CFPB Cracking Down on Servicers

CRACKDOWN BY CFPB ON ALL MORTGAGE SERVICERS

FACTS

On Feb. 10, Steven Antonakes, the deputy director of the Consumer Financial Protection Bureau, said that servicers have had more than a year to prepare for the reform rule that took effect on Jan. 10, and he suggested the CFPB would move quickly and harshly against violators.

Antonakes acknowledged that the agency has previously suggested it would be tolerant of mortgage servicing companies so long as they were making a "good faith effort" to comply with the rule, but he warned that such allowances only extend so far.

"A good faith effort, however, does not mean servicers have the freedom to harm consumers," Antonakes says. Please understand business as usual has ended in mortgage servicing.

Antonakes' speech was a clear sign that the agency has shifted from its previous message of forbearance to a more hard-lined stance regarding the mortgage servicing rule. "We put out plain-language summaries of the rules and posted video guidance...In addition, as we became aware of critical operational or interpretive issues with our rules, we addressed them," he says.

CFPB officials are frustrated with the mortgage servicing industry's lack of progress in cleaning up its mistakes. It is still widely regarded as rampant with issues, including poor documentation practices, wrongful foreclosures on homeowners and resale problems. (nmn22214)

MORAL

Since it is so easy for the borrower to complain to the CFPB on line now, it may be a lot less expensive to have us audit you first before the CFPB. If you recall, Fidelity Mortgage Corp. and its owner jointly were hit with an $81,000 plus penalty over as a kickback allegedly made to a bank in the form of a lease. As a servicer, you would be hit a lot harder. 

DOES OCWEN LOAN SERVICING CONDUCT DUAL TRACKING IN A VIOLATION OF THE LAW?

FACTS

I have just read a commentary by “Donna” in the National Mortgage News and I quote: “Dual tracking is being done by Ocwen Loan Servicing, except they don't know it because their servicing arm in Mumbai, India, does not know what is happening here with trustee sales. There is only one way communication because they do not allow e-mails or phone calls out of the center. There is no response to any request or e-mails in, and only drive by valuations which are inadequate when interior damage is present. Could it be that foreclosure is preferred because the servicer makes more money with a foreclosure than a modification or short sale?" (National Mortgage News Saturday 2-22-14 comment area).

MORAL

Based upon the comments of Antonakes, it may be he should pay a visit to Ocwen? What do you think? We make no representations as to the truth, veracity or accuracy of the comment not knowing its author but if true she does seem to have some intimate knowledge about the alleged lack of two-way communication.  The comment appears directly below the David Elliot/Seth Muse blog in NMN about a lawsuit entitled Cataldi v. New York Community Bank which says a private cause of action is allowed under 1024.42 of RESPA but no injunctions, only damages and costs can be recovered in the case involving dual tracking among other things. Notwithstanding the plaintiff suing Ocwen lost.

IN CONTEMPLATING A LOAN OFFICER CONTRACT BE AWARE OF THE FOLLOWING POTENTIAL ISSUES

FACTS

Contracts are negotiable. Depending on how good a producer the person is and how good the company is. So, even if there is an employment contract between the company and mortgage loan originator you should consider reviewing it with these thoughts in mind.   

1. Who owns the loan officer pipeline when the loan officer quits or his terminated with or without cause?
2. If the loan officer is disabled or takes a leave of absence such as family or sick leave what happens to the loans in the pipeline and how is the loan officer compensated based upon the status of the loan at the time of departure?
3. Does the loan officer take any leads in the loan officer possession when departing from the company?
4. Is the loan officer required by company policy to obtain written approval before internet and social media marketing?  (Remember, ultimately the designated officer, qualified employee, supervisor can be held responsible and disciplined for lack of supervision if nothing else. We have several of these cases we are representing in two states at the moment)
5. Does the agreement provide who is the owner of the data base when the employee leaves either voluntarily or involuntary?
6. When does the loan officer receive payment on a loan?  (e.g. California requires payment to employees at least twice per month with certain exceptions.)
7. Does the employment contract and/or company policy manual provide when a commission is not earned?  (e.g. fraud?)
8. Does the MLO contract provide how much of the total commission the MLO receives when the loan closes after the MLO has left the company?
9. What are the reasons you would not get paid a commission on a file?
10. Does the MLO contract have a non-competition clause?  (Not legal in California, Legal in Pennsylvania, etc.)
11. Does the employer company enforce privacy policies of client data being retained by MLO’s such that the Gramm-Leech-Bliley Act is not violated aside from state law privacy?
12. Does the agreement and/or company personal policy manual provide the reasons why and MLO can be terminated?
13. If the MLO violates company written policies or state, federal and agency laws and regulations, what is the termination policy in this case?
14. Does the MLO pay for marketing and other promotions?
15. Is the Employer allowed to change the terms of the written contract without notice?
16. Does the Employer require commissions or parts thereof paid back and if so under what conditions?  Do any of the conditions violate Labor Code laws or regulations?
17.  When updating or signing a contract always review it for content to see that it covers all aspects of the reasons for the change.

