Here are some recent Auditor Comments.

August 13th, 2020

 

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

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

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

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

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

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

Nelson A. Locke, Esq

Compliance Services USA

Interesting FRAUD case here. Just an FYI.

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August 4th, 2020

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

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

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

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

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

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

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

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

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

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

USAO, District of Colorado

I have nothing to say here. Incredible.

Respectfully,

Nelson A. Locke, Esq.

(800)656-4584

 

COVID Return to Work Package

August 4th, 2020

Hello all.

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

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

This is available to all present clients at no charge.

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

Stay safe!

Nelson A. Locke, Esq.

(800) 656-4584

Compliance Services USA

How COVID really feels…

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

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

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

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

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

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

Stay safe!
Fearful

 

Nelson A. Locke, Esq.

(800) 656-4584

Lockelaw.us

Pandemic/Natural Disaster Business Continuity Plan is important.

OIP

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

We have been emailing about this since mid March.

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

Turnaround time is about 36 hours.

Thanks, and stay safe.

Nelson A. Locke, Esq.

800-656-4584

 

 

BE AWARE OF THIS……

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

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

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

As always, email us with questions.

nl@lockelaw.us

Nelson A. Locke, Esq.

800-656-4584

COVID-19 Readiness Plan now required

OIP

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

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

I am recommending you order this important item from us.

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

That’s it for now.

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

You are considered an essential service.

OIP

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

Financial Services Sector Essential Critical Infrastructure Workers

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

Thanks to Sean for the heads up. Teamwork guys.

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

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

COVID-19 Readiness Plan now required

OIP

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

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

I am recommending you order this important item from us.

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

That’s it for now.

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

Brokers – license yourself in Texas!

1289926747746495649tx-logo

TEXAS is a broker friendly state.

The regulators here are reasonable and fair.

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

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

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

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

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

Respectfully,

Nelson A. Locke, Esq

(800) 656-4584

http://www.lockelaw.us

 

 

The LIBOR is being phased out.

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

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

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

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

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

That’s it for now.

Nelson A. Locke, Esq

(800) 656-4584

http://www.lockelaw.us

 

 

 

 

Have you received a Complaint from “Legal Justice Advocates” regarding allegations of disparate treatment of the visually impaired?

thIf so, please email me at once. While we believe this to be questionable,  you need to protect yourself and our  Team is ready to assist.

This link can help you to understand what is going on.

https://www.actionnewsjax.com/news/local/attorneys-in-trouble-over-ada-lawsuits-against-local-small-businesses/754005293/   

Forward what you recieved to nl@lockelaw.us and in the subject line put ADA ISSUE.

Thanks.

Nelson A. Locke, Esq.

(800) 656-4584

 

Clarification on Temporary Authority Post……..

confusedThis Temporary Authority (120 days) relates to Mortgage Loan Originators transitioning from federally insured institutions (“NMLSR”) to non-bank lenders (“NMLS”), as well as already licensed individuals holding valid personal and/or broker or lender licenses that are moving or expanding their mortgage licensing to other states.

Any questions? Give us a shout.

Nelson A. Locke, Esq.

(800) 656-4584

Important News about Temporary Authority to act as an MLO…..

Thanks to Max Lewis for providing this information.

“A little less than 2 weeks ago a new process went into effect in NMLS. It is called the “Temporary Authority to Operate.” You may or may not have heard of this. Basically, it allows a loan officer to be able to start originating loans the day their loan officer license application is submitted to the state.
Please note though that there are several conditions which must be met first:
• The company must already have a license to operate in the state in which you wish to license this loan officer.
The loan officer must be a W-2 employee.
• The loan officer must have at least one year of experience with a bank (deposit taking) preceding the date of application submission or 30 days of experience (licensure) at a non-bank company preceding the date of application submission – this is determined by the NMLS system.
• All of the requirements needed for licensure (background check, credit report, and any disclosure explanations) must be met before the license application can be submitted. What can be completed afterward is any state specific documentation, national test (if necessary) and any state specific PE. These final three items can be met once the approval is given by NMLS to operate under this new temporary authority regime. Also please note that these final three items need to be completed as soon as possible after the temporary authority is given as the state has up to 120 days to make a decision on the loan officer’ application whether to accept or deny.
The scenario above does not apply to loan officers who have had a previous license application denied, a previous license revoked or suspended, a cease and desist order or any type of misdemeanor or felony conviction.
This new ability has several benefits to you subject to the conditions listed above:
• You will be able to hire a high producing loan officer from a bank, and that loan officer can start originating pretty much right away as long as the conditions above are met.
• You will be able to hire a high producing loan officer from a competitor who can also start pretty much right away.
In each of the two situations above, the recruited person does not need to worry about being in a position of waiting anywhere from one to four months for an approval before starting to originate for the new employer. They can start right away.”

Please let us know if you have any questions.

 

Happy Holidays.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

 

 

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

AML And BSA Annual Risk Assessment Compliance

LL Logo 022015Here we are in late November, and there are some of you out there who need to have an independent party perform a Risk Assessment to satisfy state regulators regarding your compliance with Money Laundering Law and the Bank Secrecy Act.

We can do this for you, it will take about an hour and involves a small fee. $250 for survey and interview. The session will result in a complete Risk Assessment Report that will satisfy any requests for at least the next six months. This is an emerging trend. 

