Attention California Clients – Get Ready for the “CPRA”

On November 4, 2020, California voters approved of the ballot initiative Proposition 24, more commonly known as the California Privacy Rights Act (the “CPRA”).  The CPRA goes into effect on January 1, 2023, and will expand several of the existing protections in the California Consumer Privacy Act (the “CCPA”).

CPRA creates some of the following new rights and requirements:

  • Right to restrict use of “sensitive personal information”;
  • Right to correct data;
  • Storage limitation: right to prevent companies from storing information longer than necessary and right to know the length of time a business intends to retain each category of personal information;
  • Data minimization: right to prevent companies from collecting more information than necessary;
  • Right to opt out of advertisers using precise geolocation (< than 1/3 mile);
  • Penalties if email address and email password are stolen due to negligence;
  • Restrictions on onward transfers of personal information;
  • Establishes California Privacy Protection Agency to protect consumers;
  • Requires high risk data processors to perform regular cybersecurity audits and risk assessments; and
  • Requires the appointment of a chief auditor with power to audit businesses’ data practices.

Taken from the CFPB Public Site

https://www.consumerfinancemonitor.com/2020/11/09/california-voters-approve-cpra/?utm_source=Ballard+Spahr+LLP+-+Consumer+Finance+Monitor&utm_campaign=11c0fbce31-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_6dc018fe4c-11c0fbce31-72570477

We are licensed in California and would love to hear from you, should you need help with your compliance program.

Nelson A. Locke, Esq

Compliance Services, USA

(800) 656-4584

www.lockelaw.us

A few words of advice to MLOs who are changing sponsors…..

If you are an MLO looking to change employers and are currently sponsored by a Mortgage Broker Business or Lender, pay attention to these issues.

  1. You must give good notice, and that is usually in your employment agreement. If it is NOT, then reasonableness applies. Which to me means 30 days written notice to insure good customer service and some continuity of planning for both parties. Yes, its an “at will” deal usually, but a contract can change that.
  2. Your pipeline and your work in progress belongs to your current sponsor, not you. If you sabotage your sponsor’s pipeline, it is theft.
  3. Any leads you obtained while working for your sponsor, belong to your sponsor. So you can’t “take your electronic rolodex” with you unless you ask, and your current sponsor agrees.
  4. Don’t have your assistant quit before you, go to work for a new sponsor, and work leads you steal from your prior sponsor. The regulators have seen this before and you are not fooling anyone or avoiding liability.
  5. This is important. The person that hires you is equally liable if they know even a scintilla of the facts regarding where you got your leads, or if they allow you to bring purloined files over via the “assistant” ploy. Now, you have a Dodd Frank, conspiracy, and theft issue.
  6. Many regulators will pursue not only the dishonest MLO but also the new sponsor that takes them in.
  7. Notice I said dishonest? This is a moral turpitude/fraud issue. Means you will be calling me to try and help you save your license.

Just have a conscience, and if you change sponsors, do it with class and do it the way you would want to be treated. Or else. If any of you don’t believe me, I can send you an excerpt from a regulator Administrative Complaint.

Nelson A. Locke, Esq.

800-656-4584

www.lockelaw.us

Need some Continuing Ed? Here is a limited time offer for free CE classes.

My friend Jim Montrym operates the Mortgage Broker’s School.

His web site can be seen at http://www.brokerschool.com/

He has a new program that is 100% on line and for a limited time, you can access these classes and study at your own pace while earning the CE credits you need for your license renewal.

Give him or Andrea a call at 800-735-8565 – to get your access code for this limited time offer for free on-line CE classes.

This is better done sooner rather than later, folks.

Nelson A. Locke, Esq.

800-656-4584

To view our web site, click on www.lockelaw.us

Brokers – license yourself in Texas!

Giddyup!

1289926747746495649tx-logo

TEXAS is a broker friendly state.

The regulators here are reasonable and fair.

If you are thinking about expanding your business, and maybe dropping some broker un-friendly states like (you know who you are), you can license yourself fairly quickly.

Compliance Services is now offering a registered agent and office space option to our clients.

Using us you can keep your startup costs low while building your Texas contacts and marketing. 

If you are interested in expanding into the great state of TEXAS, contact us today.  While we serve brokers and lenders nationwide, we are located in the Dallas Metroplex. 

Special invitation to our Florida and California clients. Come on down!

Respectfully,

Nelson A. Locke, Esq

(800) 656-4584

http://www.lockelaw.us

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How do I calculate ATR?

ATR means Ability to Repay. I have been preaching about this for some time. I have seen a trend in the courts to require ATR regardless of what type of loan, or what type of borrower, or even, what type of lender.