MORAL
Many of you have had us prepare your contracts. Especially with the new CFPB Bureau laws and regulations causing concern with compensation for QM loans and compensation in general since the manner of computing compensation is severely restricted under the MLO laws set forth in TIL. If you have questions contact either Herman Thordsen or Sean Thordsen. (Thanks to Karen Deis' NMN blog for many of the ideas)

MORE UPDATES ON NEW LOAN ESTIMATES AND CLOSING DISCLOSURES EFFECTIVE AUG. 1, 2015

FACTS

1. Applies to all loan applications received from Aug. 1, 2015.
2. Closing disclosures to be given to consumer three business days before closing. Redisclosures if required must be given within three business days of changes.
3. Closing disclosures have to be kept for five years in lieu of the usual three years for most documents.
4. Spanish model disclosures are provided in the final rules.
5. The combined RESPA/TILA disclosures are for closed end consumer mortgages but do not include HELOCs or reverse mortgages with the exception that the RESPA disclosure is required for the reverse mortgages. 

MORAL
Updated to Feb. 20 seminar that included Richard Horn, senior counsel with CFPB. I have written earlier on the new disclosures. This is an update reminder.

IF YOU PROPERLY CATEGORIZE LOAN OFFICERS AS “OUTSIDE SALESPERSONS” IN VIRGINIA THERE IS NO MINIMUM WAGE OR OVERTIME; THIS WORKS IN CALIFORNIA AS WELL

FACTS

In Virginia the Fair Labor Standards Act regulation for outside sales exemption to workers who also perform significant portions of their jobs inside the office leaves them exempt from minimum wage and overtime. In this case Prospect Mortgage obtained a defense verdict on these issues. Prospect also secured several rulings that cement a pragmatic standard for application of the outside sales exemption, requiring only that a sales employee leave the office for “one or two hours a day, one or two times a week” in order to qualify (this does not work in California. In California it must be over 50% of the time outside the office). 

In each of his summary judgment decisions, and in his instructions to the jury in Cougill, Judge Cacheris applied a standard that required that Prospect show only that a loan officer spends “one or two hours a day, one or two times a week” engaged in outside sales activity. (This standard does not work in California) This standard naturally comes with recognition that an outside sales person may, in fact, spend a significant portion of his or her workweek in the office. 

MORAL

While successful in Virginia, do not try it in California. It will not work this way.

In California, to be an exempt outside salesperson you must:

1. Be over 18 years old
2. “Customarily and regularly” work more than 50% of the workday away from the employer’s place of business
3. Sell tangible or intangible items OR obtain orders or contracts for products, services or use of facilities

Note: Exempt outside salespersons do not need to earn a minimum amount each pay period, and they can be paid on a salary, hourly, commission, or any other payment basis.
Of the above requirements, the two that are the hardest to figure out are the “customarily and regularly” language and selling “tangible or intangible items” language.

What does it mean to “customarily and regularly” work more than 50% of the workday away from the employer’s place of business for the outside salesperson exemption?

The Department of Labor Standards Enforcement clarifies what it means to be an outside salesperson who “customarily and regularly” works more than 50% of the workday away from the employer’s place of business:

So long as the individual spends more than half of his or her time away from the employer’s place of business and, during that period of time is engaged in sales of tangible or intangible items or obtaining orders or contracts for products, services or use of facilities, the individual is [exempt from the Wage Order's provisions for overtime, etc.]. However, if the activities of the individual during the 50% of the time involve anything other than sales, the [employee would be nonexempt]. – DLSE Opinion Letter 1994-07-14.

The DLSE goes on to note that “sales promotion” is also considered exempt “sales” activity. Additionally, the stocking of a vehicle with samples or advertising material is considered a part of the sales promotion work so long as the samples or materials are not sold. DLSE Opinion Letter 1994-07-14.d under the outside salesperson exemption.

You should also note that “the employer’s place of business” is not limited to a principal place of business or an administrative headquarters. For example, “temporary trailers and model homes located at a tract housing site, although separate from the home builder’s or seller’s headquarters office nonetheless constitute ‘the employer’s place of business.’” DLSE Opinion Letter 1998-09-08. Salespersons who work at such model homes would not fit under the outside salesperson exemption.

MORAL

If you are going to use employees in outside sales it is best you consult us first and have us review your contracts in an attempt to avoid potential grief later.

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.