Please read this brief blog article on the A+ Mortgage recent HUD Audit.
Analyze the A Plus Mortgage response to HUD’s findings on pages 19-24, and HUD’s comments which follow.
Question: You’ve just been hired to manage the loan originators at A Plus. What’s your action plan?
I am glad that A+ Mortgage is being penalized for their bad deeds. People in this industry should be honest as yuo are impacting peoples livelihood.
I disagree with the FHA stipulation that loan originators must be a W2 employee as this causes a decrease in FHA business from 1099 LO’s. Also, as long as the mortgage broker reviews the file to assure specified guidelines are met no harm will be done to the client.
It’s no wonder HUD audited A+, their fees were outrageous! I can’t even imagine charging a borrower a discount, origination fee AND broker fee on top of receiving a YSP from the lender. It’s those types of lending practices that make it hard for everyone else, deceptive. Also unbelievable that A+ thinks thought they could justify charging those fees.
The first step a manager at A+ would need to take is to monitor their pipeline, where their loans are coming from and how the borrowers are being charged. Are they benefitting from a discount situation? Or being charged add’l fees on top of a discount, and why? Someone needed to take charge.
The fees that were charged are crazy and inexcusable. One would need to figure just who the LO’s are at A+. Then have a review of the application process making sure the costs & fees are disclosed properly on the GFE and the mortgage broker agreement is completed.
Some of the blame here needs to go to the wholesale lenders. You are telling me they were not aware of the these escessive fees being charged? It wouldn’t take an Einstein for someone preparing final documents to figure this out.
If I were oversee the LOs in this company, the first thing would be to have them make a choice – do FHA and become W2’d or not do FHA and continue as a 1099’d LO (I agree with Rita that I think the requirement to be W2’d is stupid. It is not in the best interest of the client. In our town, the best LO’s work for companies that either only use 1099’d LOs or they are not FHA approved.)
I would also have a fee sheet that must be filled out showing every penny, it would be reviewed prior to closing and the HUD would need to match it or those fees would not be charged unless there were documentation in the file showing the reason for the fees with a disclosure signed by the borrower that they were aware and approved of the fees. Everything would be reviewed prior to close.
The disclosure of fees as discounts while still earning Yeild Spread is a blatant lie to the borrowers. Obviusly the lo’s where taking advantage of the situtations.
I would probably have a hard time accepting a position to manage the LOs at A+ Mortgage, since it sounds like they have severe moral issues from the top down, and I wouldn’t want to affiliate myseflt with that type of company, BUT, for the sake of the argument, if I was hired to oversee the loan officers, the first step would be suspend origination of all FHA loans and then convert the staff to W-2 employees, so that we could continue to originate FHA loans. Secondly, the fee structure would need to be reworked as well, with only acceptable fees allowed to be charged. Thirdly, I would begin re-training of all the loan officers regarding compliance and ethics. Also, I would do individual audits on each loan officer as well. While the management ultimately bears the responsibility for promoting and allowing those practices to go on, I am sure if that is the culture they promoted there would also be a lot of unsavory practices by some of the individual LO’s that could put the company at risk again, even if they are trying to clean up their act.
Wow! A+ needs a compliance department.
If I were to manage the LO’s at A+, I would first start by making sure they were all W-2 employees as required by law. They would need to determine whether they would want to work for A+ exclusively or work elswhere. You can not work for two financial institutions at the same time.
Then create a compliance department and view all files before they close. I think it would be great to make sure every customer has been fully disclosed.
This would protect the company and the loan officer as well.
It would be tedious but worthwhile for everyone involved.
And you wonder why we’re in the mess we are. I would start by having 1 1099 LO and the rest W2 employee, have a set pay scale and have it posted at each desk, train them in ethics. I would assign someone to look over all and every loan that is wrote and approve it. That person would report to me and I would meet once a month with them to go over everyones work.
1. Immediate compliance audit of all files originated and still open within the last 30 days.
2. Obtain a complete listing of all lo’s currently employed by A+
3. Obtain evidence of current licensing of all LO’s and resume to establish education level and employment history.
4. Mandatory compliance class every week with testing to insure loan officer are clear on what the compliance requirements are per law.
5. All loan officers to sign addendum to employment contract addressing penalties for failure to follow compliance law and company policy – official company policy form to be provided and reveiwed will all employees.
6. Implement a performance improvement plan to address consistant violators and either improve the understanding or terminate.
As I have found within the last 6 months or so, a significant portion of my business is FHA, so that approval is very important to me to have acquired and to maintain. For me, compliance heavily outweighs the temptation to attempt to find loopholes or ways around the guidelines.
