In recent months, loan officers around the United States have begun taking federally mandated licensing examinations, which many in the industry consider beneficial for borrowers in the long run. According to the Conference of State Banking Supervisors, which oversees the testing, 31 per cent of the roughly 10,000 people who took the national test from July 30 to November 30 failed it, and about 27 per cent did not pass the state-specific component.

The results may give pause to some borrowers in New York and New Jersey, which only recently began administering the examination, and in Connecticut, which won’t offer it until April 2010.

If nearly one in three loan officers cannot pass the test, how can borrowers enter the mortgage process with confidence?

The examination is not required of everyone — only those who work for mortgage brokerages and lenders. Employees of conventional banks such as the Bank of America and the J.P. Morgan Chase need only register with the National Mortgage Licensing System, which is administered by the state banking supervisors.

The examinations are largely a response to the mortgage industry collapse, which according to some critics was a result of poorly qualified and unregulated loan officers’ providing loans to borrowers who had little chance of paying them off.

Applicants who fail the test must wait 30 days before they can try again. If they don’t pass the test by the State-imposed deadline, they cannot lend in the State. (In New York and New Jersey, the deadline is July 31, 2010, and in Connecticut, the deadline date is yet to be finalised.) Licences are renewed yearly. While loan offices need only pass the examinations once, they must keep up with various continuing education requirements.

Thomas Pinkowish, an industry consultant and a co-chairman of the education committee of the Connecticut Mortgage Bankers Association, said prospective borrowers should not be shaken by the idea that one of three loan officers might not be able to pass the test. — © 2009 The New York Times News Service

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