Private Lenders, Licenses, and Servicing a Portfolio in Florida

Is this an issue? YES. Florida looks at servicing like this.

FLORIDA MORTGAGE LENDER SERVICER LICENSE  Who is required to have this license? This licensing endorsement is required for any mortgage lender licensee who services a loan. 

“Servicing a mortgage loan” means to receive, cause to be received, or transferred for another, installment payments of principal, interest, or other payments pursuant to a mortgage loan. A “servicing endorsement” means authorizing a mortgage lender to service a loan for more than 4 months.

Who does NOT need this license?

  1. A person acting in a fiduciary capacity conferred by the authority of a court. Probably NOT you.

  2. A person who, as a seller of his or her own real property, receives one or more mortgages in a purchase money transaction. So this refers to PERSONAL not held out as a business.

  3. A person who acts solely under contract and as an agent for federal, state, or municipal agencies for the purpose of servicing mortgage loans. Probably NOT you.

  4. A person who makes only non-residential mortgage loans and sells loans only to institutional investors. Here is the key – the legal definition of non-residential.

  5. An individual making or acquiring a mortgage loan using his or her own funds for his or her own investment, and who does not hold himself or herself out to the public as being in the mortgage lending business.  If you have a business card, and make more than two or three of these a year, this might be YOU.

  6. An individual selling a mortgage that was made or purchased with that individual’s funds for his or her own investment, and who does not hold himself or herself out to the public as being in the mortgage lending business.  Selling “notes”.  

So now, ask this – What is a non-residential loan?

  • Legally acceptable definition – A loan that is used to purchase nonresidential property such as an office building or a factory.

Now – what is a commercial property?

  • Legally acceptable definition – Property used for retail or trade and not zoned residential.

    Commercial

CONCLUSION – Just because you “call” a 1-4 family a commercial investment, and have affidavits signed regarding NOO and not second or vacation home – that may not be legally sufficient. The RESPA definition and the definitions used above will apply.

So, be warned. On the radar for enforcement this year. If in doubt about your situation, let us hear from you. 

(800) 656-4584 Ext 103.

 

Site visits – “Mock Audits”

Compliance Services intends to add this service on a limited basis.

If you have interest in our coming to your facility and “auditing” your entity to see how you would do when the state or the feds come calling, send me an email at nl@lockelaw.us.

These visits clearly show us what Brokers and Lenders thought they knew but didn’t.

These visits can save thousands in potential fines.

Nelson A. Locke, Esq.

(800) 656-4584

H.R. 2121 – Hiring Bank Originators

Hello all, Happy Friday.

Back in April 2015 – HR 2121 was introduced in the House of Representatives, and the author asked for fast track. Well, it has made its way to the Senate but is stil in committee.

For those of you who were unaware, this bill would have authorized a conditional 90 day license to allow Brokers and non-bank Lenders to hire bank originators on a 90 day “honeymoon” during which the originator had to apply for an obtain a standard non-bank approval from the NMLS and their state regulator.

This was a good plan for a situation previously not considered by the CFPB or the Safe Act.

Because several of you seem to think this is in force, I wanted to advise you, it is NOT. While it passed in the House, it never passed in the Senate, thus it has died.

So don’t hire any bank originators unless they have already started the licensing process, and understand they cannot originate for you until the license is issued.

Respectfully,

 

Nelson A. Locke, Esq.

(800) 656-4584

Why you need to take your QC Program seriously. Your AUDITOR will ask for it.

Here at Complaince Services we offer a pretty robust Compliance Program. Part of it we call “Book Four” – a fully compliant Quality Control Manual with five different audit checklists for QM and Government Loans….including the HECM.

Many of you function as Brokers and believe that QC is something the LENDER should do; that you don’t have a duty to participate. You are wrong. You have no credibility without QC.

Those of you that function as Lenders frequently make the mistake of having a production person or an MLO involved in what you call your post-closing QC. That’s just not acceptable. It is not arms length and can encourage fraud which is what the QC rules strive to prevent. Some Lenders we speak with don’t do QC at all. Wow is all I can say. That is a really good way to end up on an annual audit list or be fined right out of existence when the regulators find the errors you could have caught.

Here are my recommendations. I have been through plenty of audits, I speak from experience.

  1. Start taking this requirement seriously. If you are a Broker, set your goal at 5% including declined and withdrawn files. Learn and improve. And if you are a Lender, especially one approved by FHA, VA, or the USDA – this is NOT an option. Set your goal at 10% and make sure your QC is done by a properly “firewalled” person or party.
  2. The NUMBER ONE problem we see in the post-closing QC we perform is a lack of a fully executed, signed, complete closing package. Your closing agents will give this to you if you demand it. You have a right to it. You need it. You are allowed to have it under RESPA and other regulations – because you need it to prove what closed was correct and complete. HOW are we going to protect you if your company is audited and you have no closing files?
  3. The NUMBER TWO problem we see is inconsistent management review of our reports. You must take the QC report, review it, and put your plan to comply or correct in writing. You distribute the management response to the employees involved. You attach the management response to the QC report we provide. What good are these reports if management does not use them? If you see something you disagree with, just say so in your response – but respond you must.

