This is what should be on your Compliance Shelf.

Hi Folks,

We get asked a lot what we mean when we talk about the power of the Compliance Shelf. So I decided to tell you and show you a few pictures. These are from clients of ours.

When you are visited by your regulator it goes pretty far if he or she notices a dedicated area for your Compliance Manuals and Notes (the “Compliance Shelf”). The mere existence of this shelf creates an impression that your company takes compliance seriously. So you come out of the audit gate having impressed the regulator with your preparation. That good first impression.

What does a strong Compliance Shelf look like? It has your Audit Policies and Procedures, your MLO Policies and Procedures, your Regulatory Reference Book, an Advertising Log (back two years), a Customer Complaint Log (back two years), and finally, your QC Manual and Audit Report Log, with copies of all audits and management response. Here are two examples – the one on the right was recently audited by Texas and passed.

Books   WP_20160112_001

But please, don’t think for a moment that just making this impression will save your audit from disaster. You need to live by your policies and procedures. You need to know what they mean and you need to put them into practice.

Compliance is not a part time thing. You must form a “habit of compliance”. Every day, every file. That’s how you have good audit results. It has to be your company culture. Your “shelf” is just part of the big picture.

So, what’s on YOUR “Compliance Shelf”?

Want to learn more? Call us at (800) 656-4584. Over and out.

(Thanks to Eddie and Fred for providing us with these outstanding pictures.)

Is your compliance consultant licensed? If you need a license, shouldn’t they?

Audit satsifactory

When a mortgage broker or mini-correspondent is making the important decision to retain a compliance firm one of the most important things they should consider is size. In this case, big is not always better and here’s why.

We hear from around 50 mortgage brokers and mini-correspondents a week. Many are already clients of our compliance audit prep and defense practice – calling with a question. The rest, well, they are fishing for the answer to how to best protect themselves as they realize how far out of compliance they actually are.

Some are impressed with large national firms that run full page advertising in trade papers. As they swoon over the large ad they fail to notice that the company employees non-attorney staff that are not trained to reason their way through all these regulations and understand the true meaning of the regs. That’s not us; I am an attorney with special training  regarding the CFPB, HUD, and the APA. Acting as your compliance advisor we will help you reason your way through regulations.

Sometimes the mortgage broker or mini-correspondent fails to ask if the compliance consultant has ever actually been a mortgage broker. And most of them have not. Ask if the consultant has an NMLS license. WE do. I originate loans and hold several NMLS licenses. This means when we work with our mortgage brokers and mini-correspondents we understand the process and how to integrate regulations with reality.

Integrating regulations with reality. Does that sound good to you? Further, would you like working with someone who is available quickly via email or phone to guide you at those critical decision moments? That’s us.

Call today, let’s get together and get you compliant before you find yourself holding that audit letter and wondering what you will do in your next career. Just sayin………

(800) 557-6580

More Changes for Brokers and Lenders – no longer exempt?

It now appears that after a five year period of uncertainty and an appeal all the way to the Supreme Court, Mortgage loan officers are now entitled to a 40-hour work week and overtime pay. The U.S. Supreme Court has now ruled that the Department of Labor was within its rights when it chose to reclassify loan officers as non-exempt employees who are eligible for overtime.

scalesOfJustice

In ruling on the appeal, Perez v. Mortgage Bankers Association, the Supreme Court concluded the Department of Labor did not violate the Administrative Procedures Act when it made the change to the loan officer rule. It justified the decision by concluding that the agency was not held to the APA when issuing an interpretive rule. There were three dissenting opinions, predictably from conservative justices.

The suit, which was championed by the MBA, caused the MBA to report it was “disappointed” by the decision, but is ready to move forward and help its members work within the confines of the rule.

WHAT DOES THIS MEAN FOR YOU?

Let’s just start by saying, this is not going to be negotiable. It’s a Supreme Court Decision, it’s over. Thus, I really don’t know where to start. That’s because I still fight with brokers and lenders at least once a week who still think W-2 or 1099 is an option for their employees.

Now we have to tackle the idea of time sheets? How are you going to get them to comply? And can your cash flow handle this? And if you set up some form of sham pay plan, are you ready for the inevitable FLSA claim as soon as someone gets angry with you? I’ve been there and it is not a good place to visit.

