Complete Guide to NMLS Licenses

In the lending industry, the NMLS license is a requirement for individuals and companies involved in the business of mortgage loan origination, processing, or servicing. The NMLS license ensures that all mortgage professionals meet certain minimum standards of education, testing, and background checks to protect consumers and promote a safe and sound mortgage lending industry. 

Below, we’ll discuss what an NMLS license is, the reasons credit startups need it, how to prioritize which state licenses to obtain, and the steps to apply for an NMLS license. We’ll also discuss the costs involved in obtaining an NMLS license and best practices for using the license effectively. By the end of this post, credit startup founders will have a better understanding of what an NMLS license is, the benefits it provides, and the requirements for obtaining and using it.

What is an NMLS License?

The NMLS license refers to a license issued by the Nationwide Multistate Licensing System & Registry (NMLS), which is a centralized database and licensing system for mortgage loan originators, companies, and regulatory agencies in the United States.

The NMLS license is a requirement for individuals and companies involved in the mortgage industry, including loan officers, mortgage brokers, and lenders. It is designed to ensure that all mortgage professionals meet certain minimum standards of education, testing, and background checks to protect consumers and promote a safe and sound mortgage lending industry.

In short, the NMLS license is a state-specific license that allows mortgage professionals to originate and service mortgage loans within a particular state or jurisdiction.

Who Needs an NMLS License?

Individuals and companies that are involved in the business of mortgage loan origination, processing, or servicing are typically required to obtain an NMLS license. This includes:

• Mortgage Loan Originators (MLOs) – These are individuals who work for mortgage brokers or lenders and assist borrowers with the loan application process.
• Mortgage Brokers – These are companies that serve as intermediaries between borrowers and lenders.
• Mortgage Lenders – These are companies that provide mortgage loans directly to borrowers.
• Loan Servicers – These are companies that collect payments and manage mortgage loans on behalf of lenders.
• Branch Offices – These are physical locations where mortgage professionals work and originate loans.

It’s important to note that the specific requirements for obtaining an NMLS license can vary by state and depending on the type of license being sought. In general, applicants will need to complete pre-licensing education courses, pass a background check and a licensing exam, and meet ongoing continuing education requirements.

Credit Startups and NMLS Licenses

If you are running a credit startup that engages in mortgage lending or brokerage activities in the United States, obtaining an NMLS license is necessary to operate legally. However, with licenses available in all 50 states and other territories, it can be overwhelming to know which licenses to prioritize. 

Below, we’ll look at the key considerations to prioritize NMLS state licenses and discuss how we navigated the licensing process and which licenses they prioritized at Stilt.

Why Credit Startups Need NMLS Licenses

Credit startups that engage in lending or brokerage activities are required to obtain an NMLS license to operate legally in the United States. This is because the NMLS license is a state-specific license that allows mortgage professionals to originate and service mortgage loans within a particular state or jurisdiction.

The NMLS license is also designed to ensure that all mortgage professionals meet certain minimum standards of education, testing, and background checks to protect consumers and promote a safe and sound mortgage lending industry. This means that credit startups that obtain an NMLS license will be subject to rigorous regulatory oversight, which can help to build trust with customers and investors.

Credit startups that obtain an NMLS license will also have access to the NMLS database, which provides a centralized system for managing mortgage licenses and compliance requirements. This can help streamline the licensing process and reduce the administrative burden of complying with state and federal regulations.

Which NMLS Licenses to Prioritize

Credit startups can apply for NMLS licenses in all 50 states of the United States, as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. That said, founders will want to carefully choose and prioritize which licenses to get early on. 

Several key considerations must be made when it comes to state license prioritization. The answers to these questions will help founders better understand which licenses offer the most immediate leverage. To prioritize NMLS state licenses, ask:  

• Which are the high-growth states? – If the credit startup plans to expand rapidly, it may make sense to target states with high population growth and demand for housing, such as California, Texas, Florida, and New York.
• What is the market potential? – The credit startup should consider the market potential for lending in each state, based on factors such as the size of the market, population demographics, and competition.
• What are the regulatory requirements? – Some states have more stringent licensing requirements than others, which can impact the cost and complexity of obtaining a license. It may make sense to prioritize states with less onerous regulatory requirements for an early-stage startup.

When Stilt was first getting started, these are the questions we asked. Since our target market was immigrants and visa holders, any states with high and/or increasing populations of those communities made sense as potential license states. As result, the first Stilt NMLS licenses were for California, New York, Texas, and Florida. All four of these states, however, are among the most stringently regulated states for lending. Because of Stilt’s market, it was unavoidable that these states would be among the first licenses applied for, but understanding that upfront helped us set and manage expectations. 