Most lenders in the conventional or government arena require proof of ATR in order to confirm the mortgage is QM. And, they tell you how to calculate the number.

What about the weird loans we make where there is no guidance from anyone regarding the source of funds relied on to repay the loan? One thing is certain. The legal trend is that no matter what kind of loan to whatever type of person or entity, a formula for determining the ATR is necessary on almost all loans.

That’s when YOU have to rely on yourself. Because whether the lender wants to see it or not, you need to have it. Without ATR, you could find yourself defending a regulator assertion that you are a predatory lender.

Here’s my guidance, where guidance is lacking from your lender of choice.

In those cases where there is no set guidance for Ability to Repay, you must use your common sense and a formula that shows adequate assets and cash flow to support a total DTI of no higher than 50%. That maximum back end is defensible in the event of a lawsuit or a regulator challenge. If assets are the principal source of the ATR, then they MUST be highly liquid. You have to confirm that is the case.

Any questions? Give us a call. If you need a new compliance firm, we are presently offering a special package. Let us hear from you.

Respectfully,

Nelson A. Locke, Esq

(800) 656-4584

 

 

 

 

 

Here are some recent Auditor Comments.

August 13th, 2020

 

From a West Coast Auditor – but applicable to ALL states. Common violations found in last three months.

Mortgage Call Report – There continue to be late filers, and the numbers reported continue to show inaccuracies. Licensees should assign this reporting to someone who is detail oriented, and have a second person review the call report before filing.

Loan Officer Compensation Plans – Examiners are seeing compensation plans that pay the loan originator a percentage of the broker compensation, which is a term of the loan and not allowed by Regulation Z. Loan officers are allowed to be paid a percentage of the loan amount. Brokers may receive varying compensation levels with their respective wholesale lenders. Paying the loan originator a percentage of compensation provides an incentive to steer borrowers to the wholesale lender paying the most broker compensation. In many cases the lender paying the highest compensation will not be the most advantageous lender for the borrower. Mortgage Brokers have a fiduciary relationship with the borrower which means you must act in the best interests of the borrower.

One violation that is not common appeared during the second quarter – providing falsified borrower disclosures to the Department. Not providing a required disclosure is a violation but will not, in and of itself, lead to enforcement actions, unless there is a history of repeat violations.

Providing a falsified document is a serious violation that undermines the foundation of a licensees’ ability to conduct business (see RCW 19.146.005). This violation is always referred to enforcement. It may cause fines and penalties and even lead to license revocation.

Any questions? Call us at (800) 656-4584

Nelson A. Locke, Esq

Compliance Services USA

Interesting FRAUD case here. Just an FYI.

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August 4th, 2020

Boulder Man Pleads Guilty To Nearly $32 Million Bank Fraud Scheme

DENVER – United States Attorney Jason R. Dunn announced today that Michael Scott Leslie, age 57, of Boulder, Colorado, pleaded guilty to federal bank fraud and aggravated identity theft charges.  Leslie appeared remotely on a $50,000 unsecured bond, which was continued at the hearing’s conclusion.  The Denver office of the FBI, and the Offices of the Inspector General for both the Department of Housing and Urban Development (HUD) and the Federal Deposit Insurance Corporation (FDIC) joined in today’s announcement.

According to the stipulated facts contained in Leslie’s plea agreement, Leslie owned, operated, or otherwise had an interest in several business entities, some of which were operated out of Colorado.  These entities were involved in or affiliated with financing or originating residential mortgage loans.  Through these business entities, Leslie sold residential mortgage loans to investors, including an FDIC-insured bank in Texas (“the victim bank”).

Between October 2015 and October 2017, Leslie devised and executed a scheme to defraud the victim bank by selling it 144 fraudulent residential mortgage loans valued at $31,908,806.88.  These loans were purportedly originated by one of Leslie’s companies, Montage Mortgage, and “closed”  by Snowberry, which earned fees for the closing.  The loans were then presented and sold to the victim bank until Montage identified a final investor.  For these 144 fraudulent loans, that final investor was Mortgage Capital Management (MCM).

Leslie never disclosed to the victim bank that he operated MCM and Snowberry, or the fact that sales to investor MCM, even if they had been real, were not arms-length transactions.

