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Could CFPB Consider Real Estate Brokers as Loan Officers?

FEB 28, 2013 3:53pm ET
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        STARTING JAN. 10, 2014 REAL ESTATE SALES PERSONS OR BROKERS CAN BE CONSIDERED MORTGAGE LOAN ORIGINATORS UNDER CERTAIN CONDITIONS

FACTS

The Consumer Financial Protection Bureau’s 12 CFR 1026.36(a)(1) includes in the commentary at Supplement I to Part 1026-Official Interpretations the following:

Section 1026.36- Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling

1. Meaning of loan originator. i. General. A. Section 1026.36(a) defines the set of activities or services any one of which, if done for or in the expectation of compensation or gain, makes the person doing such activities or performing such services a loan originator, unless otherwise excluded. The scope of activities covered by the term loan originator includes:

1. Referring a consumer to any person who participates in the origination process as a loan originator. Referring includes any oral or written action directed to a consumer that can affirmatively influence the consumer to select a particular loan originator or creditor to obtain an extension of credit when the consumer will pay for such credit.

MORAL

It would appear that a real estate salesperson selling a home to a buyer that refers the buyer to a particular loan originator or creditor (lender) or a loan originator that works for the lender and expects compensation becomes a loan originator and thereby gets into trouble if reported to CFPB. Do you have an opinion? This is how I read the new regulation that goes into effect on Jan. 10, 2014.

THE 3% RULE FOR MORTGAGE LOAN ORIGINATORS IS AFFECTED BY PMI

FACTS

The qualified mortgage rule’s 3% points and fees cap can be affected by mortgage insurance. The final qualified mortgage rule enacted by the Consumer Financial Protection Bureau exempts upfront premiums that Federal Housing Administration charges from the 3% cap. The FHA upfront fee is currently 175 basis points.

PMI upfront premiums that exceed 175 bps will be included in the 3% cap, according to the finale qualified mortgage rule that goes into effect on Jan. 10, 2014. PMI upfront premiums can be as high as 250 bps.  If a PMI premium payable at or before consummation exceeds the FHA insurance premium, “the portion of the private mortgage insurance premium that exceeds the FHA premium must be included in points and fees,” as published by the CFPB.  (Compliments of CAMP re basis point charges and example.)

MORAL

When you have PMI on a loan watch out for the basis points charged by a PMI that is not FHA and I believe the QM rule also mentions it must have a pro rata refund under certain conditions.

ADVERTISING HARP 2.0 INTEREST RATES WITHOUT A TAX WARNING CAN LEAVE A BROKER OR LENDER POTENTIALLY LIABLE FOR FALSE ADVERTISING OR OPEN TO A CONSUMER LAWSUIT

FACTS

 (h) Tax implications. If an advertisement distributed in paper form or through the Internet (rather than by radio or television) is for a loan secured by the consumer's principal dwelling, and the advertisement states that the advertised extension of credit may exceed the fair market value of the dwelling, the advertisement shall clearly and conspicuously state that:

(1) THE INTEREST ON THE PORTION OF THE CREDIT EXTENSION THAT IS GREATER THAN THE FAIR MARKET VALUE OF THE DWELLING IS NOT TAX DEDUCTIBLE FOR FEDERAL INCOME TAX PURPOSES; AND

(2) THE CONSUMER SHOULD CONSULT A TAX ADVISER FOR FURTHER INFORMATION REGARDING THE DEDUCTIBILITY OF INTEREST AND CHARGES.  (12cfr1026.24)

MORAL

Warn the consumer or the broker and/or lender funding the loan could possibly find themselves in a class action lawsuit or disciplined by the licensing agency, CFPB or worse yet FTC. If you have questions contact Herman Thordsen, Esq.

CONNECTICUT RESIDENT GETS 37 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD

FACTS

On Feb. 20, Eric S. Scherz was sentenced by United States District Judge Vanessa L. Bryant in Hartford to 37 months of imprisonment followed by three years of supervised release for mortgage fraud offenses.

In October 2007, Scherz secured a $417,000 mortgage loan to finance the purchase of a property in Barkhamsted, Conn. In April 2008, Scherz created a fraudulent release of mortgage on the property stating that the lender, a fictitious company Scherz created, had received full payment of the loan. Scherz subsequently filed the fraudulent release of mortgage with the Town of Barkhamsted.

Scherz stopped making payments on his mortgage in March 2009, but in April 2009, he made three fraudulent payments via wire transfer to his mortgage lender that he knew would be and were, in fact, reversed for insufficient funds.

In May 2009, Scherz sold the Barkhamsted property for $299,000 to a buyer who relied on the fraudulent release of mortgage as being genuine. At the time of the sale, Scherz’s unpaid principal balance on his mortgage was $410,718.56. Scherz did not use any of the $299,000 from the fraudulent sale to his pay his outstanding mortgage debt.