Further, this is a “top five” source of fines resulting from an audit.

There are options. This is what I do. If you need to talk about options to comply with this change and not go broke, call me at (800) 656-4584. And open your mind, because no matter what you do, it will be change. Over and out.

An Audit Horror Story, will your audit sound like this one?

Fear Name Tag

Last month I was contacted by a very frightened Mortgage Banker, a small shop with about seven employees doing Agency loans.

This woman tried her hardest to always do the right thing but made three big mistakes that I believe will cause her to lose her license. It was avoidable. I got to thinking; is this YOUR story? So I will share just enough of the story  that you can ask yourself that very important question. IS THIS YOUR STORY? Here’s part of what happened.

1. The Banker accepted assurances from staff that compliance and quality control were up to par. They weren’t. Staff gave the quick answer, because they were employees not owners and not invested in the need to tell the complete truth.

2. The Banker’s Company did not have any kind of written customer complaint policy in place. Then a consumer had a “bad experience” and complained to an Agency. When the regulator showed up unannounced to investigate the complaint, which is what they do; a presumption of non-compliance was created when no customer complaint policy was found to be in effect.

3. Once staff became sufficiently frightened by the regulator’s presence staff engaged in “self help” after the fact and tried to “fix” the problem file. They thought no one was looking. Well someone was. A regulator was looking. Now we also had a presumption of dishonesty. This is the one that will always result in the worst possible scenario for the Banker. The presumption is the attitude came from the top. That’s you, right?

Fearful

This Banker will likely lose her company’s  Lender Approval, and may even lose her personal MLO license. All of this was avoidable. How?

An honest assessment NOW about how good your program really is. Just because you spent a lot of money, does not mean your compliance program is good. It just means you may have paid too much.

Consider the use of an outside Compliance Expert to examine what YOU do and tell you if it is sufficient to keep you in that “presumption of compliance” zone.

Train your staff; tell them the consequences of conduct such as what I have described here.

Keep an eye on them.

Consider appointing your outside QC person as Agency liaison. This keeps the contact professional and does not disrupt staff where they get to the point of fear.

This is what I do. Call me at (800) 557-6580 and ask for help.

So, can you talk amongst yourselves about what happened during your audit? You will be shocked at this opinion.

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This week, the Consumer Financial Protection Bureau (CFPB) notified mortgage lenders on how to treat confidential information related to the agency’s examination practices.

Under the CFPB’s regulations, reference is made to CSI. CSI may include any work papers or other documentation that CFPB examiners have prepared in the course of an examination. Any CFPB supervisory actions, such as memoranda of understanding between the CFPB and an institution and related submissions and correspondence, are also considered as confidential information.

Even if firms have signed private confidentiality and non-disclosure agreements that restrict the sharing of certain information with a regulator, the NDAA may very well be considered voidable and superseded by CFPB regulation.  The Bureau has authority over certain non-bank financial companies such as mortgage lenders and servicers, payday lenders, private student lenders, as well as large debt collectors, consumer reporting agencies, student loan servicers and international remittance providers.

So this bulletin addresses the work papers prepared by the auditor or regulator as they work their way through your records. What I think it means, is that even if you have a confidentiality agreement with a party, federal rules supersede that agreement and you are NOT allowed to discuss the confidential work papers of the auditors who examined you. So if there is a practice out there of sharing “audit stories” it may now become a violation to talk amongst yourselves about certain aspects of audits.

Unless of course a lawyer-client or other qualified privilege exist. Such as psychiatrist, pastor, spouse; etc.

Sounds a bit like shock and awe tactics. Not sure; maybe I have misread it. One things for sure, with all the complexity of the CFPB you will need a psychiatrist, and you already need a good lawyer.  The six page bulletin is available here.

Gramm Leach Bliley – Identity Theft – and “What’s in your wallet”?

I was recently working on a situation where we needed to see some old documents related to a file that was in controversy. After much pushing and pulling a third party produced personal identification, documents, and photographs that had originally been provided when that third party was an employee of a different institution. What were they doing with that information in their possession?  Was this proper? Can you keep personal information about your past clients to include materials that could create a risk of identity theft for them or a potential abuse of  their privacy?

