California has another new rule.

December 27th, 2018

All Department of Business Oversight (DBO) licensees are required by law to establish and maintain an email address for receiving communications and documents from the DBO beginning January 1, 2019.

The email address:
1. Must not be an email of any individual employee.
2. Must be able to receive attachments.

To register a designated email address, licensees must go to DBO’s website here. Instructions to create a designated email are available here.

Licensees are required by law to notify the DBO before changing the designated email and provide the DBO with the new designated email.

If licensees fail to comply with the designated email requirements, the licensee may be subject to a fine of up to fifty dollars ($50) per day, not to exceed one thousand dollars ($1,000) in the aggregate.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

AML And BSA Annual Risk Assessment Compliance

LL Logo 022015Here we are in late November, and there are some of you out there who need to have an independent party perform a Risk Assessment to satisfy state regulators regarding your compliance with Money Laundering Law and the Bank Secrecy Act.

We can do this for you, it will take about an hour and involves a small fee. $250 for survey and interview. The session will result in a complete Risk Assessment Report that will satisfy any requests for at least the next six months. This is an emerging trend. 

If you would like to schedule this, shoot me an email at nl@lockelaw.us  and let us know.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

Have you completed your 2018 your continuing education yet? You are running out of time.

We recommend Jim Montrym and Andrea Worthington of the Mortgage Broker School.

You can reach them at (800) 735-8565, or use their web site which is :

http://www.brokerschool.com/ :category/industry-partners-processing-compliance/ 

I have used their services personally for the last 15 years. Always good, never bad. Don’t wait until the last minute, space is limited. thw8s1030z

If you use them for your CE please tell us because it could be a helpful bit of information in the event you are audited.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

States where current Audit Activity is high.

 

Hello folks, here comes December!

Is your required annual training for AML and GLB done and certified? If not, give us a call.

In the past six weeks we have assisted in responding to at least 15 state or CFPB Audits.

We have successfully negotiated the lifting of three suspensions and successfully negotiated reduced fines for violations an average of 50%.

 

Audit satsifactoryIf you need that kind of Compliance Expertise in your corner,

email us at nl@lockelaw.us

Current Active Audit States

  • Florida

  • Texas

  • Washington

  • Oregon

  • North Carolina

  • Michigan

  • Virginia

  • New York

For more information, contact us at (800) 656-4584.

Nelson A. Locke, Esq

Compliance Services, USA

 

AML And BSA Annual Risk Assessment Compliance

LL Logo 022015Here we are in late November, and there are some of you out there who need to have an independent party perform a Risk Assessment to satisfy state regulators regarding your compliance with Money Laundering Law and the Bank Secrecy Act.

We can do this for you, it will take about an hour and involves a small fee. The session will result in a complete Risk Assessment Report that will satisfy any requests for at least the next six months. This is an emerging trend. 

If you are a small Broker shop, don’t be concerned. However, if you have multiple state licenses or more than 10 MLO staff, you may want to consider this extra step to stay in the safe zone.

If you would like to schedule this, shoot me an email at nl@lockelaw.us  and let us know.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

Sexual Harassment Training Requirement

 

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October 4th, 2018

If you are a Broker or Lender operating in the New York State – NY  passed a sweeping new law requiring you to provide annual training on Sexual Harassment Prevention. The training must be interactive, must allow your employees a chance to offer feedback, and must be completed for all staff by October 9th.

We prepared a Training Package for you. If you are a New York client email us at nl@lockelaw.us and we will get it out to you. If you are not a New York client, the program was written to be usable in any state. If you would like it please let us know.

Thanks in advance.

Nelson A. Locke, Esq.

Compliance Services USA (800) 656-4584

 

 

What to do if a Lender asks you to repay commissions………..

This is a disturbing practice that is surfacing more and more.

You work hard for your borrower and help them obtain the mortgage loan they need. It is either a purchase or a refinance, and the borrower never says anything to you about intending to pay off their loan within a year. You probably signed your broker-lender agreement without asking us to review it for trap doors like this so………the contract has a clause in it allowing your lender to claw back your hard-earned fees no matter where they came from (borrower OR lender paid) and no matter why the client paid off early.

Constructively, this is a broker prepayment penalty. The regulations never considered this. The regulations protect the consumer, and then the lender shifts the penalty to you.  You probably did not know this penalty was in your contract because it likely was not explained to you when you signed your contract. Did they ask you to initial each page?

When you work hard to originate a mortgage loan you deliver something of value. You deserve to be compensated. If your borrower decides without any warning to prepay the loan, they got the benefit of your hard work for what amounts to nothing. Work without pay is called unjust enrichment. Under quasi-contract the borrower owes you for the claw back the lender assessed you with. You earned your fee.

