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

Does the recent SCOTUS decision about overtime affect you?

Overtime

On March 9, 2015 the Supreme Court reversed a ruling of the U.S. Court of Appeals for the D.C. Circuit that struck down a DOL administrative ruling regarding MLO overtime. The Court in a 9-0 decision ruled that because the 2006 DOL Opinion Letter was itself merely an interpretation of an existing rule and not a new rule with the force and effect of law DOL could reverse its prior position and issue a new interpretation without prior notice and the requirement of industry comments.

History – under the administrative exemption of the FLSA employees who are paid on a salary basis of at least $455 per week 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 should not be considered exempt any longer.

What can you do to protect yourself from being sued for overtime by a disgruntled or opportunistic former MLO? Back in 2002 this happened to me, so I can speak from some experience here.

First – don’t fight the rule but rather have a policy in writing that prohibits any work beyond 35 hours a week unless approved in writing. As long as you would enforce this strongly, I think this creates a rebuttable presumption for the DOL that you may have had an MLO who stepped outside his job description if he worked more hours than 35 hours a week. “Ultra vires” or “frolic and detour” argument. The key to this is to enforce your policy. You would need a procedure in place that monitors MLO time sheets and has your MLO sign a certification about hours worked under penalty of perjury each and every pay period, whether they have commission due or not. And you would need to demonstrate you sent people home when appropriate.

Next – your policy about overtime. Don’t prohibit overtime; just require a pre-approval in writing. Next, monitoring each and every pay period with MLO certification regarding hours reported. Be able to show you enforce your own rules.

OK, confused? I do this. Need help? Just give me a call at (800) 656-4584 and let me be your compliance guy. I am a plain talking attorney who is also an active MLO. That means I know how your world really works. My work always reflects logical application of regulations to the real world. As best as can be done. Your comments are welcome. Let’s stay out of trouble; it’s dangerous out there.

That’s it for now.

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.

Do you offer Reverse Mortgages?

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Usually, because of the unique nature of the product and the ever-changing regulations, you should consider having a compliance expert who has actually originated these loans.  In my experience, those traditional forward loan compliance people miss many of the nuances of the HECM program, leaving you to pay the fine. Maybe you need to think about that?

I have personally originated or supervised or underwritten over 3,000 HECMs. I am a DE Underwriter, licensed attorney, and Compliance Expert.

Don’t take a chance that your forward “guy” will actually know the differences. Protect yourself. Call me today.  (800) 557-6580

Take a look here.

“I just got an audit letter. What should I do now?”

Auditor Auditee 022015

When that dreaded audit letter shows up most brokers and lenders instinctively reach out to the regulator and try to start a dialog about his audit objectives. Is this a good thing? I will give you my opinion at the bottom of this post.

It’s always good to know why you were selected for an audit. There are three ways you are usually selected. First way: you have a customer complaint hanging in the wind and the regulator wants to investigate to determine the merit of the complaint and how robust your business practices are, or are not. Second, in the absence of a consumer complaint, an audit could be triggered by a suspicious activity report. A suspicious activity report (“SAR”) can be filed by any qualified industry participant who feels there is probable cause that you or your company may be doing something improper. “May” is the big word here, because this process gets very subjective. It is supposed to be taken seriously but I have seen it used improperly by parties who think that filing SARS makes them somehow look more compliant or concerned with proper operations. Finally, you can be selected randomly for an audit.

So here’s the deal. One way or the other, the auditors are likely coming. Let’s hope you are selected randomly. A random audit will follow the agency audit checklists and will be more friendly and personable.

However, if there was a SAR filed – and there is really no such thing as a “wrongful SAR” because the government impliedly encourages reporting which means literally  anyone wanting to impress their boss can recommend a SAR – you will be affected by the filing for years and approached with suspicion. If you think a SAR triggered your audit, be careful how you respond to the regulator. In fact, it is smart to have your attorney respond for you.

