FYI. Democrats introduce bill to re-instate HMDA low threshold for reporting.

Last year, Congress voted to roll back several measures passed under Dodd-Frank, a law that many in the mortgage industry said created overly burdensome regulations. This relates to HMDA.

Among the changes was a law raising the loan-quality criteria reporting requirement exemption from 25 to 500 mortgages per year and from 100 to 500 home equity loans per year.  So many of you smaller brokers and lenders were exempt.

According to the bills sponsor, Democrat Cortez Masto, the rollback effectively exempted 85% of all banks and credit unions from reporting loan characteristics vital to ensuring lending fairness.

Cortez Masto’s bill would reinstate the Dodd-Frank requirement that any bank making more than 25 mortgage loans or 100 home equity lines of credit per year report detailed characteristics, including interest rates, points and fees and loan terms, as well as borrower characteristics such as credit score and ethnicity.

The bill would also require each loan to receive a unique identifier so it can be tracked if it is sold to an investor.

Just be aware, we will keep you posted. For now, your triggers are still 25 and 100.

Email if any questions.

 

Nelson A. Locke, Esq

Compliance Services, USA

(800) 656-4584

Don’t be foolish about the status of the CFPB.

Hi folks.

There are a couple of eccentric mortgage folks out there who publish video blogs that announced today (with great glee) that RESPA is dead. Looked like a comedy skit.

Please do not believe this sensationalism. What is going on right now at the CFPB is a leadership issue, and I think it is resolving itself in the favor of the White House. That means we will likely see a more conservative approach to adding new and aggressive tactics to the present CFPB platform. It does NOT mean the CFPB is without teeth. It does NOT mean everything the CFPB has put in place is going to be dismantled. It does NOT mean RESPA is “dead”.

Do NOT make that mistake.

Video blogs that celebrate the end of regulation are irresponsible and demonstrate why we found ourselves in this regulation situation  in the first place.

If you have questions, just email me. And please folks, stay classy.

confused

 

“She rated us a 2. Said 1 is the highest.”

We just got this from one of our clients. Our clients can go home early and celebrate! The regulators appreciated the robust nature of our client’s concern for doing things right and protecting the consumer in the process.

Thank you to our client – you know who you are. You guys are the greatest!

LL Logo 112715If the rest of you are nervous I only have two things to say.

  1. If you are our client and have been doing as we ask, these are the types of results you will see. So you need not be fearful. Especially if we are doing your post closing QC as part of the package.
  2. If you are not our client, you probably need to be fearful. Call us at (800) 656-4584 and let’s see what we can do to get you into that safe place.
  3. Finally, audits are in fact increasing.

Nelson A. Locke, Esq

Compliance Services, LLC.

 

 

Electronic File Storage – things to consider.

Auditor Auditee 022015

I got a call today from a great client of mine who asked about the things to think about when moving to electronic file storage.

Electronic file storage trips about four switches in my mind. I thought this was a really good question, so here is what I recommend.

 

  1. Be aware that anytime you convert to file storage that is “off site”, most state regulators require you to advise them in writing of where you are sending the files, and what security precautions you are taking to insure we don’t expose our clients to identity theft or other financial crimes. This means write your regulator BEFORE you move to the cloud. Give them the internet service provider you are using and what security practices the provider has in place, such as firewalls, secure transmission protocols; etc. Then if you are a client of ours, file that letter in Book One behind your records retention policy. Easy to find when the regulator comes knocking.
  2. Unless you own the cloud, have your cloud provider return an NDA and Confidentiality Agreement to your company per the guidelines of Gramm Leach Bliley.  You can find a blank NDA in Book One. Keep it in your cloud provider records folder to show you took your records “safeguarding” seriously.
  3. If you use a service that offers to pick up your files, scan for you, and then shred, I have two thoughts.  FIRST – Have the file split into two sections, Section A for internal processing notes and comments that might be irrelevant (or harmful) to an audit – and Section B for the actual loan documents stacked top down from closing all the way to inception. SECOND – Have the service provide you with a certificate of safe handling when you allow them to shred your files after they scan them.

Helpful? Give us a call about anything regulatory. We always have time for new clients. Tons of references. Hope to hear from you soon.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

http:/www.expertlenderservices.com

 

 

Some good Q&A for you Mortgage Brokers to read…….

Q: Can an Alta Settlement Statement REPLACE the use of a HUD-1 or a Closing Disclosure?

A: ALTA has developed standardized ALTA Settlement Statements for title insurance and settlement companies to use to itemize all the fees and charges that both the homebuyer and seller must pay during the settlement process of a housing transaction. Settlement statements are currently used in the marketplace in conjunction with the federal HUD-1. The ALTA Settlement Statement is not meant to replace the Consumer Financial Protection Bureau’s Closing Disclosure, which went into effect on Oct. 3, 2015. Four versions of the ALTA Settlement Statement are available.

Q: Do we need to use a Closing Disclosure for non-agency loans?

A: The final rule applies to most closed-end consumer mortgages.  It does not apply to home equity lines of credit, reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (in other words, land).  The final rule also does not apply to loans made by a creditor who makes five or fewer mortgages in a year.

Q: Who has to prepare the CD?

A: Under the final rule, the creditor is responsible for delivering the Closing Disclosure form to the consumer, but creditors may use settlement agents to provide the Closing

Disclosure, provided that they comply with the final rule’s requirements for the Closing Disclosure.20  The final rule acknowledges settlement agents’ longstanding involvement in the closing of real estate and mortgage loan transactions, as well as their preparation and delivery of the HUD-1.  The final rule avoids creating uncertainty regarding the role of settlement agents and also leaves sufficient flexibility for creditors and settlement agents to arrive at the most efficient means of preparation and delivery of the Closing Disclosure to consumers.