I don’t think so. There might be some argument about regulatory record retention that you could try to rely on, but I believe the CFPB would look upon this as creating a consumer risk that actually had no purpose as an offset.

Now think, what’s in your “wallet”? Of course, I mean your storage files.

If you have any of this personal information, or have kept documents that should have been shredded after submission to your funding lender, I suggest you go to your storage facility and shred all of them right now. Keep only the file basics as required by state and federal law. Protect your client’s identity and privacy by shredding the supporting identification documentation.

Got it?

Let me work for you, Give me a call at 800-557-6580. Knowledgeable and affordable. Over and out.

Have your compliance questions answered within 24 hours by an expert at a fixed cost.

Many of my Mortgage Industry Compliance Clients tell me that before they found me, they sometimes waited days for a response from their compliance advisors. This increased chances that they would be in violation of a regulation and subject to possible fines.

So I set up a system to make this easy for you.

You can subscribe to our Q+A service on a six month or annual basis and I will respond to your compliance questions within 24 hours. If the matter is one so serious that I feel you should investigate your situation further, I will discount my hourly rate for anyone with a subscription. These are not canned answers, they are personal to your question.

This service is a nice compliment to the policies, procedures, governance documents, and training packages that I have already assembled. You have 24 hour access for questions. I have a new client. Win-Win, right!

Our new Plano office is one block away from a Texas Federal Courthouse. CFPB issues are federal and we are admitted to the federal bar. We can represent you when the CFPB comes knocking.

So, think about the value added here. What good does the big firm do you if you can’t get through to them?  Let me hear from you!

Have you scheduled your annual AML/GLB training? It’s a CFPB requirement.

Did you know that once a year, the new regs require you to train your staff (and yourself and your Board of Directors) on the nuances of Anti-Money Laundering and the Privacy Act. It does not stop there. You also have to test them, and retain proof of the tests and their passing scores.

And during the year, you have to provide the training to any new hire within 30 days of their reporting for duty.

Most Brokers and Lenders don’t take this too seriously. It will get you in hot water with the auditors and could cost you dearly if you ignore it.

The solution? Let me do it for you. I have a program that will provide both the annual and “one-at-a-time” training for you at one low cost for the full year. I even proctor the exam. All you have to do is show up via Gotomeeting. Which I also provide.

Give me a shout, there is still time to get this done before they come knocking on your door.

That’s it for now.

So, how do YOU pay your MLOs?

Man I get asked this all the time. Many of you (and you know who you are) seem to want to hang on to that wishful thinking that just because it sounds ok to you to use 1099, or the girl down at the 7-Eleven said that was how she would do it, or your MLO said he would quit if you made him pay taxes…… that the CFPB will feel the same. So let’s try to put this to bed once and for all. They WON’T.

If you exercise any kind of control whatsoever over your MLO you are likely in a W-2 situation and will be viewed as such during an audit. Control can be interpreted to be something as simple as sponsoring the MLO and having your name on their business cards. Let’s go a bit further. Do they use your office, or your electronics, or your 800 numbers, or your copy machines? Do they work when you ask them to work, even just some of the time? Do they have a desk in your office? What does their letterhead say? Do you pay their cell phone bill? Do they wear a polo shirt with YOUR logo on it?

This is an easy test. If they look like an employee they probably are. So now the CFPB and state regulators will look to see if you properly report their earnings and collect the required taxes. That’s when we see the next twist. Is it legal for you as the employer to deduct your half of their taxes from their gross pay, so the net effect to you is ZERO? No way. Do you do that?

As a consequence of miss-classifying an MLO you may end up dealing with not only the CFPB and your State Regulators, but also the IRS. Any of you ever been there? It’s no fun at all. And you have to report those pesky IRS liens to the NMLS and your Warehouse Line renewal. So,  time to get honest with yourself. Are you paying your MLOs properly? If so, do you have a good MLO contract, a hire letter, and a handbook to properly disclose your payroll procedures to them?

AND THEN THE NEXT BIG POT HOLE – IS YOUR COMP PLAN AND BONUS PLAN ACCEPTABLE?

If you don’t know or are worried I can fix this pretty quickly for you. Give me a call, I’m on it.

www.lockelaw.us

That’s it for now, over and out.