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

Paying unlicensed mortgage loan originators or their proxies

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

Advertising Issues

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

Mortgage Call Reports that are inaccurate.

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

Lack of Evidence of continuity in your Compliance Efforts

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

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

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

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

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

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

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

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

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

Nelson A. Locke, Esq.

Compliance Services USA

http://www.expertlenderservices.com

 

 

 

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