Q: What about a HECM? Is it a LE or a GFE?

A: Reverse mortgage transactions subject to RESPA.  (1)(i) Time of disclosures.  In a reverse mortgage transaction subject to both § 1026.33 and the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) that is secured by the consumer’s dwelling, the creditor shall provide the consumer with good faith estimates of the disclosures required by § 1026.18 and shall deliver or place them in the mail not later than the third business day after the creditor receives the consumer’s written application.

Q: I’m a Mortgage Broker Business. Can I do my own disclosures?

A:  If a mortgage broker receives a consumer’s application, either the creditor or the mortgage broker shall provide a consumer with the disclosures required under paragraph (e)(1)(i) of this section in accordance with paragraph (e)(1)(iii) of this section.  If the mortgage broker provides the required disclosures, the mortgage broker shall comply with all relevant requirements of this paragraph (e).  The creditor shall ensure that such disclosures are provided in accordance with all requirements of this paragraph (e).  Disclosures provided by a mortgage broker in accordance with the requirements of this paragraph (e) satisfy the creditor’s obligation under this paragraph (e). If provided by the creditor, copies of the creditor disclosures MUST be kept in the mortgage broker’s files to show an auditor that the rule was complied with.

Q: I only do foreign national loans, am I exempt from TRID?

A: Not if the property is a 1-4 family dwelling and not if the buyer is a human person. There could be some crossover here to commercial lending, but most of what I have seen is probably TRID lending. I have seen a lot of issues here, sham entities.

Q: I only make ten or fewer loans a year with my own money. Do I need a Lender’s License?

A: Probably – YES. And if all you do is create entity after entity to act as your lender, and you own each entity, that is a probable sham and is probably avoiding the licensing rules of Dodd-Frank and your state regulator. Folks, the regulators are smart enough to see though this kind of conduct. If you hold yourself out to lend money, even in as small way as a business card, or using an agent ( a lawyer, a mortgage broker) who brings you borrowers, YOU ARE ACTING AS A LENDER.

I am also attaching an ALTA Training Webinar to the blog. The blog can be found at nltrainingsite. You guys should look at this ALTA Webinar. Very good information.

trid-webinar-82715

Happy Holidays to all! We will be working right up to Friday afternoon, so feel free to call. And we are here next week. Regulators never sleep so we won’t either.

Respectfully,

Nelson A. Locke, Esq.

Mortgage Industry Compliance Expert

Attorney and Expert Witness

Office (800) 656-4584

Cell (305) 951-2785

http://www.lockelaw.us

http://expertlenderservices.com

 

This is why you can’t rely on the in-house compliance persons at the big lenders.

By Barbara S. Mishkin on December 8th, 2016

The CFPB announced that it entered into consent orders with three reverse mortgage companies to settle the CFPB’s allegations that the companies engaged in deceptive advertising in violation of the Mortgage Acts and Practices-Advertising Rule (Regulation N) and the Consumer Financial Protection Act.  Each of the consent orders requires payment of a civil money penalty to the CFPB.

According to the CFPB’s consent order with American Advisors Group (AAG) (described in the consent order as the “largest reverse mortgage lender in the United States”), AAG’s advertisements (consisting of television advertisements and information kits that included a DVD and several brochures) misrepresented that a consumer with a reverse mortgage could not lose the home and could stay in the home for the rest of the consumer’s life.  The advertisements also allegedly misrepresented that a consumer with a reverse mortgage would have no monthly payments and the mortgage would eliminate all of the consumer’s debts.  The CFPB claimed that these statements were misrepresentations because (1) a consumer with a reverse mortgage still has payments and can default and lose the  home by failing to comply with the loan terms such as requirements to pay property taxes or make homeowner’s insurance payments, and (2) a reverse mortgage is a debt and therefore cannot be used to eliminate all of a consumer’s debt.

In addition to prohibiting AAG  from making similar misrepresentations in future advertising and requiring AAG to implement a compliance plan that includes an advertising compliance policy, the consent order requires AAG to pay a civil money penalty of $400,000.

According to the CFPB’s consent order with Reverse Mortgage Solutions (RMS), a reverse mortgage lender, RMS’s advertisements (which included television, radio, print, direct mail, and online advertisements) similarly misrepresented that a consumer with a reverse mortgage could not lose the home and could stay in the home for the rest of the consumer’s life, would have no monthly payments, and the mortgage would eliminate all of the consumer’s debts.  The CFPB claimed that these statements were misrepresentations for the same reasons asserted in the AAG consent order.

The CFPB also alleged that the company misrepresented that a consumer’s heirs would inherit the home and that a consumer’s ability to obtain a reverse mortgage was time limited.  The CFPB claimed that these statements were misrepresentations because, respectively, heirs can only retain ownership of the home after the consumer’s death by either repaying the reverse mortgage or paying 95 percent of the home’s assessed value, and there was in fact no relevant time limit on a consumer’s ability to obtain a reverse mortgage.

In addition to prohibiting RMS  from making similar misrepresentations in future advertising and requiring RMS to implement a compliance plan that includes an advertising compliance policy, the consent order requires AAG to pay a civil money penalty of $325,000.

According to the CFPB’s consent order with Aegean Financial (AF), a reverse mortgage broker, AF’s advertisements (which included print, direct mail, radio, and online advertisements) similarly misrepresented that a consumer with a reverse mortgage could not lose the home and could stay in the home for the rest of the consumer’s life, and would have no monthly payments.  The CFPB claimed that these statements were misrepresentations for the same reasons asserted in the AAG consent order.

