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. Ignoring SAFE ACT requirements for proper use of NMLS information.
  2. Ignoring HUD, VA, and USDA  requirements for government disclaimers.
  3. No formal Advertising Book with a log and copies of all advertising
  4. The Broker or Lender thinks his business cards and web sites are not advertising so he never audits them for compliance.
  5. Not supervising your MLOs. You have rogue MLO with their own web sites and social media. You sponsor him, and you are responsible for everything he does. He can cost you your license. You think its not your duty, and it is.
  6. Making NMLS information too hard for a consumer to locate. For example, burying it in the footer, or using 6 point type.
  7. CFPB requirement for the use of the word LOAN after the words REVERSE MORTGAGE (UDAAP).

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

 

 

I’m not changing my mind on this one. An NMLS sponsored MLO is an employee. Period.

This just keeps showing up on audits – merits a second read.

Mortgage Industry Compliance Consulting

October 18th, 2016

The debate rages on. Unfortunately, most of those who have challenged our position that an MLO must be a W-2 – are either asking the wrong people for advice, or are not asking the question in an open and honest way.

If you have found an attorney who is telling you your 1099 practice is just fine, ask him for his written legal opinion. You will need that to show to the regulator that makes this an issue. While it won’t guarantee you won’t have a finding or fine, it is a defense of sort. Except I warned you, didn’t I. And the attorney won’t pay your fine for you.

The only reasonable conclusion is that a sponsored MLO is an employee.

We include the attachment titled 22-mlo-w2-discussion-021015 to our clients at the front of our MLO Policy Manual – Book Two. You should read this first. Let’s set…

View original post 466 more words

Read about these changes to the Social Security Death Index.

“The Social Security Death Index is the commercial name for what the government refers to as the Death Master File (DMF). The Death Master File is available to the public; however obtaining full access is difficult. On December 26, 2013 President Obama signed the Bipartisan Budget Act of 2013 which among other things limited access to the Death Master File in order to curb identity theft. In order to access the DMF one must now be certified by the Secretary of Commerce to have a “legitimate fraud prevention interest or a legitimate business purpose pursuant to law, rule, regulation or fiduciary duty.”

In addition to being certified, there is a substantial fee. At the time of writing this, a yearly subscription costs nearly $1,400.00 per year.

Banks, financial institutions, investigators, people finding services and genealogy searching sites are among those who are certified to access the DMF. Some of these sites make the information available to the public in the form of Social Security Death Index search tools (these search tools are required by law to pay for updates to the DMF in order to keep their records up-to-date).

The Social Security Death Index contains nearly 90 million records. There are records for people born as early as the 1800’s however there are very few. These death records were originally stored in paper form in filing cabinets in Social Security Administration buildings across the county. In the late 20th century, Optical Character Recognition (OCR) software was used to digitize the records.

Because of the difficulty of keeping physical records and the tediousness of digitizing them, there are numerous errors throughout the data set – omissions, misspellings, missing data, different date formats, and typos are common. Bigger mistakes such as mixing up first and last name are not unheard of. If a name or Social Security Number is not found in the database it does not mean the person is still alive. Corrections can be made to the Social Security Death Index by submitting corrections to your local Social Security Office.” 

I read the highlights of the bill and confirmed that the government did indeed institute this “fee based access”. 

https://en.wikipedia.org/wiki/Bipartisan_Budget_Act_of_2013 

Thus we are taking the death list out of future manuals. If you choose to  pay for the service or use a free service if you can find one, that is fine.

Nelson A. Locke

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.

Scary Reading for Compliance Officers

Folks,

Please take a few minutes and read the article quoted below.

This article uses MoneyGram as an example, but there is a message in here that all of you should heed. Until the time that the President has acted on abuse of power at federal agencies, we are all at risk to some level.

If you document efforts to do your job, and you actually seek out advice and try to the level of best efforts to follow the advice, you can defend yourself. But remember, the buck will stop somewhere.

Here is the article, a compliance recruiting company put this information into the public domain with what I see as their intent to educate and inform. I did not write this but it sure makes sense to me. They did a good job. Nothing more to say.

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

“When the US government wanted to punish someone at MoneyGram for the company’s role in a $100m wire fraud, law enforcement did not go after the chief executive.

Instead, Preet Bharara, then the top US prosecutor in Manhattan, (who the President just fired) filed a civil lawsuit against Thomas Haider, MoneyGram’s chief compliance officer, seeking to collect a $1m Treasury Department penalty and to ban him from the industry. The 2014 litigation, which was settled earlier this month, was the US government’s first courtroom bid to hold a compliance officer personally responsible for not preventing financial wrongdoing. “Compliance officers find this case very troubling,” said Todd Cipperman, an industry consultant in Wayne, Pennsylvania. “To hold him accountable and not hold other senior executives accountable seems strange and unfair.” Compliance officers — among the corporate world’s least glamorous players — fear they are being sacrificed to the government’s desire to punish individuals for financial industry misdeeds. Earlier this month, Mr Haider agreed to pay a reduced fine of $250,000 — roughly equal to such executives’ typical annual salary — and to accept a three-year employment ban. His case comes as other regulators target the professionals who are responsible for ensuring that their employers remain on the right side of legal and regulatory lines. The UK securities watchdog handed out its first fine to a compliance officer in 2008 and British enforcers stepped up activities in this area in 2015. The Financial Conduct Authority and its predecessor have brought a series of cases where the officer either failed to make sure his or her company was complying with regulations or failed to adequately detect or question potential market abuse. Among them was a high profile £130,000 fine of the former compliance officer of Greenlight Capital, a US hedge fund.