Finally, this has nothing to do with President Trump potentially revising Dodd-Frank. QC is here to stay. Pay attention to it.

If you would like us to give you a quote for QC services, CLICK HERE.

Thanks for reading.

Nelson A. Locke, Esq.

(800) 656-4584

 

 

 

Recent State Audit Request (January 2017) included everything in our program.

We have a client being audited by a Midwest state. The Audit list was exhaustive. The good news is that every single thing on the list is included in Books One, Two, Four, Five, and Six. IF YOU ARE OUR CLIENT.

The regulators requested tons of advertising support and the policies. They asked for copies of Web sites, Facebook, Linked In, Instagram. The regulator asked for proof of customer complaint policies and resolution. (the “Logs”). Can you hear me now?

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Here is where most Brokers and Mini-Cs fall short. The regulator asked for a very exhaustive list of file documents for audit. It could best be described as the initial file plus a final, fully executed and complete closing package. When we provide QC audit services to our clients we look for this. And in over 50% of the files we review, the records are incomplete.

Maybe you should let us audit one or two of your closed loans, before you get a five-part audit request like the one I just referred to.

One final note. Frequent use of the word “Employee”. Not the word “Contractor”. I have beaten this to death with my readers. Employee is a term of art, it means W-2. This regulator asked for all W-2 payroll records and copies of the MLO Agreements and Hiring Procedures. Again, it is all in our program.

What’s on your compliance shelf? If you are not our client, call us today to learn more. (800) 656-4584 extension 103.

Nelson A. Locke, Esq.

CLICK HERE to view our Web Site.

 

 

 

Realtor relationships with Brokers under fire…….better pay attention.

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The Consumer Financial Protection Bureau (where “BATMAN” works) today ordered Prospect Mortgage, a major mortgage lender, to pay a $3.5 million fine for improper mortgage referrals in what the regulator calls an alleged “kickback” scheme.

The lender paid illegal kickbacks for mortgage business referrals. Prospect Mortgage isn’t the only one being fined. The CFPB also dealt out penalties to real estate brokers and a mortgage servicer who took kickbacks from Prospect. These three will pay a combined total of $495,000 in consumer relief, repayment of ill-gotten gains and penalties.

“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” CFPB Director Richard Cordray (“BATMAN”) said. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”

Here are three reasons the CFPB said it is fining Prospect Mortgage:

Paid for referrals through agreements:

Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.

Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify again with Prospect:

One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.

Just yesterday a client of ours asked about a realtor who was pushing an over-market leasing arrangement for a desk that was to be exclusive but had no security as required by GLB. Further, the individual realtors who worked there openly solicited fees from the broker.

If you have a lease arrangement presently with a realtor, maybe I should take a look?

Respectfully,

Nelson A. Locke, Esq.

Compliance Services

Click Here to view our Web Site

 

 

The CFPB is filing Lawsuits and Enforcement Actions and you might be next. Are you protected?

The Consumer Financial Protection Bureau is ramping up enforcement actions ahead of a possible political showdown between President Donald J. Trump and the agency’s director, Richard Cordray. They appear to be targeting different areas of financial services and without regard for the size of the entity.

As an example of this, note that the CFPB filed two separate consent orders Monday against CitiFinancial Servicing and CitiMortgage (Mortgage Lending) over claims the servicers failed to help borrowers with foreclosure relief. That came just days after the bureau filed lawsuits against TCF National Bank (Mortgage Lending) and student loan servicer Navient (Student Loans) after both companies said they refused to be pressured into settling allegations of wrongdoing before the Trump administration took office. Our office has taken calls from Brokers in Florida, California, and Texas asking us for help with regulatory inquiries.

Though the business community had hoped a new administration would rapidly put a halt to the CFPB’s aggressive approach, so far the change in political power instead appears to be emboldening the CFPB to act.

“The CFPB is going to be more aggressive in the short term because their future is uncertain,” said Ashley Taylor, a partner at the law firm Troutman Sanders. “Agencies in transition often become more aggressive if the people who work there think their power will be curtailed.”

On Friday, the White House issued an executive order calling for a freeze of all pending or new regulations. However, the order applies only to executive agencies and not the CFPB, though non-executive agencies are generally expected to follow suit.

The CFPB has not so far issued any new regulations—which might be overturned via the Congressional Review Act of 1996—and has focused its efforts on enforcement activity.

LL Logo 112715And that, folks, is why you need us more than ever. To find out more about our Audit Protection Plan and how we stand with you in the event of an audit or enforcement action, call us at (800) 656-4584.

You can visit our website and learn more about us and our program.  CLICK HERE