If you would like to schedule this, shoot me an email at nl@lockelaw.us  and let us know.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

Have you completed your 2018 your continuing education yet? You are running out of time.

We recommend Jim Montrym and Andrea Worthington of the Mortgage Broker School.

You can reach them at (800) 735-8565, or use their web site which is :

http://www.brokerschool.com/ :category/industry-partners-processing-compliance/ 

I have used their services personally for the last 15 years. Always good, never bad. Don’t wait until the last minute, space is limited. thw8s1030z

If you use them for your CE please tell us because it could be a helpful bit of information in the event you are audited.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

States where current Audit Activity is high.

 

Hello folks, here comes December!

Is your required annual training for AML and GLB done and certified? If not, give us a call.

In the past six weeks we have assisted in responding to at least 15 state or CFPB Audits.

We have successfully negotiated the lifting of three suspensions and successfully negotiated reduced fines for violations an average of 50%.

 

Audit satsifactoryIf you need that kind of Compliance Expertise in your corner,

email us at nl@lockelaw.us

Current Active Audit States

  • Florida

  • Texas

  • Washington

  • Oregon

  • North Carolina

  • Michigan

  • Virginia

  • New York

For more information, contact us at (800) 656-4584.

Nelson A. Locke, Esq

Compliance Services, USA

 

AML And BSA Annual Risk Assessment Compliance

LL Logo 022015Here we are in late November, and there are some of you out there who need to have an independent party perform a Risk Assessment to satisfy state regulators regarding your compliance with Money Laundering Law and the Bank Secrecy Act.

We can do this for you, it will take about an hour and involves a small fee. The session will result in a complete Risk Assessment Report that will satisfy any requests for at least the next six months. This is an emerging trend. 

If you are a small Broker shop, don’t be concerned. However, if you have multiple state licenses or more than 10 MLO staff, you may want to consider this extra step to stay in the safe zone.

If you would like to schedule this, shoot me an email at nl@lockelaw.us  and let us know.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

What to do if a Lender asks you to repay commissions………..

This is a disturbing practice that is surfacing more and more.

You work hard for your borrower and help them obtain the mortgage loan they need. It is either a purchase or a refinance, and the borrower never says anything to you about intending to pay off their loan within a year. You probably signed your broker-lender agreement without asking us to review it for trap doors like this so………the contract has a clause in it allowing your lender to claw back your hard-earned fees no matter where they came from (borrower OR lender paid) and no matter why the client paid off early.

Constructively, this is a broker prepayment penalty. The regulations never considered this. The regulations protect the consumer, and then the lender shifts the penalty to you.  You probably did not know this penalty was in your contract because it likely was not explained to you when you signed your contract. Did they ask you to initial each page?

When you work hard to originate a mortgage loan you deliver something of value. You deserve to be compensated. If your borrower decides without any warning to prepay the loan, they got the benefit of your hard work for what amounts to nothing. Work without pay is called unjust enrichment. Under quasi-contract the borrower owes you for the claw back the lender assessed you with. You earned your fee.

What can you do? I don’t see a problem with a broker-borrower contractual agreement that requires the borrower to indemnify you in the event the borrower decides to pay off early. It is an advanced informed agreement. If you are our client we can provide this to you at no cost. If you are not our client but would like to learn more, contact us at (800) 656-4584. Or email us at nl@lockelaw.us 

This is just one example of the pro-broker things we do to help our clients make and retain their earnings.

That’s all for now.

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

 

Florida OFR Audit Alert

August 12th, 2018

This is a special alert for my clients.

In the last ten days five clients have received audit letters from the OFR. All five clients had NOT been audited in 8 to 10 years. One had not been audited in 20 years.

It appears to me as if the OFR is on a “catch up” campaign. This means we know of three confirmed danger areas for an OFR audit.

  1. If you are a new company with a new NMLS number, you will be audited in the first 18-24 months. Perhaps, sooner. 

  2. If it has been at least 7 years since your last audit, get ready. Use the checklist in Compliance Book Three to see how prepared you feel. Then let me know.

  3. If you have had a consumer complaint that you failed to respond to, you can expect a visit. 

But the big shocker is you old timers. Many of you may have been feeling complacent. That is not good.

Let’s pull out the checklist and be sure you feel aware and prepared. 

We are now offering a two session “MOCK AUDIT” for companies who want to go the extra mile to be sure they are prepared. If you have interest, email me and let me know so we can get you scheduled.

There is a cost of $1,000 for this service. It will save you many times that much in potential fines. We have proof. 

That’s it for now.

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

ZILLOW Co-Marketing Program Survives

CFPB ends investigation of Zillow
By Richard J. Andreano, Jr. on June 28, 2018
Posted in CFPB Enforcement, CFPB Monitor, Mortgages
In a SEC filing dated June 22, 2018, Zillow Group announced that it is no longer under investigation by the CFPB for RESPA and UDAAP compliance with regard to its co-marketing program. Zillow Group had disclosed the existence of the investigation in May 2017.
According to the SEC filing, Zillow Group received a letter from the CFPB on June 22 stating that the CFPB “had completed its investigation, that it did not intend to take enforcement action, and that the Company was relieved from the document-retention obligations required by the Bureau’s investigation.”
The completion of the investigation leaves unanswered what concerns the CFPB may have had with Zillow Group’s co-marketing program, and whether the investigation was terminated because the concerns were addressed to the CFPB’s satisfaction or for other factors.