What can you do? I don’t see a problem with a broker-borrower contractual agreement that requires the borrower to indemnify you in the event the borrower decides to pay off early. It is an advanced informed agreement. If you are our client we can provide this to you at no cost. If you are not our client but would like to learn more, contact us at (800) 656-4584. Or email us at nl@lockelaw.us 

This is just one example of the pro-broker things we do to help our clients make and retain their earnings.

That’s all for now.

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

 

Florida OFR Audit Alert

August 12th, 2018

This is a special alert for my clients.

In the last ten days five clients have received audit letters from the OFR. All five clients had NOT been audited in 8 to 10 years. One had not been audited in 20 years.

It appears to me as if the OFR is on a “catch up” campaign. This means we know of three confirmed danger areas for an OFR audit.

  1. If you are a new company with a new NMLS number, you will be audited in the first 18-24 months. Perhaps, sooner. 

  2. If it has been at least 7 years since your last audit, get ready. Use the checklist in Compliance Book Three to see how prepared you feel. Then let me know.

  3. If you have had a consumer complaint that you failed to respond to, you can expect a visit. 

But the big shocker is you old timers. Many of you may have been feeling complacent. That is not good.

Let’s pull out the checklist and be sure you feel aware and prepared. 

We are now offering a two session “MOCK AUDIT” for companies who want to go the extra mile to be sure they are prepared. If you have interest, email me and let me know so we can get you scheduled.

There is a cost of $1,000 for this service. It will save you many times that much in potential fines. We have proof. 

That’s it for now.

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

ZILLOW Co-Marketing Program Survives

CFPB ends investigation of Zillow
By Richard J. Andreano, Jr. on June 28, 2018
Posted in CFPB Enforcement, CFPB Monitor, Mortgages
In a SEC filing dated June 22, 2018, Zillow Group announced that it is no longer under investigation by the CFPB for RESPA and UDAAP compliance with regard to its co-marketing program. Zillow Group had disclosed the existence of the investigation in May 2017.
According to the SEC filing, Zillow Group received a letter from the CFPB on June 22 stating that the CFPB “had completed its investigation, that it did not intend to take enforcement action, and that the Company was relieved from the document-retention obligations required by the Bureau’s investigation.”
The completion of the investigation leaves unanswered what concerns the CFPB may have had with Zillow Group’s co-marketing program, and whether the investigation was terminated because the concerns were addressed to the CFPB’s satisfaction or for other factors.

BE CAREFUL. JUST BECAUSE THE CFPB RELEASED ITS HOLD ON ZILLOW, IS NOT A TICKET FOR YOU TO INTO THE “GREY AREA”.

IF YOU ENTER INTO ANY KIND OF MSA, IT WOULD BE WISE TO ASK OUR ADVICE FIRST.

NELSON A. LOCKE, Esq,

(800) 656-4584

DODD FRANK REFORM BILL WEBINAR

Hi there.

The title says it all.

I will review the Dodd Frank Reform Bill as it affects Mortgage Brokers and Correspondent Lenders.

The webinar is free to subscribers, and will start promptly at 3:30 eastern time on Tuesday, June 26th.

To attend, go to https://global.gotomeeting.com/join/223553717

You can also dial in using your phone.
United States: +1 (646) 749-3122
Access Code: 223-553-717

I might have some attachments for you if time allows, but in any case we can have a good discussion about how the DF Reforms might (or might not) affect you and your business.

See you there.

 

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.expertlenderservices.com

 

 

 

Check your “Facebook” profiles today.

I was reviewing a client’s social media, to insure compliance with the Safe Act and Dodd Frank.

On his Facebook profile a new little link had appeared. It said “Mortgage Brokers”. He did not authorize this. And when we clicked on it, it contained a list of all his competitors.

OUCH.

Contact Facebook and demand that the link be removed. Keep a copy of your email to them and file it in your CFPB Advertising Log Book.

It really pays to check your social media every few weeks.

Sincerely,

Nelson A. Locke, Esq.

(800-656-4584

 

 

 

 

DODD FRANK REFORM BILL WEBINAR

Hi there.

The title says it all.

I will review the Dodd Frank Reform Bill as it affects Mortgage Brokers and Correspondent Lenders.

The webinar is free to subscribers, and will start promptly at 3:30 eastern time on Tuesday, June 26th.