The 144 residential mortgage loans sold to the victim bank were not, in fact, real loans.  The borrowers listed on these 144 fraudulent loans were real individuals, but they had no idea that their identities had been used as part of the sale of the fraudulent loans. The defendant had access to their personal identifying information in one of two primary ways:  (1) the borrowers had used Montage for legitimate residential real estate transactions which were properly executed and closed, or (2) the borrowers had been solicited by Montage about refinancing their existing loans.  In the case of refinance transactions, Montage secured permission from the borrowers to request credit scores and history from the major credit agencies.  After receipt of those credit scores, Montage often told these would-be refinance borrowers that they did not qualify for a refinance.  Leslie then recycled the borrowers’ information, obtained through prior legitimate transactions or attempted refinances, to create and sell nearly $32 million of fraudulent loan packages.

To execute this scheme, Leslie forged signatures on closing documents and fabricated and altered credit reports as well as title documents, often by using the names of legitimate companies.  The fraudulent real estate transactions were never filed with the respective counties in which the properties were located, there were no closings, and no liens were ever recorded.  Through numerous bank accounts for the various business entities and his personal accounts, the defendant used money in a Ponzi-like fashion from prior fraudulent loans sold to the victim bank to fund future fraudulent loans.  This complex flow of money continued until the defendant’s fraud was detected.  When the fraud was discovered, the victim bank still had 12 fraudulent loans, valued at $3,887,505.93, on its books that it could not, given that the loans did not exist, sell to any other legitimate third-party investor.

Chief U.S. District Court Judge Philip A. Brimmer presided over the change of plea hearing today, July 31, 2020.  Leslie was first charged by information on June 5, 2020.  This case was investigated by the Denver office of the FBI, and the Offices of the Inspector General for both the Housing and Urban Development and the Federal Deposit Insurance Corporation.  The defendant was prosecuted by Assistant U.S. Attorneys Hetal J. Doshi and Jeremy Sibert.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the District of Colorado.  Related court documents can be found on PACER by searching for Case Number 20-cr-171.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

USAO, District of Colorado

I have nothing to say here. Incredible.

Respectfully,

Nelson A. Locke, Esq.

(800)656-4584

 

COVID Return to Work Package

August 4th, 2020

Hello all.

With the help of a good friend we have assembled a “Return to Work” package that includes the following items.

  1. A customer notification of the risks of COVID and its effect on business.
  2. An employee assumption of risk and waiver of liability upon returning to the office.
  3. A CDC handout on COVID symptoms.
  4. A CDC handout on social distancing and the use of masks.
  5. A CDC handout suitable for use as a door sign about masks required.
  6. A CDC handout about how to prevent the spread of COVID.

This is available to all present clients at no charge.

If you are not a client, and want this or our COVID SPIKE Plan regarding working at home and precautions regarding non-public information, email us at nl@lockelaw.us and I will get back to you. The cost is reasonable.

Stay safe!

Nelson A. Locke, Esq.

(800) 656-4584

Compliance Services USA

How COVID really feels…

Yesterday I heard from a good friend and client who contracted Covid-19. I thought about it and decided that you might benefit from hearing first hand from someone who is just emerging from a rough two weeks. This person was careful. Caught it anyway.

As they used to say on Dragnet, “the names were changed to protect the innocent.”

“Today is the first day in 9 days that I don’t have a fever.  If I had more energy I would be dancing! Here are the symptoms:

Sore throat, splitting headache, extreme eye pain, fever, extreme fatigue, extreme body aches, couldn’t sleep until I remembered I had some sleeping meds (that was a big help for 3 days so I could rest at night, then I could rest without them).  It would come in waves, no fever, then 101.8 30 minutes later.  The only good news is no respiratory issues.

We had kept the office locked from the public for 3.5 months, but made a mistake by not requiring masks in the office for employees.  I thought we were being careful enough with sanitizer and daily cleaning, but that was not the case.  We don’t know who, but someone gave us the virus.

Needless to say, we now have a mask policy unless you are at your desk, alone, with your door closed.  I don’t like to make the same mistake twice!”

Stay safe!
Fearful

 

Nelson A. Locke, Esq.

(800) 656-4584

Lockelaw.us

Regarding Broker and Lender Quality Control Efforts…….

The Department of Justice (“DOJ”) just fined Guaranteed Rate $15 million dollars for knowingly violating best quality control practices as related to FHA and VA loans in particular. Please note, Fannie, Freddie, Ginnie, and the USDA are all very similar to FHA and VA requirements.

The DOJ alleged that Guaranteed Rate knowingly failed to comply with program rules that require lenders to maintain quality control programs to prevent and correct any deficiencies in underwriting, self-report any materially deficient loans they identify, and ensure that there are no conflicts of interest in the underwriting process.