BE CAREFUL. JUST BECAUSE THE CFPB RELEASED ITS HOLD ON ZILLOW, IS NOT A TICKET FOR YOU TO INTO THE “GREY AREA”.

IF YOU ENTER INTO ANY KIND OF MSA, IT WOULD BE WISE TO ASK OUR ADVICE FIRST.

NELSON A. LOCKE, Esq,

(800) 656-4584

DODD FRANK REFORM BILL WEBINAR

Hi there.

The title says it all.

I will review the Dodd Frank Reform Bill as it affects Mortgage Brokers and Correspondent Lenders.

The webinar is free to subscribers, and will start promptly at 3:30 eastern time on Tuesday, June 26th.

To attend, go to https://global.gotomeeting.com/join/223553717

You can also dial in using your phone.
United States: +1 (646) 749-3122
Access Code: 223-553-717

I might have some attachments for you if time allows, but in any case we can have a good discussion about how the DF Reforms might (or might not) affect you and your business.

See you there.

 

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.expertlenderservices.com

 

 

 

Check your “Facebook” profiles today.

I was reviewing a client’s social media, to insure compliance with the Safe Act and Dodd Frank.

On his Facebook profile a new little link had appeared. It said “Mortgage Brokers”. He did not authorize this. And when we clicked on it, it contained a list of all his competitors.

OUCH.

Contact Facebook and demand that the link be removed. Keep a copy of your email to them and file it in your CFPB Advertising Log Book.

It really pays to check your social media every few weeks.

Sincerely,

Nelson A. Locke, Esq.

(800-656-4584

 

 

 

 

DODD FRANK REFORM BILL WEBINAR

Hi there.

The title says it all.

I will review the Dodd Frank Reform Bill as it affects Mortgage Brokers and Correspondent Lenders.

The webinar is free to subscribers, and will start promptly at 3:30 eastern time on Tuesday, June 26th.

To attend, go to https://global.gotomeeting.com/join/223553717

You can also dial in using your phone.
United States: +1 (646) 749-3122
Access Code: 223-553-717

I might have some attachments for you if time allows, but in any case we can have a good discussion about how the DF Reforms might (or might not) affect you and your business.

See you there.

 

Nelson A. Locke, Esq

Compliance Services USA

(800) 656-4584

http://www.expertlenderservices.com

 

 

 

Rule Change regarding use of a CD to reset tolerances.

Under the TRID rule, a Loan Estimate is the disclosure primarily used to reset tolerances. Because the final revised Loan Estimate must be received by the consumer no later than four business days before consummation, the Commentary to the TRID rule includes a provision under which a creditor may use a Closing Disclosure to reset tolerances if “there are less than four business days between the time” a revised Loan Estimate would need to be provided and consummation. Because of the four-business-day timing element, in various cases when a creditor learns of a change, the creditor is not able to use a Closing Disclosure to reset tolerances. This situation is what the industry termed the “black hole.” The industry repeatedly asked the CFPB to address the black hole issue.

In the final rule the CFPB removes the four business day timing element, and makes clear that either an initial or a revised Closing Disclosure can be used to reset tolerances.

Consistent with the requirements for the Loan Estimate, when the TRID rule permits a creditor to use a Closing Disclosure to revise expenses, the creditor must provide the Closing Disclosure within three business days of receiving information sufficient to establish that a changed circumstance or other event triggering a change has occurred.

We are happy to answer any questions, just email us at nl@lockelaw.us

Nelson A. Locke, Esq.

Compliance Services USA 

(800) 656-4584

 

Keller Williams Matter

Folks, please advise me via email if you fit into one of these two boxes.

  1. Are you an affiliated business with KW?
  2. If NOT, are you being adversely affected by the current KW project regarding the “disclosure”?
  3. Have you seen the “disclosure”?

My first take on the situation is of concern. Thus I need to hear from you.

Here is the link. nl@lockelaw.us

Thank you in advance.

Nelson A. Locke, Esq.

(800) 656-4584

Compliance Services USA.

Template for Occupancy Fraud Affidavit

Recently I have encountered several situations where borrowers just flat out lied about their intent to occupy the subject property as their principal residence. The brokers were caught without sufficient evidence in their files that they properly verified the intent to the best of their ability. Thus, this affidavit was born. It covers both those who state their intention as owner occupied, and those who state their intention as non-owner occupied. If you put this on your letterhead and have it executed at closing it would be hard for a fraudulent minded borrower to point the finger back at you.

If this has happened to you and you need my help, contact me at nl@lockelaw.us

That’s it for now.

Here is the form. It is designed as a crystal clear WARNING.

“Do you intend to occupy this property as your principal residence?” or “Do you intend for this property to be non-owner occupied?”

These questions, indicated by check boxes on most mortgage loan applications, might seem straightforward. But if you misrepresent your intention, it is a crime known in real estate lingo as “occupancy fraud.”