To attend, go to https://global.gotomeeting.com/join/223553717

You can also dial in using your phone.
United States: +1 (646) 749-3122
Access Code: 223-553-717

I might have some attachments for you if time allows, but in any case we can have a good discussion about how the DF Reforms might (or might not) affect you and your business.

See you there.

 

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.expertlenderservices.com

 

 

 

Rule Change regarding use of a CD to reset tolerances.

Under the TRID rule, a Loan Estimate is the disclosure primarily used to reset tolerances. Because the final revised Loan Estimate must be received by the consumer no later than four business days before consummation, the Commentary to the TRID rule includes a provision under which a creditor may use a Closing Disclosure to reset tolerances if “there are less than four business days between the time” a revised Loan Estimate would need to be provided and consummation. Because of the four-business-day timing element, in various cases when a creditor learns of a change, the creditor is not able to use a Closing Disclosure to reset tolerances. This situation is what the industry termed the “black hole.” The industry repeatedly asked the CFPB to address the black hole issue.

In the final rule the CFPB removes the four business day timing element, and makes clear that either an initial or a revised Closing Disclosure can be used to reset tolerances.

Consistent with the requirements for the Loan Estimate, when the TRID rule permits a creditor to use a Closing Disclosure to revise expenses, the creditor must provide the Closing Disclosure within three business days of receiving information sufficient to establish that a changed circumstance or other event triggering a change has occurred.

We are happy to answer any questions, just email us at nl@lockelaw.us

Nelson A. Locke, Esq.

Compliance Services USA 

(800) 656-4584

 

Keller Williams Matter

Folks, please advise me via email if you fit into one of these two boxes.

  1. Are you an affiliated business with KW?
  2. If NOT, are you being adversely affected by the current KW project regarding the “disclosure”?
  3. Have you seen the “disclosure”?

My first take on the situation is of concern. Thus I need to hear from you.

Here is the link. nl@lockelaw.us

Thank you in advance.

Nelson A. Locke, Esq.

(800) 656-4584

Compliance Services USA.

Template for Occupancy Fraud Affidavit

Recently I have encountered several situations where borrowers just flat out lied about their intent to occupy the subject property as their principal residence. The brokers were caught without sufficient evidence in their files that they properly verified the intent to the best of their ability. Thus, this affidavit was born. It covers both those who state their intention as owner occupied, and those who state their intention as non-owner occupied. If you put this on your letterhead and have it executed at closing it would be hard for a fraudulent minded borrower to point the finger back at you.

If this has happened to you and you need my help, contact me at nl@lockelaw.us

That’s it for now.

Here is the form. It is designed as a crystal clear WARNING.

“Do you intend to occupy this property as your principal residence?” or “Do you intend for this property to be non-owner occupied?”

These questions, indicated by check boxes on most mortgage loan applications, might seem straightforward. But if you misrepresent your intention, it is a crime known in real estate lingo as “occupancy fraud.”

Occupancy fraud occurs when a borrower says he or she plans to live in a home, all the while knowing the property will be rented out.  The key here is to note “all the while”. People can change their minds, but they will need to show compelling evidence that at the time they applied, closed, and funded the deal they absolutely intended for the property to be either their residence or a non-owner occupied investment property. 

Sometimes people change their mind after the fact.  That’s less serious than someone intentionally deceiving the lender by providing information indicating they are either going to occupy or not when they truly have the opposite  intention.

But it still maybe seen as an unintentional misrepresentation and give rise to a claim for damages by the lender that relied on the borrower’s statement about occupancy or investment use.

Most lenders’ loan documents define owner occupancy as a period of at least one year, but mortgage lenders have flexibility in their guidelines. If you intend to occupy a home, but move out within less than 12 months, you should notify the lender in writing and keep a copy of your letter.

Lenders perceive an owner-occupied transaction to be a safer credit risk than non owner occupied.

ONE LIE on a loan application may trigger a full-blown fraud investigation, and  you’ll be facing HUGE negative consequences if you get caught. IT IS A FELONY. But it gets worse. Lying on a mortgage loan application is so serious it can also be considered Money Laundering. ANOTHER FELONY. And then, there is the usual conspiracy charge. THREE FELONIES.

Technically, the mortgage lender could call your loan due and payable, raise your interest rate and payment, or foreclose on your loan.  Whatever does or doesn’t happen will be solely at the lender’s discretion.

The lender could file a Suspicious Activity Report (SAR) into the federal government’s Financial Crimes Enforcement Network (FinCEN), a centralized database that financial institutions use to report possible instances of fraud to law enforcement authorities. SARs could become a problem if you make a misrepresentation or outright false statement on a loan application and later want to move to another home or refinance your mortgage.