As part of the settlement, Guaranteed Rate admitted that it had not adhered to self-reporting requirements, that its FHA underwriters received commissions and gifts – a violation of program rules – and that its government underwriters were sometimes instructed not to review documents that were relevant to their underwriting decisions.

The lender also admitted that it certified loans that weren’t eligible for FHA mortgage insurance or VA guarantees, and that HUD and the VA would not have guaranteed or insured those loans otherwise.

We see this all the time. Lender tells underwriter to look away, then loan goes bad, lender tries to put it back to broker. We also see processors paid when loans fund, not for processing whether loans fund or not. To pay only when loans fund, is to create a conflict of interest such as referenced above.

If any of you have questions, reach out to me at nl@lockelaw.us

That’s it for now. Stay safe.

Nelson A. Locke, Esq.

(800) 656-4584

Pandemic/Natural Disaster Business Continuity Plan is important.

OIP

Yesterday alone, clients were asked for their plan by Washington, Indiana, North Carolina, and Michigan. Further, lenders are requesting it randomly.

We have been emailing about this since mid March.

If you want it ready BEFORE they ask you, CLICK HERE.

Turnaround time is about 36 hours.

Thanks, and stay safe.

Nelson A. Locke, Esq.

800-656-4584

 

 

BE AWARE OF THIS……

The Federal Housing Finance Agency (FHFA) this morning announced that it is approving the purchase of certain single-family mortgages in forbearance that meet specific eligibility criteria by government-sponsored enterprises Fannie Mae and Freddie Mac.

“We are focused on keeping the mortgage market working for current and future homeowners during these challenging times,” said Director Mark Calabria. “Purchases of these previously ineligible loans will help provide liquidity to mortgage markets and allow originators to keep lending.”

Due to the COVID-19 pandemic, some borrowers have sought payment forbearance shortly after closing on their single-family loan and before the lender could deliver the mortgage loan to the GSEs. Mortgage loans either in forbearance or delinquent are ineligible for delivery under GSE requirements. However, today’s action lifts that restriction for a limited period of time and only for mortgages meeting certain eligibility criteria.

As always, email us with questions.

nl@lockelaw.us

Nelson A. Locke, Esq.

800-656-4584

COVID-19 Readiness Plan now required

OIP

We have researched and drafted a readiness plan. It will meet or exceed the rigorous standard put forth by the states.

DO NOT begin work from home protocol before you comply with this plan.

I am recommending you order this important item from us.

The cost is $250 and we will guarantee it will meet your state’s requirements.  READINESS PLAN

That’s it for now.

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

You are considered an essential service.

OIP

CLICK BELOW for the Treasury Department Notice of March 22nd, 2020

Financial Services Sector Essential Critical Infrastructure Workers

Attached here is a memorandum from the Treasury Department. Keep a copy in your office in case someone tells you to shut down.

Thanks to Sean for the heads up. Teamwork guys.

Be safe, go get those loans from wherever you are!

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

COVID-19 Readiness Plan now required

OIP

We have researched and drafted a readiness plan. It will meet or exceed the rigorous standard put forth by the states.

DO NOT begin work from home protocol before you comply with this plan.

I am recommending you order this important item from us.

The cost is $250 and we will guarantee it will meet your state’s requirements.  READINESS PLAN

That’s it for now.

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

Brokers – license yourself in Texas!

1289926747746495649tx-logo

TEXAS is a broker friendly state.

The regulators here are reasonable and fair.

If you are thinking about expanding your business, and maybe dropping some broker un-friendly states like (you know who you are), you can license yourself fairly quickly.

Compliance Services is now offering a registered agent and office space option to our clients.

Using us you can keep your startup costs low while building your Texas contacts and marketing. 

If you are interested in expanding into the great state of TEXAS, contact us today.  While we serve brokers and lenders nationwide, we are located in the Dallas Metroplex. 

Special invitation to our Florida and California clients. Come on down!

Respectfully,

Nelson A. Locke, Esq

(800) 656-4584

http://www.lockelaw.us

 

 

The LIBOR is being phased out.

Please be aware of this. Your lenders will be migrating loan programs away from the LIBOR and over to other, more “stable” indexes during 2020.

Some states, such as New York, have already asked for brokers and lenders to submit a plan to manage the transition. I have a template we can use if you receive such a request.

For most of you, the transition will be effortless as you do not keep the paper, thus no servicing issues regarding the LIBOR.

If you have any questions, here is a great link for information.

https://www.schwab.com/resource-center/insights/content/libor-phase-out-what-does-it-mean-you

That’s it for now.

Nelson A. Locke, Esq

(800) 656-4584

http://www.lockelaw.us