Occupancy fraud occurs when a borrower says he or she plans to live in a home, all the while knowing the property will be rented out.  The key here is to note “all the while”. People can change their minds, but they will need to show compelling evidence that at the time they applied, closed, and funded the deal they absolutely intended for the property to be either their residence or a non-owner occupied investment property. 

Sometimes people change their mind after the fact.  That’s less serious than someone intentionally deceiving the lender by providing information indicating they are either going to occupy or not when they truly have the opposite  intention.

But it still maybe seen as an unintentional misrepresentation and give rise to a claim for damages by the lender that relied on the borrower’s statement about occupancy or investment use.

Most lenders’ loan documents define owner occupancy as a period of at least one year, but mortgage lenders have flexibility in their guidelines. If you intend to occupy a home, but move out within less than 12 months, you should notify the lender in writing and keep a copy of your letter.

Lenders perceive an owner-occupied transaction to be a safer credit risk than non owner occupied.

ONE LIE on a loan application may trigger a full-blown fraud investigation, and  you’ll be facing HUGE negative consequences if you get caught. IT IS A FELONY. But it gets worse. Lying on a mortgage loan application is so serious it can also be considered Money Laundering. ANOTHER FELONY. And then, there is the usual conspiracy charge. THREE FELONIES.

Technically, the mortgage lender could call your loan due and payable, raise your interest rate and payment, or foreclose on your loan.  Whatever does or doesn’t happen will be solely at the lender’s discretion.

The lender could file a Suspicious Activity Report (SAR) into the federal government’s Financial Crimes Enforcement Network (FinCEN), a centralized database that financial institutions use to report possible instances of fraud to law enforcement authorities. SARs could become a problem if you make a misrepresentation or outright false statement on a loan application and later want to move to another home or refinance your mortgage.

Understood, this _________ day of ________, 2018;

 

____________________________________            ___________________________________

Borrower                                                         Co-Borrower

 

___________________________________

Witness

 

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

Business Purpose Loans – Update

Yesterday the Governor of Florida signed House Bill 935 and this affects Mortgage Loan Originators, especially those operating without licenses under the theory that the loans they produce are all business purpose loans.

The bill revises ch. 494, F.S., governing non-depository loan originators, mortgage brokers, and mortgage lender businesses subject to regulation by the Office of Financial Regulation to provide greater consumer protections. The bill provides that it is unlawful for any person to misrepresent a residential mortgage loan as a business purpose loan, and defines the term, “business purpose loan.” Further, the bill provides a definition of the term “hold himself or herself out to the public as being in the mortgage lending business,” as that term currently exists under two licensing exemption provisions. These current exemptions permit an individual investor to make or acquire a mortgage loan with his or her own funds, or to sell such mortgage loan, without being licensed as a mortgage lender, so long as the individual does not “hold himself or herself out to the public as being in the mortgage lending business.”
The bill was in response to alleged unlicensed mortgage lending activity in South Florida. According to these reports, some lending entities were providing residential loans with usurious interest rates and high fees made under the guise of business purpose loans in order to avoid licensure and disclosure requirements under ch. 494, F.S., as a mortgage lender.

These groups also claim that some of these unscrupulous lenders would not make the “residential loan” unless the borrower formed a limited liability company.
These provisions take effect July 1, 2019.

 

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

Private Lending and Licensing – Round Two.

The Florida legislature kicked off its legislative session by introducing Florida Senate Bill 894 and House Bill 935, legislation that could cover private mortgage lenders. The bills, introduced by Sen. Rene Garcia (R-Miami) and Rep. Jeanette Nunes (R-Miami), would eliminate a longstanding business purpose exemption for loans secured by a Dwelling.

 

On January 18, the bill passed the House Insurance and Banking Subcommittee with a 13-1 vote in favor. On January 24, the House Commerce Committee passed the bill on a unanimous vote. The Senate similarly passed the bill on a unanimous vote in the Senate Banking and Insurance committee on January 23. The bills are expected to move through the Florida legislature and have strong bipartisan support.

 

An almost identical bill previously passed through the legislature in May 2017, but was ultimately vetoed by Governor Scott in June. 

 

Florida has been one of the more interesting states from a mortgage licensing perspective. For example, a mortgage lender license is already necessary to make a business purpose loan secured by commercial real estate and 5-or-more unit multifamily residential property if the borrower or guarantor is an individual, or if the lender is considered a non-institutional investor.

 

If the bills become law, they would empower the state Office of Financial Regulation to regulate mortgage loans made for business purposes, require brokers of these loans to be licensed, and allow examination of firms offering or making private loans.

If this is signed into law, it means more audit activity and means that if you are a private lender making business purpose loans, you better call us and let us get you into shape before the regulators start enforcement activity. We will keep you posted. 

Nelson A. Locke, Esq.

Compliance Services USA and Locke Law US

http://www.lockelaw.us

(800) 656-4584

 

What you need to know about the Dodd-Frank rewrite that is currently underway.

Not much. The rewrite does some good things for the Banking Industry but……not too much for you and I.

The bill doesn’t go nearly as far as some Republicans would like to go in gutting the 2010 law. For example, it doesn’t make big changes to the Consumer Financial Protection Bureau. When it refers to smaller lenders, it looks like it is making reference to FDIC participants.

The CFPB has also made it clear it is engaging the state regulators more now than ever.