Understood, this _________ day of ________, 2018;

 

____________________________________            ___________________________________

Borrower                                                         Co-Borrower

 

___________________________________

Witness

 

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

Business Purpose Loans – Update

Yesterday the Governor of Florida signed House Bill 935 and this affects Mortgage Loan Originators, especially those operating without licenses under the theory that the loans they produce are all business purpose loans.

The bill revises ch. 494, F.S., governing non-depository loan originators, mortgage brokers, and mortgage lender businesses subject to regulation by the Office of Financial Regulation to provide greater consumer protections. The bill provides that it is unlawful for any person to misrepresent a residential mortgage loan as a business purpose loan, and defines the term, “business purpose loan.” Further, the bill provides a definition of the term “hold himself or herself out to the public as being in the mortgage lending business,” as that term currently exists under two licensing exemption provisions. These current exemptions permit an individual investor to make or acquire a mortgage loan with his or her own funds, or to sell such mortgage loan, without being licensed as a mortgage lender, so long as the individual does not “hold himself or herself out to the public as being in the mortgage lending business.”
The bill was in response to alleged unlicensed mortgage lending activity in South Florida. According to these reports, some lending entities were providing residential loans with usurious interest rates and high fees made under the guise of business purpose loans in order to avoid licensure and disclosure requirements under ch. 494, F.S., as a mortgage lender.

These groups also claim that some of these unscrupulous lenders would not make the “residential loan” unless the borrower formed a limited liability company.
These provisions take effect July 1, 2019.

 

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

Private Lending and Licensing – Round Two.

The Florida legislature kicked off its legislative session by introducing Florida Senate Bill 894 and House Bill 935, legislation that could cover private mortgage lenders. The bills, introduced by Sen. Rene Garcia (R-Miami) and Rep. Jeanette Nunes (R-Miami), would eliminate a longstanding business purpose exemption for loans secured by a Dwelling.

 

On January 18, the bill passed the House Insurance and Banking Subcommittee with a 13-1 vote in favor. On January 24, the House Commerce Committee passed the bill on a unanimous vote. The Senate similarly passed the bill on a unanimous vote in the Senate Banking and Insurance committee on January 23. The bills are expected to move through the Florida legislature and have strong bipartisan support.

 

An almost identical bill previously passed through the legislature in May 2017, but was ultimately vetoed by Governor Scott in June. 

 

Florida has been one of the more interesting states from a mortgage licensing perspective. For example, a mortgage lender license is already necessary to make a business purpose loan secured by commercial real estate and 5-or-more unit multifamily residential property if the borrower or guarantor is an individual, or if the lender is considered a non-institutional investor.

 

If the bills become law, they would empower the state Office of Financial Regulation to regulate mortgage loans made for business purposes, require brokers of these loans to be licensed, and allow examination of firms offering or making private loans.

If this is signed into law, it means more audit activity and means that if you are a private lender making business purpose loans, you better call us and let us get you into shape before the regulators start enforcement activity. We will keep you posted. 

Nelson A. Locke, Esq.

Compliance Services USA and Locke Law US

http://www.lockelaw.us

(800) 656-4584

 

What you need to know about the Dodd-Frank rewrite that is currently underway.

Not much. The rewrite does some good things for the Banking Industry but……not too much for you and I.

The bill doesn’t go nearly as far as some Republicans would like to go in gutting the 2010 law. For example, it doesn’t make big changes to the Consumer Financial Protection Bureau. When it refers to smaller lenders, it looks like it is making reference to FDIC participants.

The CFPB has also made it clear it is engaging the state regulators more now than ever.

Don’t drop your guard or relax your focus on compliance. We have come so far. Let’s not go backwards.

Nelson A. Locke, Esq.

(800) 656-4584

http://www.expertlenderservices.com

Warning about UDAAP

Today, the CFPB again advised State Attorneys General (which means State Agencies as well) that the CFPB is monitoring how the states decide to undertake or not undertake enforcement action. Read this narrative taken from their site.

“Mr. Mulvaney stated that a significant, although not determinative, factor in the CFPB’s decision to initiate an enforcement action in a particular case will be whether state AGs or regulators are also considering whether to take enforcement action. He stated that if state AGs “are not bringing an action we are looking at, I’m going to want to know why.” More specifically, he would want to know whether the state’s reason is lack of resources or other factors unrelated to the merits of an action or whether it is that the state AG or regulator thinks the conduct in question is not illegal.”

In addition to various federal consumer protection statutes that give direct enforcement authority to state AGs or regulators, Section 1042 of the Consumer Financial Protection Act authorizes state AGs and regulators to bring civil actions to enforce the provisions of the CFPA, most notably its prohibition of unfair, deceptive or abusive acts or practices.