I am glad that A+ has beeen exposed and reprimanded. We can now reference this case in order to broaden our knowledge base on the issue and laws regarding it. Although there are aspects of the legislation that I disagree with, for instance having W-2 requirement, the parties involved have now been further encouraged to become educated about the product, the clients who this is most beneficial for and the importance of educating them, and complying with the legislation in order to maintain the ability to do these loans that are proving to be of great value to many of us in the times that our industry is in.
I remember being approached a couple of years ago by A+ mortgage as a possible recruit to their program. Their organizational structure was very much like Amway with the top management earning cuts of LO’s commissions. There was no incentive to offer products that were good for the consumer…
So, I wouldn’t consider working as a manager for them until their corporate structure was revamped. They should hire Denise Swafford. She’s got the right answers for action and it is exactly what I would recommend too.
Personally, I think I would decline the offer! I currently work as a processor, and it is my responsibility to make sure all of our files are in compliance through out the whole process – begining to end. I am a real nag when it comes to compliance and for this reason! I dont think originators really understand that you have to reimburse your clients…you just dont get a slap on the hand. One thing that I would like to know is on top of having to return the fees, were the fined anything? I agree with Denise, however on #5: “All loan officers to sign addendum to employment contract addressing penalties for failure to follow compliance law and company policy – official company policy form to be provided and reveiwed will all employees.” I would like to know what you think an approprtiate penalty would be? I stongly believe there should be no tolerance..
Whew, I think I’d have to shoot myself if I took that management job! But if I were nutty enough, I’d just start over! Obviously, everyone (or nearly everyone) would have to GO, hire new LO’s (W2 in this environment but ethical, qualified 1099’ers if that ever gets changed)initiate in-depth training programs (including ethics and customer service!), standardize Policies and Procedures, audit every file before submission…. and so on, and so on…. oh, yeah and what about a periodic review of Fiduciary duties… I loved the comment about seeking the “gold” or the “golden rule”…
If Ive just been hired to manage the LO’s at A+ my first course of action would probably be to get some new LO’s. I guess benefit of the doubt should allow for an opportunity for re-training of many of these guys but at the same time I beleive you get what you attract and many of these guys may represent a cross section of the morons who helped put us in the position we are in today. Ive met many A+ LO’s….
Regarding FHA requirement to be stricly w2…Clearly the banking industry will benefit in the long run. LO talent is running for higher ground I think.
I would begin surveying customers at the closing table. Then the next thing I would do is draft and circulate operating principles for both business development and loan fulfillment. We would review the next 10 closed files for each mortgage consultant to ensure that these principles were adhered to. Comp plans would be re-evaluated and balanced in the areas of quality, customer service and revenue. There would be limits on loan pricing, weekly production meetings, a culture of accountability, customer intimacy and building shareholder value.
For the purpose of this exercise I will assume that the owners are willing to grant a manager complete authority. With that in mind here’s my action plan to be completed within 5 business days.
1. Immediately brief all LO’s of the forthcoming changes to
include the requirement to convert to W-2 employee status.
This may eliminate some LO’s and will be the “first cut”.
2. Interview processing staff to determine their level of
competence. Hopefully there is someone with the attitude and
experience of jenn fick.
3. Assign the most experienced and dedicated processor
to the position of Branch Office Supervisor and Compliance
Officer.
4. Establish an internal operating procedures for LO’s and
staff to ensure strict compliance with existing Federal
and State regulations. Zero tolerance for non-compliance.
5. Assemble remaining LO’s for briefing on procedural changes.
Administer a brief no-notice quiz on basic FHA and disclosure
requirements. This may eliminate a few more LO’s and will be
the “second cut”.
6. Conduct individual LO interviews to determine who will on current knowledge, attitude, and willingness to adapt to the new environment. Make the “final
cut”, organize the new team, and complete the final W-2
processing.
After 30 days arrange for an outside independent audit to ensure the company is in full compliance. Make any procedural adjustments necessary and request a 90 follow-up audit. If you haven’t got it right by then you need to start thinking about another career.
Because I work with Primerica – all I do is get the client and submit the application to the Citi bank/Travelers office … so my question is what can you be charged for a loan … I haven’t paid any attention because the loans I see the people have already been charged and I know what my loan does and will charge.
I can’t even imagine charging a borrower a discount, origination fee AND broker fee on top of receiving a YSP from the lender. – noted this broker fee and origination fee are the same charges – discount I thought was something totally different. Please advise
First I would Never take a job with a company that has these type of ethics or lack of them!
