I’m here at the Washington State Mortgage Broker Commission Meeting in Bellevue.
Licensing update: back in February of 2008 we had 1900 brokers in WA state with about 1700 branch offices. Now as of May 2, 2008 we are at 1500 licensed broker main offices with 1700 branch offices.
In February 2008 we had 13,000 licensed loan originators. Now, as of May 2nd, we have 7500 licensed LOs.
WA State new Licensing Program Manager Berri Leslie comes from Oregon.
Jim Brussleback, in charge of enforcement, was asked about complaints in relation to the industry’s hope that the “bad apples” were leaving the industry. The hope from the commission is that consumer complaints would fall as these bad characters left mortgage lending. Jim reminded the commission that even though a company or LO voluntarily surrenders their license, DFI may still decide to pursue action against that person or company.
Steve Bozik asks about the complaints regarding LOs. Jim says the majority of the enforcement actions revolved around the LOs license application and not necessarily regarding LO conduct.
More in the comments section….
Exam Violations found:
15 unlicensed loan originators operating at one company
Disclosing MB fees on line 801
Failing to display LO license numbers
Failing to establish a written branch supervisory plan
Failing to redisclose a change in loan terms.
Annual reports: as of this time, 1167 mortgage brokers have not filed their annual report. (That’s over HALF of the licensed brokers!)
Question from the commission: A broker had gone through a DFI examination. The broker was surprised at how far DFI drilled down into the business financials.
DFI Answer: There are several reasons why DFI would dig into a company’s financials. There might have been trust accounting issues, third party bills flowing in and out of the business account instead of the trust account, anti-money laundering problems, safety and soundness of the business, it’s just good to know the nature of the mortgage broker’s financial business practices.
DFI Director Deb reminds us that DFI’s exams are subject to public disclosure rules.
Commissioner Steve Bozik asks, “What can the MB Commission do to help brokers be in compliance?”
DFI: The mortgage broker can have a designated person at their firm in charge of compliance.
When you put a supervisor in place, put a system in place so that the LO’s files are reviewed for state and federal regulatory compliance prior to the documents being signed by the consumer.
Deb reminds the audience that if you have a compliance program in place, that you also….have to follow it. She is hoping that DFI can create some educational webcasts available (possibly might be aproved for CE.)
Question from Commissioner Jeffrey Lorsch “Did you find problems with companies pretending that unlicensed LOs were moved around into “new positions” in the company, such as “administrative assistant” when they really were originating?”
DFI answer: this is a tough question to answer. In the one company with 15 unlicensed LOs, some were posing as “loan processors.”
Deb: a number of LOs did not renew their license this year. Subsequently, we believed there may have been an uptick in the number of unlicensed LOs. We are now actively looking for this.
Pubic Comment Time
Question from John Long, Compliance Attorney, regarding the written supervisory plan for brokers and branch offices.
DFI: We found that the net branch offices did not have a written supervisory plan. The plan needs to be in writing.
John: Recently I’ve been told that the 3 day disclosure must be SENT within 3 days but doesn’t have to be received or “delivered” within 3 days. Which is it?
DFI: We have to have proof that it was provided (sent) within three days, such as looking to file logs, since consumers rarely date things they receive.
Earlier in the meeting, the Commission discussed the definition of a lender.
Assisting a person in obtaining a loan = mortgage broker
Making a loan = lender
General legal counsel Joe Vincent has opined that DFI has sufficient authority to define the term a bit differently than it’s defined in the CLA
Table funding in the CLA and correspondent lending IS “making a loan”
Consumer loan companies are also authorized to broker loans.
Senator Weinstein’s intent was to make sure that everyone in the mortgage industry whether making loans or brokering, is licensed in some way and had a regulatory body examining their operation.
Since then, DFI has learned that there are many different kinds of mortgage brokers:
True broker
Table funder
Correspondent lender without delegated authority to UW
Correspondent lender
Wholesale lender with authority to underwrite
Lender
DFI is looking at correspondent lenders and is figuring out where they fit: under the Consumer Loan Act or under the MBPA.
Commission met last week and took input.
DFI/Commission will make a decision by May 16th that will allow companies to make the change into becoming licensed under the Consumer Loan Act if they need to.
Everybody: Be sure to sign up to receive DFI’s listserve notices. This is how we will all be notified. Here is the link:
http://www.dfi.wa.gov/cs/mortgagelist.htm
I predict that DFI will follow federal law’s definition of “lending” (found in RESPA) and that Correspondent Lenders will go under the CLA.
It’s Almost Live, with Jillayne! Did John Keister show up to inject some levity in the proceedings?
Were there any follow up answers to the previous meeting questions?
Does fiduciary responsibility follow to CLA?
What changes in allowable charges on the GFE will there be? (I seem to recall hearing that most charges are allowed on the first mortgage but not on the 2nd.)
Thanks for going and reporting!
Hi Roger,
The one light moment was when John Long (a respected mortgage attorney known for his very direct, long-winded questions) approached the podium and a DFI representative said something like, “Oh, it looks like we’re all out of time.”
🙂
No word as to if fiduciary duties will follow licensees over to the consumer loan act.
I anticipate that this will eventually happen.
There was no questions as to allowable charges on the GFE. Perhaps this will come out during the rule-making sessions.
How is your daughter?
Great job covering the meeting Jillayne. I’m now reviewing my hand written notes and I’m sure they don’t compare to what you have here!
Hi Rhonda,
You might have some better notes than I do during the section where the examiner was talking about the results of the broker exams (audit.) Remember when he was reporting that there was one company that was operating with 15 unlicensed LOs? Your notes might be better than mine for that section. Let us know what you have!
Jillayne, I don’t have much…just that DFI found an office where approx. half of the LO’s were unlicensed and posing as processors or admin.
DFI feels that the drop in LO’s from from approx. 13,000 to 7,500 (I think there are fewer licensed LO’s in WA than 7,500…but I don’t have time right now to go to DFI’s site) is from people not renewing their LO license and opting to take their chances doing “unlicensed” business.
I’m not so sure I agree. I think there may be a few but a majority of LO’s have left the industry. What do you think?
Hi Rhonda,
The problem with “taking chances” is that (I believe) the lenders are now checking the loan originator’s name against the state license database.
When everyone goes on to the Nat’l Mortgage Licensing System, it will be that much easier for lenders to do this.
If the LO’s name is not on that list, the broker is told that if he/she releases funds to that LO, then they would be in jeopardy of their contract with the lender. So I have found that during the end of 2007 and the first part of 2008 brokers have hammered down and insisted that the unlicensed LO obtain the license before the broker will issue the paycheck to the LO.
I estimate that at least 50% have left the industry and 50% are originating unlicensed. Many of the remaining folks are part-timers with other full time income (they never really were full time LOs to start with).
I receive a lot of phone calls and questions about how an unlicensed LO can receive a referral fee from a licensed LO.
It’s my understanding with the national database that only LO’s who are 1099 are registered…those who are W2 do not–only their company does. I could really be wrong on this.