From the outside, the fact that massive federal training requirements are placed on nonbank LOs but not LOs at depository institutions can feel a little unfair. But is it?
First let’s break down the requirements. Both have to register with the NMLS and submit fingerprints for a background check. For a nonbank LO, the training all starts with 20 hours of Pre-licensing education, followed by anywhere from 1 to 15 hours of additional training per state depending on what states they want to be licensed in. They also have to complete a standardized test with a pass rate hovering around fifty percent. Each year, they then have to take a minimum of 8 hours of Continuing Education, or up to nearly 40 hours, depending on how many states you’re licensed in.
Depository LOs do receive training from their companies, and have yearly training to take, however forgetting to take your annual classes results in essentially being cut off from the industry for nonbank LOs, while their depository counterparts don’t face the same kind of immediate penalties from external bodies, though they will face internal pressure. One thing that depository LOs do have, is a multitude of levels of oversight, while nonbank LOs may only have a single manager tasked with keeping them on track.
At the end of the day, we care about making sure that borrowers are being taken care of while they navigate the complexities involved with purchasing the largest asset that many of them will ever own, and having well educated LOs is a huge part of that. At the Knowledge Coop, we take training seriously, and will always advocate for what’s best for the consumer.