The CFPB also alleged that AF misrepresented that a consumer who refinanced a reverse mortgage would not be subject to costs.  According to the CFPB, this statement was a misrepresentation because a consumer who refinanced a reverse mortgage would incur costs such as credit report fees, flood certification fees, title insurance costs, appraisal costs, and other closing costs.  The CFPB also claimed that the statement in AF’s Spanish-language advertisements that “if you are 62 years old or older and you own a house, we have good news for you; you qualify for a reverse mortgage from the United States Housing Department” was misleading.  According to the CFPB, the statement was misleading because, while HUD provides insurance for the most popular type of reverse mortgage, a reverse mortgage is not a government benefit or  loan from the government and the product is not  endorsed or sponsored by the government.  The CFPB also alleged that AF failed to keep records of its advertisements as required by Regulation N.

In addition to prohibiting AF from making similar misrepresentations or misleading statements in future advertising and requiring RMS to implement a compliance plan that includes an advertising compliance policy, the consent order requires AAG to pay a civil money penalty of $65,000.

Please remember, Compliance Services reviews your advertising at no charge. Send it to us BEFORE you get into trouble.

 Respectfully,

 Nelson A. Locke, Esq.

Mortgage Industry Compliance Expert

Attorney and Expert Witness

Office (800) 656-4584

Cell (305) 951-2785

http://www.lockelaw.us

http://expertlenderservices.com

 

Commercial Loans and Private Lenders

Commercial

 

January 2nd, 2016

Because of the aggressive nature of the CFPB audit practice and the predictable fear that it creates among brokers and lenders, some of you have chosen to focus on the commercial niche. The mistaken belief is that by switching to commercial, you avoid the risks associated with RESPA, TRID, and the usual compliance requirements of a mortgage broker or lender. Some of you even think you are exempt from the SAFE Act and can let your licenses lapse.

Folks, don’t do this. You can run from compliance but you can’t hide, and they will get around to you eventually. Even if your business model changes to full commercial lending, you still have a healthy list of rules and regulations you MUST comply with in order to pass an audit. And in 99% of the situations I have investigated a license is required.

I drafted a compilation of some Q&A I searched out. It is informative and can be helpful to you. Download this and read it before you make any decisions about reducing or eliminating your compliance efforts.

Commercial Loans and RESPA TRID FAQ 123115

Thanks for reading, call us at (800) 656-4584 and request information about how to engage Compliance Services. You will be amazed at how easy we will make the process for you. Hundreds of clients  and all of them happy.

Nelson A. Locke, Esq

(800) 656-4584

Foreign Nationals and RESPA TRID

imagesQEAM70RZ

January 2nd 2016,

Yes it is true, I cannot stay away from the office for very long. Good for you, huh.

During the past quarter we were engaged by several mortgage companies that  specialize in loans to Foreign Nationals. they also offer federally related loans, but foreign national loans are a specialty.

So I decided to create a one  page summary of when you need to apply RESPA and TRID, and when you can revert to the old way of using a HUD-1 and maybe a classic GFE.

Foreign National Guidelines 100315

Happy New Year everybody!

Nelson A Locke, Esq.

(800) 656-4584

http://www.expertlenderservices.com

 

CFPB Identifies four special audit areas for 2016.

Well, folks, I think you all should read the attached. The CFPB went public with its four primary audit areas, beyond the normal ones disclosed in our Books One, Two, and Three.

  1. COMP PLANS, and yes, looking backwards two or three years as well.
  2. TRID, with no grace period.
  3. MSAs, nothing here to be said. They can be done legally, but it takes a lot of work and commitment by all involved to steer clear of RESPA Violations.
  4. ATR – yes, that pesky part of your QM Policy in Book One. They will evaluate your use of some form of proper ATR test.

No where did they mention exempting anyone from these four areas. No special favors for private money lenders who lend against 1-4 family etc. So, please read the attached.

We still have time to get you set up for the end of this year. Where compliance is involved, sooner is better. Later is foolish. You can reach us at  (800) 656-4584 and we will get to work right away!

CFPB Agenda for 2016 120915

(800) 656-4584 or nl@lockelaw.us

http://www.expertlenderservices.com

 

 

More on QM/ATR and Investment/Commercial Loans

Hello all,

One of my valued clients asked me about the applicability of the Qualified Mortgage Rule and the Ability to Repay Rule ……did they apply to loans securing investment or commercial properties. Apparently there are some attorneys and compliance people out there who think they do. As a mortgage guy, I think they do not.

It was a great question and something I think you all should read. Even though many of you do not work in the commercial or investment property arena, you must know the rules. Because a deal might come through your door and you want to handle it correctly.

This question demonstrated how complex things have become. Here we have one question where the answer involves careful study of QM, ATR, RESPA and TILA.

Keep Calm and ask questions! If you are not my client, you probably should be. I still have a few openings.

 

+++++++++++++++++++++++++++++++++++++

 

Transactions Covered by QM and ATR Rules

QM and ATR rules apply to the following:

  • Purchase and refinance transactions secured by owner-occupied and second homes.

QM and ATR rules do not apply to the following:

  • Investment property*

NOTE:   Investment properties that are for business purposes are exempt from QM rules.

If the borrower occupies any investment property for > 14 days in any given year the investment property is no longer considered for business purposes only and would be subject to QM and ATR rules.