First off the management would have to be trained (that is if any of the existing staff would remain on board) and be well versed on the policy and procedures of the company. That being said, I would actually have to write a policy and procedures manual including maximum fees and appropriate conduct because I believe they don’t have one. If they do, no one uses it.
It would be a very long process but worth it if it would produce honest and ethical originators for the clients.
If I had to manage these loan officers, I would first make sure that only A+ employees are originating FHA loans. I would also have a series of training sessions and go over the guidelines for FHA. This company needs an internal audit process to ensure that loans are being properly disclosed in the beginning of the process and also also to ensure that customers are getting what is qoated them. If these gfe’s had been audited to begin with someone would have caught that both a discount and a ysp was being charged. Even after a loan is locked an auditor could require that the lo either lower the rate charged the borrower to charge the discount, or remove the discount fee and disclose the ysp. Both should never have been charged.
This is kind of thing that gives this business a bad name. If I were the new manager I would 1st fire all LOs with these bad loans. There is no excuse for this kind of unethical behavior.
Next I would make sure everyone doing FHA is a W2 employee and require them to take FHA traing before originating FHA loans.
Going forward I would “audit” most if not all the files going through for any violations of unethical loan charges and fees.
There is so much conflicting information on this. I have taken
classes on FHA lending and have been told you must be a W2 employee
and can not work ANYWHERE else, (ie:not even part time as a dishwasher) while closing FHA loans. DFI in the state of WA says otherwise, or at least they did when I checked with them. So again
much confusion. Charging a discount and a Mortgage loanorigination fee is not allowed on any transaction, FHA or otherwise. Taking over as management of this company would clearly require training, training,
and more training of all LO’s, and close scrutiny of compliance on all
files.
I feel the company was too out of control with so many branches and the compliance was way too loose and they lost control.
This audit was clearly needed although there would be no way that I would want to go in and fix the problems. It is fixable for sure but the reins have to be so tight.
The loan officers/processors would need alot of training, files reviewed and then reviewed again by compliance dept and somebody must looks at the fees before docs go out. It must match the GF signed and dated within 3 days of ordering docs and the fees must be in compliance with the program and never charge is discount if you get YSP…the borrower(s) were taken advantage of by greedy LO’s
People like this is what cost the bad wrap for LO’s and Brokers
My action plan would be to start by having my LOs be w-2. I ultimately would want all my LOs to be able to handle FHA and not turn anyone away just because they didn’t know how to do it. I would then follow up with monthly scheduled trainings not just on the guidelines of FHA but also overall office practice as well such as consistency in fees. The fees from this report were not only through the roof but also all over the board.
The very first thing I would do is to imposed strict rules of following the State and Federal Law. And to exercise the Ethics in Mortgage Industry. I would like that all loans be processed by an in house Loan Processors.
I will employed real good Loan Processors to check all the fees and disclosures and see to it that they are all in compliance.
And if there’s is loan fee then there’ll be no YSP. If there’s YSP then there will be no loan fee. And that no check be paid to any loan originator not until everything is in compliance not only to state, federal law but also to the rules and regulations that are imposed in the mortgage company.
The question , it seems to be illogical.
They were audited and shut down , they should not be working
WOW the audit of FHA case # 561 8275604
$935 orig fee
$3,043 Discount with $ 3,084 YSP and a $3,545 broker fee
There is no legal way to collect a discount and YSP both !
A discount has to buy the rate down
A+ collected 5.7% of the loan amount as thier check !
Unbelievable to make that commission on an FHA
Definitley not acting in the best interest of the borrower
My question is the escrow person should have noticed this error
the LENDER who paid these discounts would have seem thisxtra fee on the final HUD and yet they still funded or bought them ?
Why is the name of the investor who paid the YSP and saw the final HUD not named in the audit ? They are guilty also
The employees of A+( excuse me the 1099 independent contractors )
need to be w-2 and EDUCATED and must attend courses immediately
have an instructor come to the work site
Now if they are real estate agents also working for A+ they have to chose which profession they want to work in
I would also not allow the title company closing agents that closed the audited loans not to handle any more !
Finally I would get the name of good attorney and keep him on the pay for there are bound to be some unhappy customers .
any more closing .
By looking to the Audit report, while being hired to Manage the Loan originators at A Plus, First, I will make sure that proper trainng is on place. I will follow up on the Audit report and make sure that all unfare practices are taken care of. I will consider to hire an Attorney not just to look for the upcoming unhappy customers, and to allow this attorney to be part of the Internal Control process on all Loans specially the ones with FHA funding. New and more effective procedures will have to be implemented and follow up to repay any and all disallowed discount points; Fees and Other originating fees that exceded the 1% allowed for this loans.
