New York Scrutinizes Consultants
The New York State Banking Department is holding its licensees and registrants responsible for the consultants that they use.
According to officials from the department speaking at a New York regulatory session held at the Northeast Regional Conference of Mortgage Bankers Associations here, there had been instances of licensees hiring convicted felons and calling them consultants.
Barbara Kent, director of consumer affairs and financial products for the Banking Department, said, "We don't want mortgage banking to become the industry of choice for felons."
A new state law has provided a definition of consultant. According to the department's website, "The term consultant shall mean an individual or entity involved in advising or directing management, performing management functions, or providing services to management of a licensed mortgage banker or registered mortgage broker on matters relating to the operation of the company, or an individual or entity that receives compensation, either directly or indirectly, from the licensed or registered entity, for advising potential applicants or borrowers with regard to the making of a mortgage loan."
The officials explained any type of consultant is covered by the new definition, whether related to the mortgage loan process or not.
Ms. Kent said the Banking Department wants to be notified within 10 days of a consultant being hired or being fired. Mortgage bankers and brokers will have to do reasonable due diligence on finding out whether a consultant is convicted felon. It is not an automatic disqualification if there had been a conviction, except in certain instances.
Another change in the law establishes a sliding scale for the surety bond for mortgage brokers. The scale is based on the number of applications the broker took in the year previous. The bond fee for this year will be based on the 2002 report.
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