Additionally, there can be no evidence that the borrower purchased/refinanced the investment property for personal rather than business reasons (e.g. property purchased for a family member).

This statement is derived from the ABA Opinion http://www.americanbar.org/publications/blt/2013/04/02_shatz.html published in part below.  The author is well known and reliable.

Ability-to-Repay Rule

The Ability-to-Repay Rule, Regulation Z Section 1026.43, requires that a creditor make a “reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms.” The creditor must follow underwriting requirements and verify the information by using reasonably relied upon third-party records. The rule applies to all residential mortgages including purchase loans, refinances, home equity loans, first liens, and subordinate liens. In short, if the creditor is making a loan secured by a principal residence, second or vacation home, condominium, or mobile or manufactured home, the creditor must verify the borrowers’ ability to repay the loan. The section does not apply to commercial or business loans, even if secured by a personal dwelling. It also does not apply to loans for timeshares, reverse mortgages, loan modifications, and temporary bridge loans.

Any questions, call me at (800) 656-4584

Hard Money Business Purpose Loans against Principal Residences

This is “risky business”. While there are exceptions in Reg Z that will allow you to make this kind of loan and stay outside of HOEPA and non-qualified mortgage areas, it is by no means crystal clear that this is something you should happily do again and again.

Here’s the issue. The Dodd Frank Act and the subsequent CFPB rules and interpretations are pretty crystal clear in their primary intent, to protect a borrower’s principal residence, his homestead. I don’t think any of us would argue that point, after all it is called the “Consumer Financial Protection Bureau.”

This is a classic situation of ambiguity. If you take Reg Z’s exception at face value, you might end up OK. The operative word is “might”.

You can protect yourself and improve your chances of surviving a regulator challenge to this type of loan by following this simple procedure.

  • Require the borrower to sign an affidavit at application, acknowledging that they intend for this loan to be for a proper business purpose, and that none of the proceeds will be used for anything other than that.
  • Then, at your closing, have them execute the same disclosure again, this time with a notary present.
  • If you retain these two documents in your files, and the customer’s business fails, and he then says that you steered him into putting his residence at risk, you have an argument.

It may be persuasive enough to keep you out of trouble.

If you just make the loan, and rely on the exception, it may imply you really did not investigate and thus failed some duty of care.

Look, like some of my policies I offer you, this is an optional one. But no one ever failed an audit for being too concerned with protecting consumers. That is exactly what this policy does.

If you want to learn more, call me at the number below. If you are not my client, perhaps you should think about it.

That’s it for now.

Nelson A. Locke, Esq.

Compliance Expert

(800) 656-4584

Do you advertise HUD or FHA products?

If you originate HUD loans (FHA) you should post this disclosure on your web site and your marketing materials.

Back in the day, this really was not an issue. Now with the CFPB it is an issue. Think of it from the consumer protection perspective. False or misleading advertising. Misleading is a big word, loose interpretation.

Things have certainly changed. For example, there used to be two HUD logos that existed. One was solid white, the other had a blue ring around it. The blue one was allowed for lenders to use, to announce their approval by HUD and FHA. The white one was for HUD or FHA use only. If only things were still that simple. However, even then, with only two choices of logos, most of us still got this one wrong and used the white one in marketing. The blue one was correct.

Hud or FHA would see the white logo and then call, probably order us to take down the white one, and we would change to the blue one. That does not happen anymore. I would recommend you NOT use either one.

So what can you do? If you want to stay out of trouble with HUD or FHA and avoid any perception that you are claiming to be affiliated with HUD, or have some sort of real or imaginary approval from HUD beyond that of your DE status, post this on your marketing materials.

“These materials are not from HUD or FHA and were not approved by HUD or a government agency. The Sender is not in any way affiliated with any organization listed or referenced within this website, including HUD/FHA. The inclusion of various education, information, web links, or materials are not an endorsement of the Sender or any of its employees or business partners. For information directly from HUD/FHA, visit http://www.hudclips.com

Feel free to cut and paste this on to the bottom of the first page of your marketing material and web site.

Anyone have any questions about anything? Just email me, hit reply and let me help you!

Is your compliance consultant licensed? If you need a license, shouldn’t they?

Audit satsifactory

When a mortgage broker or mini-correspondent is making the important decision to retain a compliance firm one of the most important things they should consider is size. In this case, big is not always better and here’s why.

We hear from around 50 mortgage brokers and mini-correspondents a week. Many are already clients of our compliance audit prep and defense practice – calling with a question. The rest, well, they are fishing for the answer to how to best protect themselves as they realize how far out of compliance they actually are.

Some are impressed with large national firms that run full page advertising in trade papers. As they swoon over the large ad they fail to notice that the company employees non-attorney staff that are not trained to reason their way through all these regulations and understand the true meaning of the regs. That’s not us; I am an attorney with special training  regarding the CFPB, HUD, and the APA. Acting as your compliance advisor we will help you reason your way through regulations.

Sometimes the mortgage broker or mini-correspondent fails to ask if the compliance consultant has ever actually been a mortgage broker. And most of them have not. Ask if the consultant has an NMLS license. WE do. I originate loans and hold several NMLS licenses. This means when we work with our mortgage brokers and mini-correspondents we understand the process and how to integrate regulations with reality.

Integrating regulations with reality. Does that sound good to you? Further, would you like working with someone who is available quickly via email or phone to guide you at those critical decision moments? That’s us.

Call today, let’s get together and get you compliant before you find yourself holding that audit letter and wondering what you will do in your next career. Just sayin………

(800) 557-6580

Does the recent SCOTUS decision about overtime affect you?