Now, if the audit was triggered by a consumer complaint you can usually tell pretty quickly. It is revealed by the auditor if asked. Your response should be to show you have a good CFPB compliant consumer complaint policy with a designated executive and a proper log book. This will show the auditor how your consumer complaints are handled and what the resolution was. This builds credibility.

However here is my best advice. For any audit notice call your outside compliance specialist right away. Appoint them your CFPB or AGENCY liaison. Let them do the “asking” for you.

By the way, I do this. Call me today. Before you find yourself in trouble. (800) 557-6580

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.

Financial Assessment is taking effect now – were your loan officers and underwriters prepared for the impact of this major change in our thinking?

This post will be about Reverse Mortgages and the upcoming implementation of financial assessment. While I direct it to HECM originators and underwriters, you can probably rest assured it will end up on the agency or CFPB’s future “check lists” for use during an audit. So, what is a financial assessment?

Financial Assessment

Effective April 27th, 2015, all HECM borrowers will be submitted to a soft underwriting procedure called the “financial assessment”. It is a review procedure developed by FHA with input from the Industry. It requires the originator to be more savvy when collecting the initial data and requires the underwriter to review the borrower’s financial situation and certify to HUD that the borrower is “HECM-worthy”, and that the borrower’s financial profile is such that it becomes unlikely the HECM would default and become a liability to the FHA fund down the road somewhere.

Credit will be scrutinized more closely. In addition to federal or other liens and problems with prior mortgages, the underwriters will now screen at an enhanced level looking for borrower patterns of financial irresponsibility regarding use of credit, payment of taxes, maintenance, and insurance.  Title histories will be scrutinized more closely for unusual changes in ownership. And as always occupancy will remain a key issue for underwriter comfort level.

While this assessment does not rise to the level of a full underwrite it is certainly much more involved than what our borrowers have had to satisfy in the past.

Underwriters, you know your additional responsibilities. You read  ML 14-21, 14-22, and HUD’s Financial Assessment Guide . But what about you originators?

You guys are going to have to  ask more questions, dig deeper into credit, verify more, and educate more. If you don’t, your borrower will hear it all from the counselor, and FUD will ruin your prospects.

Because I also originate loans, I just completed my first round with financial assessment. It was manageable. Your attitude is a big part of how you deal with this change.

I am available for a one hour webinar with yourself or your staff, to review this new development and provide some guidance especially to the MLO. All you have to do is call the number above. Affordable training done by a licensed compliance attorney who actually originates HECM loans, go figure huh.

Don’t lose business where you can avoid it. And don’t originate loans that don’t meet the new guidelines, because that disappoints your senior and upsets the guy who pays the bills.

That’s it for now. If you need me, just let me know.

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.

Tips to get your clients off that pesky “fence”…..and land the application!

fence sitter

We all know how hard it can be when you work with that certain type of senior who just seems incapable of making the “go ahead” decision. Sometimes they have really good reasons for taking their time. For example, they might be trying to decide if they should downsize instead. Or maybe they are thinking of selling and moving into assisted care. Or perhaps they are thinking about moving to another state.

But many times the decisional paralysis is the result of irrational fear. We have spoken about the fud factor in other sessions. Fud is what causes irrational fear. Many seniors have irrational fear especially as they age. Life is a bell shaped curve and self confidence follows that curve almost exactly. The older we get the less confident we are.

If you have encountered a client that is paralyzed by irrational fear, this audio might help you. It gives you tips on identifying six of the most common irrational fears, and how to address them.

Getting Seniors off the fence 091614

Read about my “TENS LIST” and how to use it to get more applications!

The most successful originators are the ones with the best discipline. They put equal amounts of time each day into farming or prospecting for new applications, as they invest in processing and closing activities on their existing files.

When I was originating, I knew I needed a system that would force me to be organized and consistent in my daily approach to finding new business.

And so, I invented the TENS LIST. Listen here to a short description of how it works.

Then download the example TENS LIST format and put it into motion.  Here’s the form.  LW Tens List 082114

Your applications will climb almost immediately.