Don’t drop your guard or relax your focus on compliance. We have come so far. Let’s not go backwards.

Nelson A. Locke, Esq.

(800) 656-4584

http://www.expertlenderservices.com

Warning about UDAAP

Today, the CFPB again advised State Attorneys General (which means State Agencies as well) that the CFPB is monitoring how the states decide to undertake or not undertake enforcement action. Read this narrative taken from their site.

“Mr. Mulvaney stated that a significant, although not determinative, factor in the CFPB’s decision to initiate an enforcement action in a particular case will be whether state AGs or regulators are also considering whether to take enforcement action. He stated that if state AGs “are not bringing an action we are looking at, I’m going to want to know why.” More specifically, he would want to know whether the state’s reason is lack of resources or other factors unrelated to the merits of an action or whether it is that the state AG or regulator thinks the conduct in question is not illegal.”

In addition to various federal consumer protection statutes that give direct enforcement authority to state AGs or regulators, Section 1042 of the Consumer Financial Protection Act authorizes state AGs and regulators to bring civil actions to enforce the provisions of the CFPA, most notably its prohibition of unfair, deceptive or abusive acts or practices.

That’s the part that deserves your attention. The UDAAP provisions are broad by design and can be used to commence enforcement action for almost any reason.

Deceptive Acts or Practices
A representation, omission, actor practice is deceptive when
(1) The representation, omission, act, or practice misleads or is likely to mislead the consumer;
(2) The consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and
(3) The misleading representation, omission, act, or practice is material.

And some real or imagined consumer harm occurs as the result of the deceptive act or practice.

If a regulator sees or hears something that triggers their radar, they will examine your website and social media. Then your customer complaint log. Then the complete nature of your record keeping. Then they will interview you and measure your response.

Just be aware, folks – knowledge and training can reduce this risk greatly.

Nelson A. Locke, Esq. (800) 656-4584

 

 

 

Rapid Rescores and Extra Cost

confused

This morning we spent about an hour investigating an article recently published discussing rapid rescore where the consumer is disputing accuracy, and the issue of passing the fee along to the client. 

There has been much discussion on this issue. Some feel that if the initial Loan estimate included an amount in anticipation of a rapid rescore, it might be acceptable to pass the cost on to the consumer. Others feel that 15 USC 1681i(a)(1)(A) is to be interpreted exactly as written which says clearly “free of charge” and then does not recite an exception. So it means – “free of charge” to the consumer. That leaves the credit bureau and your CRA open to charge your mortgage company. It can’t go to the consumer. Here is the exact language. Which seems to apply specifically to where a consumer is disputing accuracy.

§1681i. Procedure in case of disputed accuracy
(a) Reinvestigations of disputed information
(1) Reinvestigation required
(A) In general
Subject to subsection (f), if the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file in accordance with paragraph (5), before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.

So here is your best business practice. You cannot charge the consumer for rapid rescore and must absorb the cost yourself. Also, because of the CFPB comp rules we don’t see how you can ding the MLO for this cost.

The current regulatory trend is not to add new regulations. Thus existing regulations  like the FCRA are being enforced more regularly.  If your practice was to charge the consumer for a rapid rescore involving disputed accuracy by the consumer, and even if you brokered the loan and the lender allowed the fee on the Closing Disclosure – you could have problems during an audit or if a consumer complains. Govern yourself accordingly.

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

(800) 656-4584

 

 

 

Updated HMDA Guidance

The FFIEC, the Agency primarily responsible for informing us about the new changes to Regulation C – the “Home Mortgage Disclosure Act of 1975”, has issued a new manual to assist us in understanding what our reporting responsibilities are.

Unfortunately, this simple bit of guidance is over 300 pages long. You can save a copy by clicking on this link – 2018guide.

I am curious, would you all like me to set up a webinar to discuss this in more detail? If so, please reply here. There might be a small fee, depends on the number of responses.

DELETE MY NAME AND EMAIL ADDRESS BELOW AND INSERT YOUR OWN. THEN PRESS SUBMIT.

 

Good luck with the reading assignment.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

http://www.lockelaw.us

 

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.

 

 

WARNING – Audit Activity Increasing

Florida, Texas, and Washington are all showing an increased level of mortgage broker and lender audit activity.

The recurring themes are:

  1. Advertising issues
  2. MCR issues
  3. Unlicensed Originators

Most of the business being tagged are in their first two or three years of existence.

Some are older, established businesses.

You need to be aware.

If you have received one of these audit letters, please contact us for assistance.

Respectfully,

 

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

 

CFPB revises HMDA changes on October 17th…………

Things have changed again with HMDA, good for brokers and smaller lenders.

On Oct. 16, 2017, the CFPB published a new chart, the Reportable HMDA Data: A regulatory and reporting overview reference chart  (“Reporting Reference Chart”). The changes relate to raising the reporting threshold volume numbers on open ended credit to where most brokers and small lenders may find themselves exempt.

HMDA 010118 Flow Chart

I need to clarify a HMDA comment I made in an earlier blog. A broker does not have to report to HMDA a credit decision made regarding a pre-qual. But the broker does have to comply with ECOA and send the consumer an adverse action notice. Some pre-quals never get to a lender – thus the duty falls on the broker who decides not to pursue the loan. “Six items or not.” You can never go wrong sending an Adverse Action Notice. Its a best business practice.