Overtime

On March 9, 2015 the Supreme Court reversed a ruling of the U.S. Court of Appeals for the D.C. Circuit that struck down a DOL administrative ruling regarding MLO overtime. The Court in a 9-0 decision ruled that because the 2006 DOL Opinion Letter was itself merely an interpretation of an existing rule and not a new rule with the force and effect of law DOL could reverse its prior position and issue a new interpretation without prior notice and the requirement of industry comments.

History – under the administrative exemption of the FLSA employees who are paid on a salary basis of at least $455 per week may be exempt from overtime compensation if the employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and their primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. Employees in the financial services industry generally meet the duties requirements for this exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments, or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing, or promoting the employer’s financial products; provided, however, that their primary duty is not selling financial products.

There’s the rub: provided their primary duty is NOT selling financial products.

So, pretty much, any MLO who is originating should not be considered exempt any longer.

What can you do to protect yourself from being sued for overtime by a disgruntled or opportunistic former MLO? Back in 2002 this happened to me, so I can speak from some experience here.

First – don’t fight the rule but rather have a policy in writing that prohibits any work beyond 35 hours a week unless approved in writing. As long as you would enforce this strongly, I think this creates a rebuttable presumption for the DOL that you may have had an MLO who stepped outside his job description if he worked more hours than 35 hours a week. “Ultra vires” or “frolic and detour” argument. The key to this is to enforce your policy. You would need a procedure in place that monitors MLO time sheets and has your MLO sign a certification about hours worked under penalty of perjury each and every pay period, whether they have commission due or not. And you would need to demonstrate you sent people home when appropriate.

Next – your policy about overtime. Don’t prohibit overtime; just require a pre-approval in writing. Next, monitoring each and every pay period with MLO certification regarding hours reported. Be able to show you enforce your own rules.

OK, confused? I do this. Need help? Just give me a call at (800) 656-4584 and let me be your compliance guy. I am a plain talking attorney who is also an active MLO. That means I know how your world really works. My work always reflects logical application of regulations to the real world. As best as can be done. Your comments are welcome. Let’s stay out of trouble; it’s dangerous out there.

That’s it for now.

More Changes for Brokers and Lenders – no longer exempt?

It now appears that after a five year period of uncertainty and an appeal all the way to the Supreme Court, Mortgage loan officers are now entitled to a 40-hour work week and overtime pay. The U.S. Supreme Court has now ruled that the Department of Labor was within its rights when it chose to reclassify loan officers as non-exempt employees who are eligible for overtime.

scalesOfJustice

In ruling on the appeal, Perez v. Mortgage Bankers Association, the Supreme Court concluded the Department of Labor did not violate the Administrative Procedures Act when it made the change to the loan officer rule. It justified the decision by concluding that the agency was not held to the APA when issuing an interpretive rule. There were three dissenting opinions, predictably from conservative justices.

The suit, which was championed by the MBA, caused the MBA to report it was “disappointed” by the decision, but is ready to move forward and help its members work within the confines of the rule.

WHAT DOES THIS MEAN FOR YOU?

Let’s just start by saying, this is not going to be negotiable. It’s a Supreme Court Decision, it’s over. Thus, I really don’t know where to start. That’s because I still fight with brokers and lenders at least once a week who still think W-2 or 1099 is an option for their employees.

Now we have to tackle the idea of time sheets? How are you going to get them to comply? And can your cash flow handle this? And if you set up some form of sham pay plan, are you ready for the inevitable FLSA claim as soon as someone gets angry with you? I’ve been there and it is not a good place to visit.

Further, this is a “top five” source of fines resulting from an audit.

There are options. This is what I do. If you need to talk about options to comply with this change and not go broke, call me at (800) 656-4584. And open your mind, because no matter what you do, it will be change. Over and out.

An Audit Horror Story, will your audit sound like this one?

Fear Name Tag

Last month I was contacted by a very frightened Mortgage Banker, a small shop with about seven employees doing Agency loans.

This woman tried her hardest to always do the right thing but made three big mistakes that I believe will cause her to lose her license. It was avoidable. I got to thinking; is this YOUR story? So I will share just enough of the story  that you can ask yourself that very important question. IS THIS YOUR STORY? Here’s part of what happened.

1. The Banker accepted assurances from staff that compliance and quality control were up to par. They weren’t. Staff gave the quick answer, because they were employees not owners and not invested in the need to tell the complete truth.

2. The Banker’s Company did not have any kind of written customer complaint policy in place. Then a consumer had a “bad experience” and complained to an Agency. When the regulator showed up unannounced to investigate the complaint, which is what they do; a presumption of non-compliance was created when no customer complaint policy was found to be in effect.

3. Once staff became sufficiently frightened by the regulator’s presence staff engaged in “self help” after the fact and tried to “fix” the problem file. They thought no one was looking. Well someone was. A regulator was looking. Now we also had a presumption of dishonesty. This is the one that will always result in the worst possible scenario for the Banker. The presumption is the attitude came from the top. That’s you, right?

Fearful

This Banker will likely lose her company’s  Lender Approval, and may even lose her personal MLO license. All of this was avoidable. How?

An honest assessment NOW about how good your program really is. Just because you spent a lot of money, does not mean your compliance program is good. It just means you may have paid too much.

Consider the use of an outside Compliance Expert to examine what YOU do and tell you if it is sufficient to keep you in that “presumption of compliance” zone.

Train your staff; tell them the consequences of conduct such as what I have described here.

Keep an eye on them.

Consider appointing your outside QC person as Agency liaison. This keeps the contact professional and does not disrupt staff where they get to the point of fear.