It is a very good action that audits like this one on A Pluse are in place in this challenging times for the good of the borrowers.
The audit exposed several areas of concern in non compliance . In particular it exposed areas of over charging according FHA’s guidelines that resulted in over payment by the client . According to the report A+ was not completely honest in the charges of the cost of loan. There were other areas of non compliance that puts A+ in shady grounds . If A+ were to continue to operate a complete over hual of doing business should take place ! First of all IT should comply with all recomendations of the audit. It sould provide training to all staff especially to the lo’s . An aera of priority would be in caring for the client ,how to develop good relationships and to be professional The company should hire an internal auditor to review all files before submitting them for proccess.
The first company I worked for had the “owner”, the “branch manager” and several “team” managers… each team manager had a group of LO’s assigned to them. It was the team manager’s job to assist Lo’s with their files, and most importantly, every file had to be signed off by the team manager PRIOR to being submitted to the processors. If the file made it to the processors and wasn’t in compliance, it was kicked back out to the office manager…who took it up with the team manager and so on. ALL staff need to be trained in compliance. This was a good system for making sure files were clean prior to submission to the lenders.
If I were manager of A+ I would immediately establish a compliance review system that each file would undergo prior to submission. The LO’s would be required to undergo compliance training, and as required for FHA loans…become W2 employees. If the LO’s are not willing to comply…then they best not let the door hit them in the @%$ on the way out!!
There are several area’s of concern here… how were these loans funded and paid out? A lot of people turned a blind eye to these files.
It is my understanding that this company is still in business and operation under a different name? I guess I don’t understand why they didn’t have their licenses taken away.
The first thing I would do is get an instuctor for compliance training. Then follow up with all employees to make sure ALL of their paperwork is being done properly. Which would include reviewing doc requests and HUDS for appropriate fees.
I have only ever been a W2 employee as a Loan Officer, and haven’t known a broker in years that still paid 1099. I thought that was a thing of the past.
This reminds me of the Jerry McGuire Movie “greed is good !” Maybe these guys and gals could get together with Madoff and help him with his 50 billion $ scam. I don’t suppose anyone in this group could spell fiduciary either. I agree with Gail…..the W-2, 1099 LO situation is very confusing I don’t find it helpful that it is so vague.
I would get all the originators in a room eye ball to eye ball and lay out the compliance requirements which they then sign before they leave. Every loan needs to be audited be 2 office staff including the initial GFE. A loan officer without proper over site is no safer than a 3 year old with a loaded gun to play with. Make sure the office staff are good mommies or send the kids to live with someone else.
I liked Jeff Rafuse’s response as to what would I do to improve the situation. I am always amazed at the level of greed that occurs in this industry. So many times we hear about the LO being predatory and yet how many times we seen financial institutions promoting predatory practices. It was refreshing to read this article and I hope we see more of this in the future.
I thought all files was audited by the broker and have to be in compliance before getting paid. My broker would hold my commission if the file is out of compliance.
I think that it’s great that A+Mortgage had to pay back the money that they basically scammed from the unsuspecting borrowers.
I have been able as a W2d employee to secure FHA loans for my clients for only about a year now. There were definitely negative aspects of the change from 1099 to W2d employee. I think that needing to be a licensed Loan Originator in this state should be regulation and “control” enough to allow 1099d contract LOs to secure FHA loans.
It seems that I share the rest of the people’s opinion on A+. But I would go one step further and close them down and let them be an example for the rest of the industry. Why are they still operating?
If an LO is going to charge their clients that much, they certainly do not care about them which means they would not work on the clients behalf, right? Close them down. This industry needs some regulation.
Get all the originators in a room eye ball to eye ball and lay out the law to them. Have 2 people review each file and follow compliance. Chop off any one that squeals.
First I would hold a meeting and tell all the employees what a mess this company is in and that in order to continue in this business we must do a clean up.
Verify all the employees have a license
Test their knowledge about FHA loan
hold monthly/weekly FHA meetings with up to date information regarding current isssues and or regulations
Make sure there is not cofusion about guidelines when dealing with an FHA loan.
Verify all employees are getting a W-2
Make sure this office is in compliance at all times.
Shame on A+ Mortgage. You are not allowed a mortgage discount and YSP. Of course they should pay it back to the consumers. DISCOUNT is to buy the rate down and generally is paid to the lender. Managing this would mean a clean slate and retraining fresh. I don’t know what it matters to be W-2 vs 1099 for FHA loans. either way you pay taxes on your dollars made. I heard loan originators having FHA approval must be w-2 which is fine by me. I have no trouble with that regulation.