How to Apply for an NMLS License as a Credit Startup

As a credit startup founder, if you are considering getting an NMLS license, here are the general steps involved in the licensing process:

1. Create an NMLS account – Start by creating an account on the NMLS website and completing the registration process.
2. Complete pre-licensing education – Depending on the type of license you’re seeking, you may need to complete pre-licensing education courses. These courses provide a foundational understanding of the mortgage industry and state-specific regulations.
3. Obtain required documentation – You will need to provide personal and business information, as well as documentation such as education transcripts, employment history, and financial statements.
4. Pass a background check – You will undergo a background check that includes a credit report, criminal history, and a review of any regulatory actions.
5. Pass the licensing exam – You will need to pass a state-specific licensing exam that tests your knowledge of mortgage industry regulations and best practices.
6. Submit the license application – Once you have met all the requirements, you can submit your license application through the NMLS system.
7. Pay application and licensing fees – You will need to pay application and licensing fees, which can vary by state and license type.
8. Maintain the license – After obtaining the license, you will need to meet ongoing compliance obligations, such as completing continuing education requirements and submitting annual reports.

Obtaining an NMLS license involves completing pre-licensing education, providing required documentation, passing a background check and licensing exam, submitting the license application, paying fees, and meeting ongoing compliance obligations.

NMLS License Cost

The cost of obtaining an NMLS license can vary by state and license type, and includes application fees, licensing fees, education costs, background check fees, and exam fees. Below is a table that provides an overview of the NMLS license fees in select states as of March 2023:

Note that these fees are subject to change and may vary depending on the type of license being sought and other factors. Applicants should consult the NMLS website and review the specific requirements in each state before applying for an NMLS license.

Best Practices for an NMLS License

Once a startup has been approved for an NMLS license, it can begin conducting business activities in accordance with the license type and the regulations governing that license. Here are some general steps to help you effectively utilize your NMLS license:

• Understand your license scope: Make sure you are aware of the specific activities your license permits, and the regulations that apply to those activities in each state where you plan to operate. This might include originating, processing, or servicing loans, depending on your license type.
• Display your NMLS license: It is important to display your NMLS identification number on all marketing materials, websites, business cards, and other communications. This helps establish trust with customers and ensures you are in compliance with regulatory requirements.
• Compliance management: Develop and maintain a robust compliance management system (CMS) to ensure your startup remains in compliance with all federal and state regulations. This includes developing policies and procedures, training employees, conducting regular audits, and monitoring ongoing compliance.
• Maintain records: Keep thorough records of your business operations, including loan files, marketing materials, and customer communications. These records may be required during audits or examinations by state regulators.
• Report required information: Make sure to report any required information to the NMLS system, such as financial statements, annual reports, and any changes in your business structure, ownership, or key personnel.
• Continuing education and renewal: Stay up-to-date with any continuing education (CE) requirements and renew your license as needed. This will help ensure that your license remains in good standing and that your startup remains knowledgeable about industry changes and regulations.
• Monitor regulatory changes: Stay informed about any changes to regulations or licensing requirements in the states where your startup operates. This will help you maintain compliance and adapt your business practices as necessary.
• Network and grow: Use your NMLS license as a foundation for building relationships with other industry professionals, such as lenders, real estate agents, and title companies. These connections can help your startup grow its business and establish a strong reputation in the industry.

Remember that your NMLS license is a privilege, and it is essential to operate your startup in compliance with all applicable laws and regulations. Failure to do so can result in fines, sanctions, or even the loss of your license.

Final Thoughts

Obtaining an NMLS license is a crucial step for credit startups that are involved in mortgage lending or brokerage activities. It ensures that they meet minimum standards of education, testing, and background checks, thereby protecting consumers and promoting a safe and sound mortgage lending industry. With the information provided in this post, credit startup founders will be better equipped to understand the requirements for obtaining an NMLS license and using it effectively to grow their business while maintaining compliance with state and federal regulations.

NMLS License FAQ

Here are five common FAQs that startups/founders have about NMLS licenses, along with their answers:

What is an NMLS license, and why do I need one?

An NMLS license is a state-specific license that allows individuals and companies to originate and service mortgage loans within a particular state or jurisdiction. You need an NMLS license if you are involved in the business of mortgage loan origination, processing, or servicing to comply with state and federal regulations and protect consumers.

How do I apply for an NMLS license?

To apply for an NMLS license, you will need to create an NMLS account, complete pre-licensing education, obtain the required documentation, pass a background check and licensing exam, submit the license application, and pay fees. The specific requirements and process can vary by state and license type.

What are the ongoing compliance obligations of maintaining an NMLS license?

The ongoing compliance obligations of maintaining an NMLS license can include completing continuing education requirements, submitting annual reports, maintaining surety bonds, and complying with state and federal regulations.

What are the costs associated with obtaining an NMLS license?

The costs associated with obtaining an NMLS license can vary by state and license type but typically include application fees, licensing fees, education costs, background check fees, and exam fees.

Can I apply for NMLS licenses in multiple states?

Yes, you can apply for NMLS licenses in multiple states through the NMLS system. However, the specific requirements and costs can vary by state, and you will need to comply with the regulations of each state in which you operate.

Frank Gogol

A seasoned SEO expert, Frank has a long history of working with and for startups. Starting in mid-2018, Frank served as the SEO Strategist for Stilt, a fintech startup that provided fair loans for immigrants in the US and other underserved markets. While with the company, he scaled site traffic from zero to more than 1.5 million unique visits per month, driving the bulk of the company’s lead generation until it was acquired by J.G. Wentworth in December 2022. As employee #5 at Stilt, Frank was witness to, and part of, the successful building and sale of a fintech company, uniquely positioning him to create content for founders about all things startups.

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