This is what I do. Call me at (800) 557-6580 and ask for help.

Do you offer Reverse Mortgages?

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Usually, because of the unique nature of the product and the ever-changing regulations, you should consider having a compliance expert who has actually originated these loans.  In my experience, those traditional forward loan compliance people miss many of the nuances of the HECM program, leaving you to pay the fine. Maybe you need to think about that?

I have personally originated or supervised or underwritten over 3,000 HECMs. I am a DE Underwriter, licensed attorney, and Compliance Expert.

Don’t take a chance that your forward “guy” will actually know the differences. Protect yourself. Call me today.  (800) 557-6580

Take a look here.

“I just got an audit letter. What should I do now?”

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When that dreaded audit letter shows up most brokers and lenders instinctively reach out to the regulator and try to start a dialog about his audit objectives. Is this a good thing? I will give you my opinion at the bottom of this post.

It’s always good to know why you were selected for an audit. There are three ways you are usually selected. First way: you have a customer complaint hanging in the wind and the regulator wants to investigate to determine the merit of the complaint and how robust your business practices are, or are not. Second, in the absence of a consumer complaint, an audit could be triggered by a suspicious activity report. A suspicious activity report (“SAR”) can be filed by any qualified industry participant who feels there is probable cause that you or your company may be doing something improper. “May” is the big word here, because this process gets very subjective. It is supposed to be taken seriously but I have seen it used improperly by parties who think that filing SARS makes them somehow look more compliant or concerned with proper operations. Finally, you can be selected randomly for an audit.

So here’s the deal. One way or the other, the auditors are likely coming. Let’s hope you are selected randomly. A random audit will follow the agency audit checklists and will be more friendly and personable.

However, if there was a SAR filed – and there is really no such thing as a “wrongful SAR” because the government impliedly encourages reporting which means literally  anyone wanting to impress their boss can recommend a SAR – you will be affected by the filing for years and approached with suspicion. If you think a SAR triggered your audit, be careful how you respond to the regulator. In fact, it is smart to have your attorney respond for you.

Now, if the audit was triggered by a consumer complaint you can usually tell pretty quickly. It is revealed by the auditor if asked. Your response should be to show you have a good CFPB compliant consumer complaint policy with a designated executive and a proper log book. This will show the auditor how your consumer complaints are handled and what the resolution was. This builds credibility.

However here is my best advice. For any audit notice call your outside compliance specialist right away. Appoint them your CFPB or AGENCY liaison. Let them do the “asking” for you.

By the way, I do this. Call me today. Before you find yourself in trouble. (800) 557-6580

So, can you talk amongst yourselves about what happened during your audit? You will be shocked at this opinion.

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This week, the Consumer Financial Protection Bureau (CFPB) notified mortgage lenders on how to treat confidential information related to the agency’s examination practices.

Under the CFPB’s regulations, reference is made to CSI. CSI may include any work papers or other documentation that CFPB examiners have prepared in the course of an examination. Any CFPB supervisory actions, such as memoranda of understanding between the CFPB and an institution and related submissions and correspondence, are also considered as confidential information.

Even if firms have signed private confidentiality and non-disclosure agreements that restrict the sharing of certain information with a regulator, the NDAA may very well be considered voidable and superseded by CFPB regulation.  The Bureau has authority over certain non-bank financial companies such as mortgage lenders and servicers, payday lenders, private student lenders, as well as large debt collectors, consumer reporting agencies, student loan servicers and international remittance providers.

So this bulletin addresses the work papers prepared by the auditor or regulator as they work their way through your records. What I think it means, is that even if you have a confidentiality agreement with a party, federal rules supersede that agreement and you are NOT allowed to discuss the confidential work papers of the auditors who examined you. So if there is a practice out there of sharing “audit stories” it may now become a violation to talk amongst yourselves about certain aspects of audits.

Unless of course a lawyer-client or other qualified privilege exist. Such as psychiatrist, pastor, spouse; etc.

Sounds a bit like shock and awe tactics. Not sure; maybe I have misread it. One things for sure, with all the complexity of the CFPB you will need a psychiatrist, and you already need a good lawyer.  The six page bulletin is available here.

“I have compliance manuals I created a long time ago, they were good back then, why change?”

Here are why you should take a good hard look at your existing Compliance Manual.

DODD-FRANK did not exist “back then”.

The SAFE ACT did not exist “back then”.

The CFPB had not even been conceived “back then”

The NMLS was in its gestation period…..but not up yet “back then”.

Everything is different. Everything has changed. You should either compare your home grown manual to a current iteration of what the CFPB looks for, or just throw in the towel and start as if you didn’t have a program at all. Sometimes the clean sweep is the best way to create the presumption of compliance. Imagine the look on your auditor’s face. He just asked for your Compliance Manuals. And you said….”here they are, we have used these since 2008″.

Look, its ALL different. You originate, you know that. You have been dealing with it daily as your sponsors struggle to protect themselves by monitoring you. It’s a new question every day. It’s a whole new world out there for us mortgage lenders.

Here’s an idea. I offer a subscription plan whereby you can send me your compliance questions whenever they arise, and I will provide guidance via an email response based on knowledge of our current world. Just don’t abuse me, folks. If you are that far out of compliance or out of date, just engage me and let’s get rolling.

You can reach me at (800) 557-6580. That’s it for now.

Financial Assessment is taking effect now – were your loan officers and underwriters prepared for the impact of this major change in our thinking?

