Unlicensed origination activity by loan officers is occurring “at a surprising rate,” according to a report released at the American Association of Residential Mortgage Regulators’ annual conference in Boston.
The third annual report by the Multistate Mortgage Committee, an oversight body authorized by regulators in all but one state to examine multistate mortgage entities, also noted that the many FHA and VA lenders are collecting fees illegally. And a “significant number” of licensees failed to provide timely Truth-in-Lending disclosures.
The report is based on 23 multistate examinations conducted in 2011. Some of the country’s largest lenders were examined, with participation ranging from several states to more than 30.
Because some lenders hid their employees under several layers of management, investigators sometimes had difficultly uncovering unlicensed individuals who were originating loans. But uncover it, they did, so much so that in February 2011, the committee found it necessary to issue an advisory letter warning of “a significant degree” of unlicensed loan originator activity.
Based on the MMC’s work, a 10-state consent order was reached in June of last year with Mortgage Access Corp. d/b/a Weichert Financial Services and headquartered in Morris Plains, N.J., agreed to remit a $3 million penalty.
The examination found numerous compliance and internal control deficiencies, including the origination or completion of mortgage loan applications by loan originators that were not licensed in the appropriate jurisdictions.
The multistate exam also revealed that MAC failed to institute the proper oversight and controls to ensure compliance with applicable licensing and regulations in the various states in which it operates. MAC was found to have allowed individuals unlicensed in particular states to participate in various aspects of the mortgage loan originator process, in violation of the states’ mortgage originator licensing requirements.
“The effectiveness of the multistate effort as a platform to regulate large companies across the country, while enhancing consumer protection, is a testament to the states’ ability to modify the regulatory approach to better assess for compliance with applicable state and federal law,” said John Ducrest, Louisiana commissioner of financial institutions.
The collection of unearned or unallowable fees, or the incorrect amounts, on government-backed loans “point to a serious internal routine and control issue,” the report also noted. In a “substantial number” of cases, it added, the lack of controls required lenders to reimburse overcharged borrowers, and in some cases, threatened the safe and sound operation of lenders.
The meeting, being held in Boston, shows that regulators, more than ever, are cracking down on the residential finance industry. On Thursday National Mortgage News broke the news that auditors at the Federal Housing Finance Agency