Let us hear from you.

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

(800) 656-4584

 

 

What is the Uniform Closing Dataset and do I have to file this effective September 25th, 2017?

https://www.fanniemae.com/singlefamily/uniform-closing-dataset

The Uniform Closing Dataset Protocol (UCD) is a component of the Uniform Mortgage Data Program® (UMDP®), an ongoing effort by Fannie Mae and Freddie Mac at the direction of our regulator, the Federal Housing Finance Agency, to provide a common industry dataset to support the Consumer Financial Protection Bureau’s (CFPB) Closing Disclosure.

You as the Broker may be required to file this information. Some Lenders are asking for evidence you filed it as a pre-closing condition while others are doing it for you. You need to be aware of what it is and how to do it, in case you become responsible for the actual submission.

I suggest you contact the lenders that you broker Fannie and Freddie loans with and see what they choose to do. Further, this may affect VA and USDA. I’m not clear on that yet.

Here is a Industry Cheat Sheet for your use. This may help you. https://www.fanniemae.com/content/fact_sheet/ucd-fact-sheet.pdf

As always, contact us via email with any questions, but not until AFTER you have read these links please. The answer may be there.

Nelson A. Locke, Esq.

Compliance Services USA

(800) 656-4584

 

 

 

 

To advise your clients of the recent Equifax NPI mega-breach……

Here is a letter format you can use as either an email or a printed letter. It might be a good idea to include a copy of this with new loan applications for the next 180 days or so. It might even be a good idea to link your website to the below press release, you could do this on your IMPORTANT DISCLOSURE page.

EQUIFAX CYBERSECURITY INCIDENT

Dear Client,

Equifax announced recently that they had experienced a “cybersecurity incident potentially impacting approximately 143 million US customers.” Because your recent mortgage transaction with us may have involved a credit pull from Equifax, we felt you should read the attached Equifax press release.

https://investor.equifax.com/news-and-events/news/2017/09-07-2017-213000628

Equifax states it has established a dedicated website which can be accessed at this link www.equifaxsecurity2017.com to help consumers determine if their information has been potentially impacted and to sign up for credit file monitoring and identity theft protection.

Sincerely,

Your Name, NMLS Number, Address, and Phone.

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Thanks for reading.

Nelson A. Locke, Esq.

http://www.expertlenderservices.com

 

 

Quit guessing when you make a job offer or hire a new MLO.

nl@lockelaw.us

Hi folks,

I get a lot of requests from clients who are hiring new MLO or other staff and are unsure of what they need to do to have a good solid hiring package.

So I created one for you. It is about 50 pages long and includes everything from an offer letter all the way to a copy of the generic HR manual. All you should do is pick the pages you need and put them to use.

If you would like this,please click below and send a request. It is FREE to current clients and $250 to non-clients.

Our Compliance Program includes all your Manuals, Annual Training, electronic media audits, Safe Act and DF Certification, and our exclusive Audit Protection Plan. Our annual fee works out to about 150 bucks a month. All inclusive. We accept credit cards. When the regulator sends the audit letter – you are NOT alone.

To send a contact request for this package, click here. nl@lockelaw.us

If you received a file named MLO Hiring Package already, it had two missing pages. I have already re-sent MLO Hiring Packaged FIXED to you. If you have the old one, just destroy it.

CLICK HERE to view our Web Site.

Compliance Services USA
(800) 656-4584

Discussion of the October 2017 RESPA TILA changes …….

Comments on changes to the 2017 RESPA TILA Rule HERE. 201707_cfpb_Executive-summary-of-2017-TILA-RESPA-rule1

This is a poorly named Rule Change. Compliance is optional from October 2017 to October 2018. Compliance will become mandatory for applications received on or after October 1st 2018. Many are under the impression these changes must be implemented this October. Not so. You can implement changes according to any plan you create before October 2018, but you must have all changes in place October 2018.

Here are the key points and please remember, these are mandatory in October 2018.
1. Choice to use a CD versus an LE when checking tolerances and good faith. This is the creditors choice, not the broker.
2. Servicers will be required to provide consumer disclosures regarding partial payment policy and notice of the closing of an escrow account that was subject to RESPA.
3. You must treat cooperatives as if they were real property and provide the required RESPA TILA disclosures, regardless of how your state classifies cooperatives. Some presently call them personal property and claim they are exempt from these disclosures.
4. Now, Loans to Trusts are subject to all disclosures. Trusts will be treated as if the credit extended to natural (not artificial) persons. This is curious and should be sending a message to those of you who bundle 1 to 4 family units into new LLCs and claim exemption from RESPA-TILA. Small commercial is on the radar for RESPA TILA.
5. There are clarifications regarding construction loans. If there are going to be two phases, you must provide two GFE within three days of receiving the application for the particular phase. If only one transaction, then only one disclosure. There are many clarifications regarding how to allocate costs – see page 5 of the report attached above.
6. Simultaneous closings of a purchase money first and second – allows you to disclose the loans combined. I always recommended this. The law says your client has to understand the big picture. Have you ever seen a client try to add together two sets of GFE or LE or CD?
7. Tolerances now say if overstated, still ok. If understated more than $100, not OK.
8. If you fail to allow a consumer to shop for settlement services, there is ZERO tolerance.
9. Loan Estimate guidance is on pages 7 and 8.
10. Written list of Providers – see page 10 bottom. If you don’t use the special layout for the disclosure, you might lose the safe harbor.
11. SHARING DISCLOSURES – you can do it. Just be sure to correct so that what you send to the seller, for example, is what applies to the seller and NOT the buyer. And vice versa. You can leave the information you want to protect – off the form by providing it as blanks.