This post will be about Reverse Mortgages and the upcoming implementation of financial assessment. While I direct it to HECM originators and underwriters, you can probably rest assured it will end up on the agency or CFPB’s future “check lists” for use during an audit. So, what is a financial assessment?

Financial Assessment

Effective April 27th, 2015, all HECM borrowers will be submitted to a soft underwriting procedure called the “financial assessment”. It is a review procedure developed by FHA with input from the Industry. It requires the originator to be more savvy when collecting the initial data and requires the underwriter to review the borrower’s financial situation and certify to HUD that the borrower is “HECM-worthy”, and that the borrower’s financial profile is such that it becomes unlikely the HECM would default and become a liability to the FHA fund down the road somewhere.

Credit will be scrutinized more closely. In addition to federal or other liens and problems with prior mortgages, the underwriters will now screen at an enhanced level looking for borrower patterns of financial irresponsibility regarding use of credit, payment of taxes, maintenance, and insurance.  Title histories will be scrutinized more closely for unusual changes in ownership. And as always occupancy will remain a key issue for underwriter comfort level.

While this assessment does not rise to the level of a full underwrite it is certainly much more involved than what our borrowers have had to satisfy in the past.

Underwriters, you know your additional responsibilities. You read  ML 14-21, 14-22, and HUD’s Financial Assessment Guide . But what about you originators?

You guys are going to have to  ask more questions, dig deeper into credit, verify more, and educate more. If you don’t, your borrower will hear it all from the counselor, and FUD will ruin your prospects.

Because I also originate loans, I just completed my first round with financial assessment. It was manageable. Your attitude is a big part of how you deal with this change.

I am available for a one hour webinar with yourself or your staff, to review this new development and provide some guidance especially to the MLO. All you have to do is call the number above. Affordable training done by a licensed compliance attorney who actually originates HECM loans, go figure huh.

Don’t lose business where you can avoid it. And don’t originate loans that don’t meet the new guidelines, because that disappoints your senior and upsets the guy who pays the bills.

That’s it for now. If you need me, just let me know.

Gramm Leach Bliley – Identity Theft – and “What’s in your wallet”?

I was recently working on a situation where we needed to see some old documents related to a file that was in controversy. After much pushing and pulling a third party produced personal identification, documents, and photographs that had originally been provided when that third party was an employee of a different institution. What were they doing with that information in their possession?  Was this proper? Can you keep personal information about your past clients to include materials that could create a risk of identity theft for them or a potential abuse of  their privacy?

I don’t think so. There might be some argument about regulatory record retention that you could try to rely on, but I believe the CFPB would look upon this as creating a consumer risk that actually had no purpose as an offset.

Now think, what’s in your “wallet”? Of course, I mean your storage files.

If you have any of this personal information, or have kept documents that should have been shredded after submission to your funding lender, I suggest you go to your storage facility and shred all of them right now. Keep only the file basics as required by state and federal law. Protect your client’s identity and privacy by shredding the supporting identification documentation.

Got it?

Let me work for you, Give me a call at 800-557-6580. Knowledgeable and affordable. Over and out.

Have your compliance questions answered within 24 hours by an expert at a fixed cost.

Many of my Mortgage Industry Compliance Clients tell me that before they found me, they sometimes waited days for a response from their compliance advisors. This increased chances that they would be in violation of a regulation and subject to possible fines.

So I set up a system to make this easy for you.

You can subscribe to our Q+A service on a six month or annual basis and I will respond to your compliance questions within 24 hours. If the matter is one so serious that I feel you should investigate your situation further, I will discount my hourly rate for anyone with a subscription. These are not canned answers, they are personal to your question.

This service is a nice compliment to the policies, procedures, governance documents, and training packages that I have already assembled. You have 24 hour access for questions. I have a new client. Win-Win, right!

Our new Plano office is one block away from a Texas Federal Courthouse. CFPB issues are federal and we are admitted to the federal bar. We can represent you when the CFPB comes knocking.

So, think about the value added here. What good does the big firm do you if you can’t get through to them?  Let me hear from you!

Have you scheduled your annual AML/GLB training? It’s a CFPB requirement.

Did you know that once a year, the new regs require you to train your staff (and yourself and your Board of Directors) on the nuances of Anti-Money Laundering and the Privacy Act. It does not stop there. You also have to test them, and retain proof of the tests and their passing scores.

And during the year, you have to provide the training to any new hire within 30 days of their reporting for duty.

Most Brokers and Lenders don’t take this too seriously. It will get you in hot water with the auditors and could cost you dearly if you ignore it.

The solution? Let me do it for you. I have a program that will provide both the annual and “one-at-a-time” training for you at one low cost for the full year. I even proctor the exam. All you have to do is show up via Gotomeeting. Which I also provide.

Give me a shout, there is still time to get this done before they come knocking on your door.

That’s it for now.

So, how do YOU pay your MLOs?

Man I get asked this all the time. Many of you (and you know who you are) seem to want to hang on to that wishful thinking that just because it sounds ok to you to use 1099, or the girl down at the 7-Eleven said that was how she would do it, or your MLO said he would quit if you made him pay taxes…… that the CFPB will feel the same. So let’s try to put this to bed once and for all. They WON’T.

If you exercise any kind of control whatsoever over your MLO you are likely in a W-2 situation and will be viewed as such during an audit. Control can be interpreted to be something as simple as sponsoring the MLO and having your name on their business cards. Let’s go a bit further. Do they use your office, or your electronics, or your 800 numbers, or your copy machines? Do they work when you ask them to work, even just some of the time? Do they have a desk in your office? What does their letterhead say? Do you pay their cell phone bill? Do they wear a polo shirt with YOUR logo on it?

