similarly, the prepared test candidate will be able to know not only the things that comprise the mortgage originations industry, but how those things all fit together to form the process of mortgage loan originations. You should be prepared to solve for double, triple, and quadruple negatives. Imagine being presented with a question that asks,
“In accordance with REG B, except for which of the following is not prohibited?”
This could prove quite intimidating for the unprepared test taker. Two fairly effective strategies for deciphering questions such as this consist of word rearrangement and reduction.
By changing the order in which the question’s words are presented, meaning may become clearer. “Which of the following is not prohibited, except?” This brings you one step closer to understanding what the question is asking. But then, combined with the process of “reduction,” meaning becomes crystal clear.
Reduction involves eliminating multiple words and replacing them with fewer words that carry the same meaning. And, in this example, we can do this by eliminating the two words, “not prohibited” and replacing them with the one word, “allowed.” When both strategies are combined, we’re left with, “Which of the following is allowed, except?” So now it becomes apparent that we’re looking for something that is not allowed.
The four answer options to this imaginary question consist of two regulatory requirements and two regulatory prohibitions. We can now immediately eliminate the regulatory requirements. Of the two remaining answers, one is a prohibition of ECOA and the other of TILA. So, at this point, all we’re left needing to know in order to correctly answer this question is that the Equal Credit Opportunity Act is the act that operates under Reg B.
Number Seven – You Must Believe in Yourself
Everyone knows the story of The Little Engine That Could.  In short, a train was struggling to make its way up a mountain all-the-while thinking to itself, “I think I can. I think I can. I think I can.” And it wasn’t until the train changed its thinking to, “I know I can. I know I can. I know I can” when it was finally able to surmount the hill’s apex and come down the other side.
Thought precedes reality. Therefore, even if you have your doubts and concerns about passing the NMLS exam, it is critical for you to consciously control your thinking so that you’re repeating and reinforcing, “I’m going to pass this exam. I’m going to pass this exam. I’m going to pass this exam.” And, between this type of positive visualization combined with effective study practices, just watch the good things that unfold.
The litmus test to identifying readiness for the NMLS exam involves several components. Once the exam candidate:
- Is thoroughly familiar with everything appearing on the National Test Content Outline;
- Is consistently scoring in the mid-to-high 90’s on quality practice exams;
- Can carry on a casual conversation about the material presented on the Content Outline; and
- Is prepared for the tricky nature of the exam itself
at that point he or she will have a higher-than-average likelihood of successfully navigating the tricky waters of the NMLS National MLO Licensing Exam.
 Website, NMLS, Test Performance Information, https://nmlsportal.csbs.org/csm?id=kb_article_view&sysparm_article=KB0016864&sys_kb_id=f86b9f0c1b993c508c04dbdbe54bcbb6, 09/21/2021.
 The Little Engine That Could, Piper, Watty, Illustrated by George and Doris Hauman, 1930