List of top five violations that result in fines, suspensions, or revocations.

Paying unlicensed mortgage loan originators or their proxies

  1. Assistants who are acting as licensed MLOs.
  2. Licensed MLOs you sponsor who have you pay their personal, unlicensed LLC or corp.
  3. Licensed MLOs you sponsor who have you pay a third party entity in their name.
  4. Lead Generators who are unlicensed but gather the type of information necessary to originate a loan – beyond mere contact information or public records.
  5. Both the Broker and the MLO are not licensed because they think that as commercial lenders, they are exempt. The problem is the loans they call commercial, are NOT.

Advertising Issues

  1. No formal Advertising Book with a log and copies of all advertising
  2. The Broker or Lender thinks his business cards and web sites are not advertising so he never audits them for compliance.
  3. Rogue MLO with is own web sites and social media. You sponsor him, and you are responsible for everything he does. He can cost you your license.
  4. Making NMLS information too hard for a consumer to locate. For example, burying it in the footer, or using 6 point type.

Mortgage Call Reports that are inaccurate.

  1. The MCA does not match the Broker’s Loan Journal.
  2. The MCA is late or incomplete.

Lack of Evidence of continuity in your Compliance Efforts

  1. Failure to update.
  2. Failure to miss required annual training.
  3. Loan File Audits revealing substantial number of missing documents – no evidence of a complete file.

Making loans on 1-4 family residences without proper disclosures.

  1. The loan is masquerading as a commercial loan. The “LLC” scam.
  2. The package is missing minimal GFE and Closing Statement Requirements.
  3. The Broker fails to do any type of qualifying.

A SPECIAL NOTE about Advertising and Maintenance of Advertising Records: We continue to see small brokers and lenders making mistakes resulting in large fines, suspensions, or revocation. If this happens to you, it can be outside of a regular audit. The different agencies, both state and federal, have staff assigned to watch what happens in print and electronic media form.

You could run an ad, post a flyer, set up a Facebook page, add your name to Linked In ……….. and if you failed to follow DF or the Safe Act requirements, BOOM.

So the first thing I wanted to say is our staff is trained to review client advertising in all forms before it goes live. Just send it via email and wait for our response.

The second thing is to insure you have a proper Advertising Log Book with samples and a dated log.  Do you?

All of this is part of our Compliance Program. It is built into our fee so you are encouraged to take advantage of us.

Any Questions? Call us at (800) 656-4584.

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

 

 

 

Electronic File Storage – things to consider.

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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

 

 

The CHOICE Act – affects CFPB structure and rule making. NOT the need for strong compliance.

By a vote of 233-188, the House of Representatives passed H.R. 10, the Financial CHOICE Act yesterday.  The bill, often referred to as the Dodd-Frank Act replacement bill, includes an overhaul of the CFPB’s structure and authority and makes significant changes to the rulemaking process followed by the CFPB and federal banking agencies.

As passed by the full House, the bill includes several amendments to the version of the bill passed by the House Financial Services Committee on May 4.  One such amendment is the amendment introduced by House Financial Services Committee Chairman, Jeb Hensarling, to strike the provision which purported to repeal the Durbin AmendmentBased on reports we have seen, it does not appear any of the amendments impact the bill’s provisions dealing with the CFPB.

The bill’s fate in the Senate is very uncertain, with most pundits predicting it will not pass the Senate in its current form.

An update on potential CFPB changes……

Hi folks, please be sure to read all the way to the bottom to see my comment.

Hot off the CFPB presses:

Dovetailing with President Trump’s recent Executive Order requiring a reduction in regulatory burden, on March 21, 2017, a CFPB official remarked at the American Bankers Association Government Relations Summit that the CFPB was planning to start its review of significant mortgage regulations, including the ability to repay/qualified mortgage rule.

The Dodd-Frank Act requires the CFPB to use available evidence and data to assess all of its rules five years after they go into effect to ensure they are meeting the purposes and objectives of Dodd-Frank, and the specific goals of the subject rule.  January 2018 will mark five years since the ability to repay/ qualified mortgage rule was finalized, as well as other key mortgage regulations, in January 2013.

Citing this requirement and “common sense,” Chris D’Angelo, Associate Director of the CFPB’s Division of Supervision, Enforcement and Fair Lending, said that the CFPB is “embarking upon now the beginning of an assessment process for our major mortgage rules.” D’Angelo said that the CFPB would assess these rules’ “real-world effects” on the market, as well as “whether it had the effect which was intended, what the costs were, .”