This is an easy test. If they look like an employee they probably are. So now the CFPB and state regulators will look to see if you properly report their earnings and collect the required taxes. That’s when we see the next twist. Is it legal for you as the employer to deduct your half of their taxes from their gross pay, so the net effect to you is ZERO? No way. Do you do that?

As a consequence of miss-classifying an MLO you may end up dealing with not only the CFPB and your State Regulators, but also the IRS. Any of you ever been there? It’s no fun at all. And you have to report those pesky IRS liens to the NMLS and your Warehouse Line renewal. So,  time to get honest with yourself. Are you paying your MLOs properly? If so, do you have a good MLO contract, a hire letter, and a handbook to properly disclose your payroll procedures to them?

AND THEN THE NEXT BIG POT HOLE – IS YOUR COMP PLAN AND BONUS PLAN ACCEPTABLE?

If you don’t know or are worried I can fix this pretty quickly for you. Give me a call, I’m on it.

www.lockelaw.us

That’s it for now, over and out.

Welcome to the Reverse Mortgage Training Blog!

Well, somebody had to do it, right? What I plan to do here is re-build the training libraries I had created for my former employer. Thanks to Go Daddy, they just sort of evaporated one day. Remember that if you plan to use Go Daddy for a blog. It’s nice that they have Danica Patrick working for them, but I would have preferred they had left my blogs alone. Now I have to start all over.

So I plan to use some of the older ones, update them when necessary, and and create many new ones to help a HECM MLO gain more insight into the product and a greater understanding of the senior demographic.

I’m planning on posting about once a week.

So if I gave you access to this blog, USE IT and watch your sales climb. Nothing would make us happier.

 

 

What the HECM is a Reverse Mortgage anyway?

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WHAT? REVERSE MORTGAGE?

You know, for years we never had this problem. All mortgages were “forward” mortgages. They all amortized. They all started out high and ended up at zero. And then, in 1988, along came a little guy in Minnesota with a crazy idea. What if we started out low, and went up? Hence, the Reverse Mortgage was born.

First there were only FHA programs. Then Fannie Mae jumped into the hot tub with FHA. Next, Transamerica and Household Bank. Finally, some private banks like Virtual Bank climbed in also.

Then, oops, over 50 million seniors? Might be some risks to consider. So the process started to reverse itself. First Fannie Mae climbed out of the hot tub. Then the insurance companies and private banks jumped out too. Finally, even FHA eliminated half its programs and here we are today with essentially three variants of reverse mortgages to market.

Want to learn more? Listen to this presentation. Things have been changing quickly; I might not be 100% right. But you will come away knowing more than you started with.

Marketing to Seniors – The best way is going to surprise you!

This is one of the most important questions I get asked. I used to be a whale of an originator. Everyone wanted to know how I found all those clients.  I never left my desk.

Further, there are persons in our office right now that follow this system perfectly and have never had to look too far for a new application.

So what is the secret about marketing to Seniors?

Listen and learn.

 

 

“Senior Speak”……what they are hearing when you are busy talking, and how to get them on the same page!

Seniors are unique. As we age, we hear and speak differently. I don’t mean the words or grammar used – I mean what is going on analytically inside our head as we listen to the words being spoken. As most seniors age, they naturally becomes more cautious and vulnerable. That affects the way they hear things.

So to be effective you must take this into consideration when you make a telephone call or an in-person presentation.

Here are some important tips about “Senior Speak”.

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Tips to get your clients off that pesky “fence”…..and land the application!

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We all know how hard it can be when you work with that certain type of senior who just seems incapable of making the “go ahead” decision. Sometimes they have really good reasons for taking their time. For example, they might be trying to decide if they should downsize instead. Or maybe they are thinking of selling and moving into assisted care. Or perhaps they are thinking about moving to another state.

But many times the decisional paralysis is the result of irrational fear. We have spoken about the fud factor in other sessions. Fud is what causes irrational fear. Many seniors have irrational fear especially as they age. Life is a bell shaped curve and self confidence follows that curve almost exactly. The older we get the less confident we are.

If you have encountered a client that is paralyzed by irrational fear, this audio might help you. It gives you tips on identifying six of the most common irrational fears, and how to address them.

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Read about my “TENS LIST” and how to use it to get more applications!

The most successful originators are the ones with the best discipline. They put equal amounts of time each day into farming or prospecting for new applications, as they invest in processing and closing activities on their existing files.

When I was originating, I knew I needed a system that would force me to be organized and consistent in my daily approach to finding new business.

And so, I invented the TENS LIST. Listen here to a short description of how it works.

Then download the example TENS LIST format and put it into motion.  Here’s the form.  LW Tens List 082114

Your applications will climb almost immediately.

Telephone Tips – CALL TWO

And here we have the second half of the story. Remember, in part one of this two part series, you left your client sitting in their favorite chair, eyes closed, dreaming about what they were going to do with all that new found financial freedom.

In this segment we will hear about how to handle the second call – the “good news”. How to set it up and close the appointment.

But what about “bad news”? I will give you some ideas on how to handle that and keep the client in the process.

Remember, no deal is ever cold unless YOU allow it to go cold. Using this information, you will increase your application count and subsequently, your income.

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Telephone Tips – Introduction

Hey there people, I promised I would give some tips on how to make handling that 800 pound gorilla (the telephone) a more pleasant experience. I made a series of three audio files, this is number one. I will also release a written outline, as soon as I figure out how.

Once again I would like to thank Go Daddy for screwing up and erasing all my prior blogs and making all this work necessary.

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