Mortgage Concepts is a recurring video series covering best practices and compliance education for California mortgage loan originators. This video reviews CFL and MLO licensing by the DFPI, consumer mortgage originating, and reporting under the CRMLA. For course credit toward renewing your NMLS license, visit

Who needs to be CFL licensed

Anyone who makes or services consumer mortgages in California and is not a DRE Broker, a depository institution (banks), or a government agency needs to hold a CFL license issued by the DFPI. [Fin C §50002(a)]

consumer mortgage is a mortgage secured by a one-to-four-unit residential dwelling acquired and made primarily for funding a:

  • personal;
  • household; or
  • family use. [12 Code of Federal Regulations §1026.2] 

A two-tiered licensing structure

To qualify for licensing under the CRMLA to make or service consumer mortgages, a person, individual or entity needs to first register with the Nationwide Mortgage Licensing System and Registry (NMLS) and obtain and maintain a unique NMLS identifier. [Fin C §50002.5(d)]

Under the CRMLA scheme, the NMLS recognizes two types of California licenses:

  • the CFL license; and
  • the individual MLO license.

An MLO is an individual who, for compensation or gain:

  • takes a consumer mortgage application;
  • offers the terms of the consumer mortgage loan; or
  • negotiates the terms of a consumer mortgage loan. [Fin C §50003.5(a)]

An MLO is a facilitator: they directly communicate with the borrower as an employee and on behalf of a CFL, and assists the borrower in finding a suitable mortgage product.

In contrast, a CFL licensee, an individual or entity, makes (lends) or services a consumer mortgage arranged by an MLO in their employ. [Fin C §50002(a)]

CRMLA Lending is the process of making the decision to approve a consumer mortgage application, and providing the funds to originate the mortgage. [Fin C §50003(m)]

Servicing is the process of collecting mortgage payments from the borrower, applying the payments to mortgage obligations, maintaining mortgage records and performing administrative activities connected to the mortgage. A CFL servicer may service consumer mortgages it owns, and consumer mortgages owned by others. [Fin C §50003(x)]

CFL licensees are only able to make or broker consumer mortgages through an individual MLO. [Fin C §50002.5(c)]

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Individual MLOs, exemptions

To engage in individual MLO activities, an individual must obtain:

  • an individual MLO license under the DFPI [Fin C §50002.5(c)];
  • an active DRE broker license and MLO endorsement; or
  • an active DRE salesperson license and MLO endorsement. [Fin C §50003.5(b)(4)]

Clerical employees, underwriters and processors employed by CFL licensees are not considered MLOs, and are exempt from MLO licensing. [Fin C §50003.5(b)(1)]

However, a contract underwriter or processor must hold both a CFL license to act as the lender or servicer of mortgages and an individual MLO license to provide underwriting or processing services as they must work with the consumer. [Fin C §50003.6(c)]

A CFL licensee is responsible for verifying the MLO license status of each individual MLO they hire or pay. [Fin C §50002.5(a)-(b)]

Applying to be an individual MLO

For an individual to obtain an MLO license and perform mortgage origination services on behalf of a CFL licensee, they must first apply for an individual NMLS account by completing the Individual Account Request Form on the NMLS website.

The individual MLO applicant will be provided with an NMLS ID, an NMLS user ID and a password.

They then log in to the NMLS system to file their application for an MLO license using the NMLS MU-4 online filing.

Filing the MU-4

The MU-4 filing requires the MLO applicant to:

  • complete 20 hours of pre-licensing education, including two hours of DFPI-specific mortgage law [Fin C §50142(a)];
  • successfully pass an exam administered by the NMLS on federal and state mortgage lending laws [Fin C §50143];
  • submit a statement of citizenship to the DFPI [Fin C §50000 et seq.];
  • authorize fingerprint submission for a background check; and
  • pay fees to the DFPI through the NMLS.

Additionally, individual MLOs need to show they’ve:

  • never had an MLO license revoked by any regulatory agency;
  • never been convicted or pled guilty or no contest to a felony involving fraud, dishonesty, a breach of trust or money laundering during seven years prior to the application;
  • demonstrated financial responsibility, character and general fitness to operate as an honest and fair MLO; and
  • obtained employment with a CFL licensee. [Fin C §50141]

Fees for obtaining a DFPI license are $330 for an individual MLO license, plus a $15 credit report fee and a $36.25 background check fee. Fees for obtaining a CFL license are a $200 application fee, a $100 investigation fee and $100 processing fee, all paid through the NMLS.