Respectfully,

Nelson A. Locke, Esq.
Mortgage Industry Compliance Expert
Attorney and Expert Witness
7800 Preston Road – Suite 118
Plano, TX 75024
Office (800) 656-4584
Cell (305) 951-2785
http://www.lockelaw.us
http://expertlenderservices.com

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

 

 

 

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.

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

 

Remember the CFPB rule that prohibited you from discussing your audit with your peers?

The CFPB’s proposed amendments to its rule on the disclosure of records and information is now the subject of a blog post written by Compliance Attorneys Ballard Spahr.

Entitled “CFPB Proposal Unconstitutionally Imposes Prior Restraint on Regulated Entities’ Speech,” the blog post focuses on a provision in the CFPB’s proposed rule published in the Federal Register on August 24, 2016.  I previously advised you all about this. The provision would prohibit the recipient of a civil investigative demand (CID) or letter from the CFPB providing notice and opportunity to respond and advise (NORA) from disclosing the CID or NORA to third parties without prior consent of a high ranking CFPB official.  The blog post explains why the proposal is not only ill-advised as a matter of public policy but is also unconstitutional both as a prior restraint on speech and a content-based restriction.

The CFPB’s proposal also includes a provision that would expand its discretion to share confidential supervisory information with state attorneys general and other agencies that do not have supervisory authority over companies.

I have previously blogged that I felt this was one of the most stupid, ill-advised rules I had ever seen. If mortgage industry participants cannot share their audit experiences they lose the opportunity to benefit from a peer’s audit and thus improve their operations based on someone else’s experience. Benefitting the consumer, of course. At other time in any other universe, working together would have been encouraged.

So let’s see how this ends up. I would bet Mr. Trump would have a field day with this rule.

Call me if you need assistance with your Compliance Program. A nationwide service, we have hundreds of satisfied Brokers and Mini-C’s and we can assist you as well. Ask about our Audit Protection Plan. Nothing like it, anywhere.

(800) 656-4584 Extension 103

CLICK HERE  to view our web site.

 

 

 

Have a laugh on me. Read below.

I just received a marketing email that came from a think tank in DC. It made reference to something called the Data Transparency Coalition, and was presenting training on financial transparency to be presented by a representative of the  US Treasury.

So, at the bottom it also said this:

“Workshop Available to Federal, State and Local Government Employees Only. Press is NOT Invited to Attend to Permit Candid Discussion at this Educational Workshop”

nutface

Would you find this as amusing as I do? What are they discussing that they need to exclude some outside attendance? I swear its true.

Also a quick comment on those of you who feel like Dodd Frank will be abolished. Just my opinion, no it won’t. It will be modified and refined and probably made smaller. But it is here to stay. The great recession will guarantee that we will never be allowed to operate without stricter compliance parameters. Don’t delude yourself.

It is the end of the year and many of you must re-certify for NMLS and State purposes – making important statements about your compliance in your financial reports.

If you are stretching the truth or maybe not ready for an audit at all, please call us at (800) 656-4584 x103. We can help and if we hear from you this week we can certify you for year end. We work pretty quickly this time of year to insure you can be truthful when you re-certify.

With respect,

Nelson A. Locke, Esq.

Compliance Services and Locke Law US, LLC

(800) 656-4584

Audit Rating System Finalized.

The Federal Financial Institutions Examination Council (FFIEC), whose members include the CFPB, has finalized guidance setting forth a revised uniform interagency consumer compliance rating system (CCRS).  The revisions reflect changes in consumer compliance supervision since the current rating system was adopted in 1980.  The other FFIEC members are the Fed, FDIC, NCUA, OCC, and State Liaison Committee.

The FFIEC members plan to implement the revised rating system for consumer compliance examinations that begin on or after March 31, 2017.

The CCRS includes three categories of assessment factors: board and management oversight, compliance program, and violations of law and consumer harm.  The assessment factors in the three categories consist of the following:

  • To assess an institution’s board and management oversight, examiners will consider: oversight and commitment to the institution’s CMS; effectiveness of the institution’s change management process; comprehension, identification and management of risks arising from the institution’s products, services, and activities; and any corrective action undertaken as consumer compliance issues are identified.
  • To assess an institution’s compliance program, examiners will consider: whether the institution’s policies and procedures are appropriate to the risk in the institution’s products, services, and activities; the degree to which compliance training is current and tailored to risk and staff responsibilities; the sufficiency of monitoring, and if applicable, auditing, to encompass compliance risks; and the responsiveness and effectiveness of the consumer complaint resolution process.
  • To assess an institution’s violations of law and consumer harm, examiners will consider: the root causes of any violations identified during examinations; the severity of any consumer harm resulting from the violations; the duration of time over which the violations occurred; and the pervasiveness of the violations.  The CCRS includes incentives for self-identification and prompt correction of violations.