On Jan. 6, 2012, Scherz waived his right to indictment and pleaded guilty to three counts of wire fraud. Scherz has previously served a 70-month federal term of imprisonment for his role in a mortgage fraud scheme in Florida in the 1990s.  (usattct22113)

MORAL 

I guess he enjoyed the first accommodations so well, he wanted to go back for a second visit.

PENNSYLVANIA MORTGAGE BROKER AND LOAN OFFICERS GET PRISON FOR MORTGAGE FRAUDFACTS

On Feb. 13, Dennis Nicholas, Bernadette Nicholas and Kevin McAllister were sentenced for engaging in schemes to defraud Wilmington Trust Federal Savings Bank and Malvern Federal Savings Bank that involved properties valued at more than $35.5 million. Dennis Nicholas was sentenced to 72 months in prison; Bernadette Nicholas was sentenced to 42 months in prison; and McAllister was sentenced to 20 months in prison. In addition to the prison terms, U.S. District Court Judge Legrome D. Davis ordered Bernadette Nicholas and Kevin McAllister to jointly pay restitution to Wilmington Trust in the amount of $2.5 million; ordered Bernadette Nicholas to pay restitution to Malvern Federal Savings in the amount of $2.5 million; and ordered Dennis Nicholas to pay restitution to Malvern Federal Savings in the amount of $2,755,909.27.

Comments (3)
Well, whereas I'd love to see the cfpb involved in the real estate shenanigans of one stop shopping at the real estate broker's office, the end result will be damaging to a consumer if they cannot be given a few names of reputable lenders to a buyer. They will be out on their own, often choosing the wrong lender for the wrong reasons. It will be deja vu most of the other cfpb rules, like longer and more confusing GFE. The only way for a real estate agent to feel safe will be to not refer anyone.
Posted by | Friday, March 01 2013 at 5:22PM ET
I have been in the business for 20 years and have never seen anything like this in my experience to many agency's to many rules and reg's that is a given the industry at it's core is very simplistic.

Addressing Realtor's and CFPB's close look if it walks like a duck and quacks like a duck it' more than likely is a duck the relationship between in house lending and the retail mortgage industry is and has been so corrupt it could be said that there is a plethora of collusive opportunity in any given deal that merits being held to the Highest Standard.

On that Note people that write and ultimately pass these regulations and rules should be required to not only Register with the NMLS they should also be subject to the same vetting that Originators must endure.

On the subject of rules and regulations it should be as simplistic as the Ten Commandments I think everyone knows how to read them and understands them and most Importantly how to apply them in everyday* life.

As it is now the sheer size and scope and the cost of enforcement is off the charts next there will Special Units that infiltrate Real Estate Offices small Independent Origination bases and Starbucks for morning coffee to make sure that nobody refers a friend to someone they know in the business.

Cash is King and where there is a deal to be made it will be done period
it's just that simple you cannot enforce that part of it I think for the most part the industry is solid there will always be the sensational are you that stupid story.

*Which brings us to last months Oscar for Stupid the Supreme Court Magistrate in Michigan yes this Judge committed fraud Real Estate and Document fraud.

NewsJet Magazine
Posted by Frank X. S | Saturday, March 02 2013 at 11:21AM ET
I have been in the business for 20 years and have never seen anything like this in my experience to many agency's to many rules and reg's that is a given the industry at it's core is very simplistic.

Addressing Realtor's and CFPB's close look if it walks like a duck and quacks like a duck it' more than likely is a duck the relationship between in house lending and the retail mortgage industry is and has been so corrupt it could be said that there is a plethora of collusive opportunity in any given deal that merits being held to the Highest Standard.

On that Note people that write and ultimately pass these regulations and rules should be required to not only Register with the NMLS they should also be subject to the same vetting that Originators must endure.

On the subject of rules and regulations it should be as simplistic as the Ten Commandments I think everyone knows how to read them and understands them and most Importantly how to apply them in everyday life life.*

As it is now the sheer size and scope and the cost of enforcement is off the charts next there will Special Units that infiltrate Real Estate Offices small Independent Origination bases and Starbucks for morning coffee to make sure that nobody refers a friend to someone they know in the business.

Cash is King and where there is a deal to be made it will be done period
it's just that simple you cannot enforce that part of it I think for the most part the industry is solid there will always be the sensational are you that stupid story.

*Which brings us to last months Oscar for Stupid the Supreme Court Magistrate in Michigan yes this Judge committed fraud Real Estate and Document fraud.

NewsJet Magazine
Posted by Frank X. S | Saturday, March 02 2013 at 11:24AM ET
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