D’Angelo noted that the CFPB was still receiving complaints related to the mortgage servicing industry despite the existence of these rules, and that most of the problems were due to “the third-party service providers and the folks who develop your technology solutions.”  He also stated that incentive compensation practices would be considered but noted that “We know that you need those in order to manage larger organizations and how you drive your employees.”

Given Presidential pressure to reduce regulatory burdens and the fact that the CFPB’s mortgage rules have been criticized by financial industry participants and consumer advocates alike, the CFPB review of the key mortgage rules warrants close attention.

So what does this say? My interpretation is that they are planning on waiting until at least next year, probably after January, to issue a report supporting what they have done to us since 2013. It is in their best interest to write a persuasive report and show the best possible results. Many of you out there think this agency will disappear or be weakened by the Administration. I am asking you to be concerned about the exact opposite. Now, more than ever you better keep your compliance guard up. After we enter 2018 and actually read their findings I could make a better prediction. No matter what you hear, there is no crystal ball you can use to predict how this will go.

We recently changed our program a bit to provide free web and social media audits and free Safe Act certifications. Further, we have expanded our “repurchase defense” practice and it is working very well. Let us hear from you, and see how we can be of service.

(800) 656-4584

Nelson A. Locke, Esq.

Compliance Services USA

CLICK HERE to view Web Site

CLICK HERE to send email and request more information

Mortgage Brokers and Realtors Indicted

Seventeen Mortgage Brokers and Settlement Service Providers have been charged in a 17-count indictment with conspiracy to commit bank fraud and various substantive bank fraud offenses, in violation of Title 18, United States Code, Sections 1349 and 1344.

 

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Timothy Mowery, Special Agent in Charge, Federal Housing Finance Agent, Office of Inspector General (FHFA-OIG), Southeast Region, George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Division, and Juan J. Perez, Director, Miami-Dade Police Department (MDPD), made the announcement.

 

During 2007 and 2008, the defendants conspired to perpetrate a complex mortgage fraud scheme against various FDIC-insured lenders.

 

The defendants conspired to fraudulently obtain mortgage loans for unqualified buyers of units in two condominium projects on the west coast of Florida: Portofino at Largo, also known as Indian Palms, in Largo, Florida; and Bayshore Landing, in Tampa, Florida.

 

The defendants submitted fraudulent loan applications to induce the lenders to make mortgage loans to the unqualified buyers. The submitted loan applications contained false and fraudulent statements relating to: the borrower’s occupation of, or intent to occupy, the mortgaged property as a residence; the borrower’s employment, income, and assets; the borrower’s liabilities; the borrower’s payment of an earnest money deposit and cash-to-close; the sellers’ payment of kick-backs to the borrowers; and other information that was material to the borrower’s qualifications to borrow money from the lenders and the values of the mortgage properties.

 

The indictment states that the co-conspirators would require certain parties to use some of the proceeds from certain of the fraudulently obtained mortgage loans to pay a fictitious “marketing fee” to one of the “marketing companies” set up by the conspirators.

 

If convicted, the defendants face a statutory maximum term of 30 years’ imprisonment, a $1 million fine, and mandatory restitution, on each count in the indictment.

 

Mr. Ferrer commends the investigative efforts of the FHFA-OIG, FBI and MDPD. The case is being prosecuted by Assistant United States Attorney Dwayne E. Williams.

 

An indictment is a formal charging documents notifying the defendant of the charges. All persons charged by indictment are presumed innocent until proven guilty in a court of law.

If you are concerned that you might have inadvertently done something like this, and you want us to review your situation, call us at (800) 656-4584. Sooner is better.

So you only do “commercial loans” and that means you are exempt?

Florida Senate to re-open 494 with special attention to Commercial Lending and Unlicensed Loan Originators

 We told you so. There has been so much abuse regarding the re-branding of residential property into commercial or investment classifications that it now looks like the state is going to close the loop hole.  The OFR is tightening up what residential means, tracking it to what RESPA and TILA consider residential. Next, they are looking at those of you who tell us all the time you don’t “hold yourself out” to the public, yet you clearly do. Finally, with these new interpretations, where is your license?

 If this news is making you nervous you probably need our services. You can reach us at (800) 656-4584 x103.

 We have experience evaluating and advising “commercial lenders” who are in the danger zone.

 If you ignore this regulatory and enforcement trend you will find yourself on the wrong end of an audit very soon.

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 Again, call (800) 656-4584 x103. Let us help you get out of the grey zone and into the safe zone.

 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

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

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

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

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

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

Paid for referrals through agreements:

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

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

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

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

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

Respectfully,

Nelson A. Locke, Esq.

Compliance Services

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