Florida Mortgage Professionals Take Note

July 30th, 2019

Taken from an OFR Audit Letter dated last week.

“For the Examination Period, the Mortgage Brokerage Transaction and Lending Journal, Form OFR-494- 10 or HMDA-LAR; a listing of all applications by Loan Officer; and a listing of all Mortgage Loan Modification Applications.

SPECIFY IF ANY FUNDED/CLOSED LOANS IN THE MORTGAGE BROKERAGE
TRANSACTION & LENDING JOURNAL ARE FOR INVESTMENT/BUSINESS PROPERTIES.”

If you have fooled yourself into believing you could package what would otherwise be a QM or non-QM residential loan into a non-QM loan deeded to an LLC or Corp, be warned.

Nelson A. Locke, Esq.

Compliance Services, USA

800-656-4584

Are you a “MINI-CORRESPONDENT”?

The CFPB is concerned that some mortgage brokers may be shifting to the mini-correspondent model under the mistaken belief that identifying themselves as such would automatically exempt them from important consumer protection rules affecting broker compensation. The guidance sets out how the Bureau evaluates mortgage transactions involving mini-correspondent lenders. It confirms who must comply with the broker compensation rules, regardless of how they may describe their business structure.
“Before the financial crisis, consumers seeking mortgages were steered toward high-cost and risky loans that were not in the consumer’s interest,” said CFPB Director Richard Cordray. “The CFPB’s rules on mortgage broker compensation are intended to protect consumers from this type of abuse. Today we are putting companies on notice that they cannot avoid those rules by calling themselves by a different name.”
The policy guidance is available at: http://files.consumerfinance.gov/f/201407_cfpb_guidance_mini-correspondent-lenders.pdf
Mortgage brokers connect borrowers with lenders who underwrite and fund loans. In contrast, a correspondent lender, as generally understood in the mortgage industry, processes applications, provides legally required disclosures, frequently underwrites the loans, makes the final credit approval decision, funds the loans, and sells them to investors.
The CFPB is concerned that some mortgage brokers may be setting up arrangements with investors in which the broker claims to be a “mini-correspondent lender,” when in fact the broker is still essentially just facilitating a transaction between a borrower and a lender. While some brokers may be setting up such arrangements because they intend to grow into full correspondent lenders, the Bureau is concerned that other brokers may simply be attempting to evade consumer protection rules. Today’s guidance confirms that mortgage brokers who merely choose to describe themselves as mini-correspondent lenders are not automatically exempt from applicable consumer protection requirements.
The guidance sets out some of the questions the CFPB may consider in evaluating mortgage transactions involving mini-correspondent lenders in order to understand their true nature. This evaluation involves examining how the mini-correspondent lender is structured and operating, for example: whether it is continuing to broker loans; its sources of funding; whether it funds its loans through a bona fide warehouse line of credit; its relationship with its investors; and its involvement in mortgage origination activities such as loan processing, underwriting, and making the final credit approval decision.
Ya’ll better be careful out there! If you need to discuss this, just email us for an appointment to talk.

Nelson A. Locke, Esq.

Compliance Services, USA

7800 Preston Road – Suite 118

Plano, TX 75024

(800) 656-4584

https://www.lockelaw.us

 

Brokers who rely on their lender’s captive LOS system may be missing proof of disclosure and subject to adverse findings in an audit.

That pretty much says it all.

During April Audits we saw quite a few instances of Brokers relying on Lender disclosures.

These Brokers opted to quit using Point similar systems to save money.

When audited, their files were missing LEs or CDs and the Regulators cited the Broker for lack of attention to his/her client and the rules.

Brokers need to remember, the rules say that either the Broker or the Lender can prepare disclosures.

However, the Broker must be sure the client got them and the Broker must be sure the Broker has a copy for their post closing archives, in case of audit.

Do you?

Thanks,

Nelson A. Locke, Esq.

Compliance Services, USA.

(800) 656-4584

nl@lockelaw.us

 

 

 

 

LEHMAN BROTHERS RE-PURCHASE LETTERS.

Fear Name Tag

 

Last week we heard from five Florida clients that they had received a FedEx package from LBHI, who is the Bankruptcy Court collection arm for what used to be Lehman Brothers Mortgage, and Aurora Loans of Colorado. The demand letters ranged from $120K to the millions.

THIS IS A REAL ISSUE.

DO NOT THINK IT IS A SCAM.

If you received one of these letters, please contact our office at (800) 656-4584 or email me directly at nl@lockelaw.us

Do NOT attempt to handle this yourself.

This is a real issue and could cost you thousands more than necessary.

Respectfully,

Nelson A. Locke, Esq.

Locke Law US, LLC.

(800) 656-4584

Business Purpose Loan Abuse is about to END

Commercial

Florida Statute 494 has some changes effective July 1st, 2019 that tighten up the  use of the RESPA loophole for Business Purpose Loans.

Language has been added that makes it a clear violation of FS 494 to misrepresent a residential mortgage loan as a business purpose loan.

Sound familiar? Your client lives in a property either as is full time residence or his second/vacation home. Because of his credit circumstances he cannot qualify for a QM or non-QM loan. So someone suggests he create an LLC, and make it look like an investment. Less required disclosure, higher interest rates and costs to the client. Then when the loan closes the “façade” is stripped away – the borrower is the client not the LLC, he house is his residence, he uses the proceeds to pay off his credit cards, and any cash needed comes and goes between the client and lender, not the LLC.

So what do you need to do? You need to be sure a business purpose loan is exactly that. Most if not all of the proceeds must go into a true business venture. Further, if the business purpose loan involves a RESPA property (residential) then the MLO and his sponsor better have a license. Finally, if in doubt, disclose to a higher level.

These loans will become red flags for audits. Be prepared.

Confused? Ask your compliance team. If you don’t have one, call us at 800-656-4584 and let us tell you how we can help you stay out of trouble.

Nelson A. Locke, Esq.

Compliance Services, USA.

nl@lockelaw.us

 

 

 

 

 

 

 

If you think you can do without your Compliance Attorney, think again.

I think all of you should listen to this. It is a pretty good summary of what I am experiencing with regulators already. For example, a recent Consent Order revoking licenses, fining $50,000, and barring the Broker from the Industry for 10 years.

Why? Respa violations 101.

You need to pay attention to your compliance attorney, and you need to ask frequent questions especially where advertising is involved. 

https://thenationalrealestatepost.com/is-tougher-compliance-enforcement-coming-soon/

 

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Thank you National Real Estate Post – a good topic that is timely and nuclear (if you ignore it).

Nelson A. Locke, Esq.

Compliance Services, USA

(800) 656-4584

www.lockelaw.us

 

 

 

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