The revised rating system uses a scale of 1 through 5, with 1 representing the highest rating and lowest degree of supervisory concern and 5 representing the lowest rating and most critically deficient level of performance and thus the highest degree of supervisory concern.  An institution’s overall rating under the CCRS is intended to reflect a comprehensive evaluation of the institution’s performance under the rating system by considering the categories and assessment factors in the context of the institution’s size, complexity, and risk profile.

The CCRS does not assign specific numeric ratings to any of the above assessment factors and an institution’s rating is not be based on a numeric average or any other quantitative calculation.  As a result, an institution does not have to receive a satisfactory rating in all categories to receive an overall satisfactory rating.  Conversely, even if some assessments are rated as satisfactory, an institution can still receive an overall less than satisfactory rating.

The important note is YES this does apply to small Brokers and Lenders and has already been rolled out in a few states. In recent audits, it has been used thoughtfully and seemed fair. Frankly the people having the worst audit experience are those who think they are somehow “above” the process. Be warned.

Nelson A. Locke, Esq.

(800) 656-4584

http://www.lockelaw.us

 

On December 1st, the FLSA “Overtime Rule” is being updated. Who does this affect?

Back in May 2016 the Department of Labor (“DOL”) announced that effective December 1st, 2016 employers would have to raise the salary level of exempt employees to $47,476 per year for the employee to still be considered exempt. That is about $900 a week.

Now I am getting panic calls and emails asking me if this means you should increase your mortgage loan originator hourly wages to keep the exemption. So here comes the shocker.  

Folks, your mortgage loan originators are NOT exempt. This December 1st rule applies to true administrative employees and managers. Based on last years DOL ruling, this new ruling does NOT apply to mortgage loan originators. MLOs have not been exempt since May of 2015. The MB had sued the DOL to make them exempt, but SCOTUS agreed with the DOL regarding the DOL ruling that MLOs were not exempt because MLOs were involved in sales.

Let’s start out with the history behind the rule.

Under the old administrative exemption of the FLSA, employees who are paid on a salary basis of at least $455 per week (pre-December 1st 2016) 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 cannot be considered exempt any longer. So December 1st does not affect them. It affects non-selling managers and administrative staff. The new level of over $900 a week is real. That is what you should review.  

Back to your MLOs. What can you do to protect yourself from being sued for overtime by a disgruntled or opportunistic former MLO?

  • Don’t fight the rule but rather have a policy in writing that prohibits any non-exempt employee (which is what the DOL calls your MLO staff) work beyond 35 hours a week unless approved in writing.
  • If you enforce this strongly I think this creates a rebuttable presumption for the DOL that you may have used your best reasonable efforts to comply.
  • You may experience an MLO who stepped outside his job description if he worked more hours than 35 hours a week without written approval. If you kept an eye on him or her and then they raise this issue, you can counter with an “ultra vires” or “frolic and detour” argument. The key to this is to enforce your policy and keep an eye on your non-exempt employees.
  • You would need a procedure in place that creates and monitors regular non-exempt employee time sheets and has your non-exempt employee sign a certification about hours worked under penalty of perjury every pay period, whether they have commission due or not. And you would need to demonstrate you enforce your rule and send people home when appropriate.

SUMMARY: Mortgage Loan Originators are non-exempt employees. As such they are subject to the protections of the overtime rule of the FLSA. If you don’t monitor and manage their hours worked, you can end up in a very bad place. Don’t prohibit overtime; rather require they obtain your pre-approval in writing. Next, monitor every pay period with non-exempt employee certification regarding hours reported. Keep these records carefully. When you find a violator, be able to show you enforce your own rules.

ONE FINAL COMMENT. We are still engaging with plenty of loan originators who think they can be paid as a 1099 contractor. The DOL decision applies the common law definition of employee.

Here you go, compliments of Black’s Law Dictionary. “Black Letter Law”.

“An employee is a person who works in the service of an employer under an express or implied contract of hire, under which the employer has the right to control the details of the work performed.”  

So you have a license that requires a sponsor who is paid instead of you, who provides you with documents, compliance overview, and training, and maybe even leads. And you must originate and process your loans under his or her direction. And then, your employer has to pay you from what he is paid, because you cannot be paid directly under the current rules.

If you still think you are independent, you are just not listening.  You are an employee.

 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

Ready for year-end certification?

certified

If your Compliance Program is older than 2014, is what you would consider marginal, or is made up of cut-and-paste, you need to take this last opportunity before 2015 ends to get a fully compliant program into motion.

As you renew your NMLS licenses your Company’s financial reports require you to certify that your compliance program is up to date and remain a priority of management.

If you are still unsure of what is frequently audited, we have developed an audit checklist for your use.  Our checklist is current as of November. Some states have expanded on it but this is what we could consider to be a safe minimum amount of preparation.

We recently expanded staff and can guarantee that any new client who contacts us this week will have the tools to be compliant by the Holidays.

Please let us hear from you. You don’t have to keep worrying about this and you don’t have to suffer the results of a bad audit.

To receive a copy of our Audit Checklist, CLICK HERE.

To call us, dial (800) 656-4584 anytime. Thanks.