That’s the part that deserves your attention. The UDAAP provisions are broad by design and can be used to commence enforcement action for almost any reason.

Deceptive Acts or Practices
A representation, omission, actor practice is deceptive when
(1) The representation, omission, act, or practice misleads or is likely to mislead the consumer;
(2) The consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and
(3) The misleading representation, omission, act, or practice is material.

And some real or imagined consumer harm occurs as the result of the deceptive act or practice.

If a regulator sees or hears something that triggers their radar, they will examine your website and social media. Then your customer complaint log. Then the complete nature of your record keeping. Then they will interview you and measure your response.

Just be aware, folks – knowledge and training can reduce this risk greatly.

Nelson A. Locke, Esq. (800) 656-4584

 

 

 

Rapid Rescores and Extra Cost

confused

This morning we spent about an hour investigating an article recently published discussing rapid rescore where the consumer is disputing accuracy, and the issue of passing the fee along to the client. 

There has been much discussion on this issue. Some feel that if the initial Loan estimate included an amount in anticipation of a rapid rescore, it might be acceptable to pass the cost on to the consumer. Others feel that 15 USC 1681i(a)(1)(A) is to be interpreted exactly as written which says clearly “free of charge” and then does not recite an exception. So it means – “free of charge” to the consumer. That leaves the credit bureau and your CRA open to charge your mortgage company. It can’t go to the consumer. Here is the exact language. Which seems to apply specifically to where a consumer is disputing accuracy.

§1681i. Procedure in case of disputed accuracy
(a) Reinvestigations of disputed information
(1) Reinvestigation required
(A) In general
Subject to subsection (f), if the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file in accordance with paragraph (5), before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.

So here is your best business practice. You cannot charge the consumer for rapid rescore and must absorb the cost yourself. Also, because of the CFPB comp rules we don’t see how you can ding the MLO for this cost.

The current regulatory trend is not to add new regulations. Thus existing regulations  like the FCRA are being enforced more regularly.  If your practice was to charge the consumer for a rapid rescore involving disputed accuracy by the consumer, and even if you brokered the loan and the lender allowed the fee on the Closing Disclosure – you could have problems during an audit or if a consumer complains. Govern yourself accordingly.

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

(800) 656-4584

 

 

 

Updated HMDA Guidance

The FFIEC, the Agency primarily responsible for informing us about the new changes to Regulation C – the “Home Mortgage Disclosure Act of 1975”, has issued a new manual to assist us in understanding what our reporting responsibilities are.

Unfortunately, this simple bit of guidance is over 300 pages long. You can save a copy by clicking on this link – 2018guide.

I am curious, would you all like me to set up a webinar to discuss this in more detail? If so, please reply here. There might be a small fee, depends on the number of responses.

DELETE MY NAME AND EMAIL ADDRESS BELOW AND INSERT YOUR OWN. THEN PRESS SUBMIT.

 

Good luck with the reading assignment.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

Confidentiality – a word of advice to you owners, officers, and directors.

When you communicate with your entity’s attorney, if the communication has to do with legal action or regulator issues – do all you can to protect the confidentiality of the conversation the two of you are having.

If you “cc” an MLO, a processor, or for that matter any other third party other than an attorney, you may unwittingly place confidentiality at risk. You may find that emails which you intended to be private – become the subject of discovery.

All too often I see compromising situations where in the event of litigation or regulator action – your attorney client privilege might be vulnerable.

That’s it for now.

Compliance Services USA

http://www.expertlenderservices.com

(800) 656-4584

 

Audit Notices are FLYING OUT

Fearful

Yes it is true. Here we are about 10 days into the new year. As of yesterday, six clients in Florida, Texas, and North Carolina had received audit notices. That’s about 3% of our client base meaning that we could see a very high audit rate this year – perhaps as high as 30%. The agencies are getting really aggressive.

All of the audit notices were accompanied with a checklist that incorporated the items on our CFPB Audit Preparation Checklist which is page four of compliance book three. If you don’t know what that is, email us at nl@lockelaw.us we will send you a copy. We have been telling you since 2015 that the audit notice process is standardizing, so it is easier for you to be able to know in advance what a regulator is looking for.

The CFPB Audit Checklist is the best roadmap you could have. Have you ever read it? Book Three page four. Or email us.

Here’s to a Happy New Year! Thanks for engaging us as your Compliance Expert.

 

Nelson A. Locke, Esq

Jon Gordon, Director

Compliance Services, USA

(800) 656-4584