In wake of scandal, LOs give continuing education programs failing grade

The very people responsible for delivering continuing education courses say the material could use some updating

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If you’re a mortgage loan officer with a decade of experience in the industry, you have likely spent over 80 hours taking continuing education courses.

Per regulations put into place by the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”) and enforced by the Nationwide Mortgage Licensing System and Registry, every loan officer must spend an average of eight hours on an annual basis to recertify their national license.

The hours spent on continued education should be useful. Tricky situations can arise in mortgage lending, especially when navigating less-common products or originating non-agency loans. Continuing education classes represent an opportunity for LOs to sharpen skills. 

But a 26-state federal investigation that penalized 400-plus LOs for effectively cutting class raises questions about the effectiveness of the continuing education programs. 

Roughly a dozen LOs and instructors told HousingWire that current continuing education courses teach the same mortgage ethics and regulation guidelines that they already know cold, and do very little to teach them skills they need for day-to-day work. In short, they say, the classes are not particularly relevant, and represent a big missed opportunity. 

Teaching by the book

The very people responsible for delivering the classes say the material could use some updating.

CE instructors say that the NMLS – owned and operated by a subsidiary of the Conference of State Bank Supervisors – requires them to annually recite and cover regulations such as the Truth in Lending Act, Equal Credit Opportunity Act, and the Real Estate Settlement Procedures Act (RESPA).

John Jeha, an LO at Stonecastle Mortgage who also works as a CE instructor, said that after new regulations were introduced in 2011, it took about five years for them to be fully implemented and that educators were happy to “flesh it out and instruct the loan officers.”

“All the rules and regulations have pretty much been implemented and now we’re just rehashing the same rules and regulations,” Jeha said. LOs often lose focus during CE classes, he told HousingWire.

Meanwhile, Ken Perry, founder of the Knowledge Coop, a continuing education company, agreed that educators simply aren’t keeping it fresh. “They’re doing the same exact training every single year, ” he said. ” They aren’t delivering the latest information.”

Rich Madison, vice president of credentialing and accreditation programs at the Conference of State Bank Supervisors, wrote in an email that his experience with MLOs “is that the vast majority take CE requirements very seriously” and that if some LOs are not “getting enough out of a school, [they should] shop around and find another one that will better suit [their] career needs.

“We’re always pushing schools to make courses more relevant and engaging,” Madison said. “It would be interesting to see scenario-based learning where the content of a course is delivered around discovering the needs of a customer and how the customer scenario presents challenges in the areas of loan products available, fair lending, qualifying requirements, or any number of other potential real-world factors. We would welcome the opportunity to approve courses with a creative take on how they design and develop content.”

Loan officers and instructors alike say that apart from learning regulations, LOs should also be equipped with “esoteric financial knowledge” and an understanding of how to work with borrowers.

“The curriculum is not directly relevant to ensuring the licensed individual possess the intellectual tools needed to create informed consumers when dealing with the professed ‘largest financial transaction’ of their lives,” said William Kidwell, a loan officer at Intelligent Investments, LLC.  

Kidwell added: “The federal law and the law as adopted by the states set a woefully low bar and certainly has little education related to being in a position to advise consumers on difficult balance sheets, cost versus debt, and debt service parameters.”

Different year, same teacher

CE classes are taught by private companies that set up their own educational platforms, which then get approved by the NMLS and the states. According to instructors who teach CE classes, the price for taking these classes ranges between $20 to $150 and the courses are taught based on a “laundry list” of topics that the NMLS supplies. To access the NMLS platform, LOs must also pay a $30 annual fee.

“The whole premise of CE was in response to the Great Recession [and] was introduced in part because of issues with housing [and the need] to protect consumers,” said one California-based LO who requested anonymity to speak freely. “And in order to protect consumers you need to make sure that LOs are ethical, hence the implementation of background checks and credit reports.”

The SAFE Act, apart from requiring continuing education, implemented requirements that all MLOs must submit fingerprints to the NMLS for a criminal background check. LOs must also provide authorization for NMLS to obtain an independent credit report.

The LO who requested anonymity said that instead of focusing on regulations, continuing education should drill down on topics that can help LOs in their day-to-day jobs, such as teaching them customer service, and going over niche products such as asset depletion on conventional loans, delayed financing and renovation products.

Cutting class

Continuing education came under the spotlight after a multi-state investigation determined more than 400 mortgage loan originators falsely claimed to have completed an annual continuing education requirement.

As a result, LOs in 42 states who settled with state regulators will have to dole out an average of about $2,700 each — $1,000 for each state they are licensed in — for skipping the annual eight-hour course. They must also surrender their licenses for three months and take additional educational programs.

The 26-state investigation, which the California Department of Financial Protection and Innovation led, picked up on the discrepancies using a digital tool to check fulfillment of NMLS requirements. The 426 LOs implicated in the investigation all paid for educational programs from Carlsbad, California-based firm Real Estate Educational Services (REES), headed by Danny Yen.

Yen was accused of concocting schemes in which he either took the classes in exchange for compensation, or gave LOs class credit without requiring them to show up to class. Part of the penalty stems from REES offering online courses — like a three-hour one on fair housing and discrimination laws — but only being licensed to give in-person classes.

However, officials said there was no evidence consumers were harmed by LOs skipping the continuing education courses. 

Yen did not respond to a request for comment.

Jeff Anderson, a broker/owner based in California, said it doesn’t mean broader malfeasance didn’t occur.

“There are rules in every facet of the mortgage business that loan officers and lenders must follow. Some don’t follow the rules and/or they look for shortcuts to circumvent them,” he said. “These 400 loan officers are just the ones that got caught in a specific scam. If an LO is willing to cheat on CE it’s logical to me that they’re cheating in other areas as well. It’s nice to hear the regulator say ‘there’s no evidence that any loan generated by these 400+ LOs caused consumer harm.’ But, I’m not convinced it’s true just because the regulator said so. How can they be sure? Did they audit 100% of the loans originated by these loan officers during the past year? Did they interview every borrower? Did they investigate their referral relationships for possible RESPA violations? I doubt they did any of these things.”

The California Department of Financial Protection and Innovation did not respond to request for comment.

One LO told HousingWire that he’s not surprised that some opted to quickly settle, stay on ice for three months and then move on. 

Continuing education “is nothing but a big waste of time and a money grab,” he said. 

James Kleimann contributed reporting to this story.


  1. As a provider I agree with many of the comments. The Required Topics published by NMLS severely restrict what we can present. And the guidelines by California Department of Financial Protection and Innovation are outdated.

    And I would like to note: 400 investigated out of 11 years of education and the violations are from only one provider. That is not a wave of crime, it is a compliment to the program.

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