In the US, Finra, the industry regulator in 2014 fined Brown Brothers Harriman’s chief compliance officer $25,000 and suspended him for one month for compliance failures. The Securities and Exchange Commission, which also has acted in several cases, says it will not pursue compliance professionals unless they are involved in wrongdoing, mislead investigators, or are negligent. This has failed to calm industry nerves. “These compliance officers are doing the best they can,” said Jonathan Lopez of Orrick, Herrington & Sutcliffe and a former federal prosecutor in money laundering cases. “It’s a pretty harrowing field to be operating in.” Still, even some who are skeptical of the government’s crackdown say Mr Haider’s failures were notable. His punishment grew out of an investigation by the Treasury Department’s Financial Crimes Enforcement Network, which concluded that MoneyGram had turned a blind eye to consumer fraud on its network of money-moving outlets. For five years beginning in 2004, scam artists defrauded “tens of thousands” of often-elderly customers by posing as relatives in need of emergency aid or by promising large lottery prizes or attractive job offers in return for cash wired via MoneyGram, according to the US Department of Justice. The fraudsters’ co-conspirators included an expatriate Nigerian tribal chief, who owned several MoneyGram outlets. The company signed a deferred prosecution agreement with the DoJ in 2012, conceding that it had criminally aided and abetted wire fraud and failed to maintain an effective anti-money laundering program as required by the Bank Secrecy Act. MoneyGram agreed to the appointment of a court-ordered monitor and surrendered $100m to repay its victims.

The DoJ said the company was guilty of a “systematic, pervasive and wilful failure” to meet its anti-money laundering obligations. Even as annual fraud reports ballooned to 19,614 in 2008 from 1,575 in 2004, MoneyGram failed to close suspect outlets, federal prosecutors said. As compliance chief, Mr Haider was directly responsible for managing MoneyGram’s anti-fraud programs. But on his watch, MoneyGram admitted filing erroneous “suspicious activity reports” with the Treasury Department that identified fraud victims as the fraudster, according to court documents. Since Mr Haider left the company in 2008, its “management, organizational structure, and compliance programs have changed significantly”, MoneyGram said, adding that it “has invested hundreds of millions of dollars in our technology and compliance infrastructure to protect our consumers”. Mr Haider, who did not respond to a request for comment, also failed to close outlets that his subordinates had identified as suspect, according to the settlement filed in US District Court in Minnesota. Among them were four outlets that had received a total of 150 complaints in a six-month period. Mr Haider had been warned about their owner, James Ugoh, a Nigerian tribal chief who had emigrated to Toronto. “Toronto PD also called me — they think this agent is dirty,” read an email Mr Haider received from an internal watchdog.  In 2014, Mr Ugoh was sentenced to more than 12 years in prison after pleading guilty to conspiracy to commit mail fraud, wire fraud and money laundering.”

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

 

Update on violations where we are seeing consistent, large fines.

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Hi folks, it has been a while since we have shared what we are seeing on Audit Findings and Violation Notices, so here we go with an update.

Before you quickly say, “Well, that’s not us, we don’t this and we don’t that”……..please make sure you understand what the “this and that” actually is. For example, just because you think you don’t advertise does not mean you are not acting in a way that requires keeping an Advertising Log. Business Cards? Social Media? Just a few examples.

Here are the areas that keep popping up. They are in no particular order of importance.

  • Hiring a new MLO and asking him to bring his pipeline with him.
  • Allowing your MLOs to keep actual loan files (full of NPI) in unsecure places.
  • Compensating an MLO you sponsor by paying his/her “company” directly
  • Failure to compensate a former MLO employer for expenses related to a file he/she transferred to you lawfully
  • When an MLO leaves, marking the entire pipeline as withdrawn, and then re-assigning it to one of your other employees without concern for the MLO that left you and their rights to commissions
  • Evading a lawful requirement to with hold payroll taxes
  • Comp plans that can encourage steering
  • Failure to make a real, good faith effort, to keep your MCR as accurate as possible
  • Having a loan journal that does not match what you file on your MCR
  • Allowing non-compliant pirate web sites and social media to exist just because “they are not yours”
  • Keeping your archived loans off premises without advising your regulator first, and insuring the off site facility is GLB compliant

If your head is spinning, hire us. Let us sort this out for you. ALL OF THIS IS COVERED IN OUR PROGRAM. We have hundreds of clients, our clients get great results when audited, our fee is super reasonable, so give us a chance to take these pressures off your mind.

Respectfully,

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

http://www.expertlenderservices.com