If the decision was mine the office would be shut down and license revoked. To many violations and no accountability by A+ Mortgage. This is exactly what gives this industry a bad name. But thats not what your asking.
The first thing i would do is change everything. Need to get into compliance with State and Federal law. W-2 all employees. Start compliance training instantly. Bring all branches into compliance. Monitor all fees. All fees must be disclosed properly and explained to homeowners. Weed out all bad LO’s and report them to the State. Audit all files and work with the State to correct them. Basically start all over.
WOW, they should have been nailed to the wall. I would have a compliance department that would review each file, and all LO’s would be W2, and would need to attend frequent meetings for updates and Etc. The actions of A+ do not surprise me as I have seen many brutal exorbitant fees charged. I hope to see some type of accountability here and in other cases that are brought to the limelight of society.
If I got hired on to manage this mess first I believe I would not work for these people because the issue goes higher than a Loan Manager. The cause of this mess is an attitude of non disclosure to clients from the very top. The only way to control a group that has been trained in predatory practice like this would be to fire them all. The main issue here is greed. I would establish and foster an atmosphere of focus on the client’s best interest and compliance with DFI. Full disclosure of yield spread and other fees would be mandatory. FHA requires w2 compliance. This company makes me mad.
That is a pretty sorry litany of charges:
As the HUD investigation showed, there was a company wide disregard for educating their LO’s in proper compliance, and making sure that completed files were compliant.
That function is the most important thing a “broker” provides, along with maintaining lender/bank relations.
Remember, you CANNOT charge a discount fee and earn a YSP!
Only one person is banned from originating loans, the owner, Gregory Nick.
However, the rest of A+ organization was absorbed into Sound Mortgage, where presumably, the uneducated and non-compliant LO’s can continue to originate loans.
Maybe they had them pass some kind of test. Like fogging a mirror….
Be more concerned with your character than your reputation. Your character is what you really are while your reputation is merely what others think you are. -John Wooden
I wouldn’t work for a leader without character as those who serve him will undoubtedly have less.
Furthermore, I too disagree with the W-2 stipulation for originating FHA loans as it is a greater disservice to those consumers who do, can, and will benefit from an FHA loan. Other guidelines are in place and/or can be added to protect FHA consumers.
Before being hired, I would want to know what kind of company this is, as well as the challenges it is facing. Obviously, one of the challenges is compliance and accountability.
Upon taking over the management, I would do the following:
1. Interview each originator and staff member. I would want to know what kind of people are working for me, and what challenges they see.
2. I would do a complete of audit of their systems and ensure that proper safe-guards and accountablity are in place.
3. I would review the FHA guidelines and past FHA audits to see what issues had arisen in the past, and to ensure that those issues had been corrected.
4. I would have each loan officer change their employment status to W-2, in compliance with FHA guidelines.
5. Each originator would also be required to sign an acknowledgement indicating that they are not working for or at any other firm.
6. I would make sure I had a capable compliance officer and processors who would help keep me out of trouble as well.
What a task to take on. But as Dennis said above you would first do a complete overview of the staff and systems in place. Then you would have to integrate procedures and rules that would make certain the client was treated in a fair manner.
As the manager I would make sure that a compliance system was created to insure that clients were treated in a fair manner.
As far as A+, the industry as a whole gets a bad rap because of companies like this.
This audit demonstrates the importance of clean business. Our clients should be treated like our friends and not someone we can take advantage of. Doing good and ethical business equals more and more referrals.
I would never want to manage any of those LO’s. My first question is why not have all LO’s w-2d. Why would a broker want their LO’s (that are 1099) to be able to do loans elsewhere? I am a processor and it is partially my responsibility to make sure that the loan is in compliance at the submission level and at the closing level. I hold all my LO’s accountable from the beginning at keeping in compliance. We never have a Broker fee and an origination fee at the same time, Especially since FHA loans can only have an origination fee. No Broker fee allowed! How do they get away with charging a discount fee and getting YSP!
1. check company solvency before accepting the job
2. take care of obvious housecleaning
3. briefing of remaining employees
4. office checks and balances and review of all new files by single accountable and knowledgable person
5. establish office policy each new loan entered
6. manage to best of my ability
It’s amazing to me how many bloodsucking companies remain trying to tke advantage of the consumer. Even after all the crap the industry has been through and how hard most of us are trying to pull through in a positive manner.
My plan of action would be to fire all upper manangement, establish a new code of conduct, and start weeding out any other bad seeds.