Mortgage Broker/ Lender/ Correspondent Lender Compliance
Individuals and businesses working in the mortgage brokerage and lending industries have been subject to state and federal oversight for many decades, but it has only been in the post-2008 era that the amount and stringency of such oversight has reached the fever pitch level it is at today. With ever increasing competition for customers in the mortgage brokerage and lending market, your business cannot afford the penalties and reputation damage that arise from failing to comply with state and federal standards. At The Bernard Law Group, our mortgage compliance attorneys have many years of experience working with and advising parties in all sectors of the real estate industry, including mortgage brokers and lenders, and we have the experience to make sure that your mortgage brokerage and lending business is in compliance with all applicable federal and state standards.
Banking Examinations and Audits
- Did you receive notice of a pending bank examination? We can help!
- Are you looking to establish a compliance program to run your mortgage company effectively? We can help!
It is inevitable that a mortgage company will be subject to examination by one or more of its regulators during the company’s lifecycle. We help our mortgage company clients to proactively prepare for such examinations and audits, but more importantly, to run their companies compliantly, even if there isn’t an anticipated bank examination on the horizon.
Examinations tend to fall into the following general categories, although the name associated with each examination type may vary:
- Initial Examinations – typically initiated in approximately one year from the company’s first license approval in the state. These initial examinations tend to be streamlined to determine whether the company poses any risk to consumers but will generally include a broad review of the company’s financial condition, internal controls, legal and regulatory compliance, management’s demonstrated ability to run the company in a manner that protects consumers, and cybersecurity.
- Regular Compliance Examinations – general periodic examinations of licensed mortgage companies by their respective regulators. These regular compliance examinations tend to focus on the mortgage company’s overall compliance management system (CMS). The CMS, if well established, will demonstrate that the company understands its required compliance responsibilities, the laws, regulations and rules applicable to its business operations, and that such requirements are effectively communicated to its employees through training, oversight and enforcement. Regular examinations also focus on the management team, their established compliance program, complaint management, oversight, and management’s ability to prevent or mitigate fraud or other risks in its operations, protect consumer privacy, the strength of the company’s anti-money laundering program, cybersecurity and disaster recovery protocols. Regular compliance examinations may also include review of independent oversight regarding the company’s origination practices, including quality control reviews and independent compliance audits.
- Safety and Soundness/Risk Based Examinations – typically the most comprehensive form of examination, and includes all the above, along with detailed examination of the company’s financial condition, overall operations, policies and procedures established by the company and detailed examination of the records indicating that the company complies with its own established policies, and the laws, regulations, guidelines and best practices applicable to the company’s size, scope and business practices. In addition, there is a focused review of the company’s management information systems and information technology, including management’s ability to effectively identify, monitor, and mitigate the risks associated with the company’s activities, including but not limited to financial, credit, legal, cyber, and reputational.
- Targeted Examinations – special examinations in response to whistleblower reports to regulators regarding non-compliant, fraudulent or other illegal activity at the company, or based on a single or multiple consumer complaints regarding the company’s business practices. Targeted examinations can occur without advance notification to the company, and the examiners tend to focus on the specific subject violation reported to the regulators. The targeted examination may reveal additional areas of concern and examiners may expand the scope of their assessment, or may decide that their findings warrant a more detailed examination or an official investigation.
Get ready for your company’s examination so you can originate by day, and sleep at night!
Licensing for Mortgage Companies, Mortgage Loan Originators, and Mortgage Lead Generators
Let us help you grow your business by applying for new licenses.
Whether you are a mortgage company, mortgage lead generator, or an individual mortgage loan originator, we can help you to expand your origination footprint by applying for new licenses. Our firm has a proven track record of helping companies and individual loan officers navigate the mortgage licensing process. We handle the procedures and details while you focus on growing your business.
Temporary Authority to Operate
Did you know that certain loan officers may be able to originate loans under a sponsored employer prior to being fully licensed? On March 15, 2018, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155), which included a new provision under the SAFE Act of 2008. This new provision, known as Temporary Authority to Operate, streamlines the license application process for federally registered mortgage loan originators (MLOs) seeking state licensure, and state-licensed MLOs seeking licensure in another state, and became effective November 24, 2019. If you are a state licensed or federally registered MLO, call us today to help to determine whether you are eligible for Temporary Authority.
Contact us today for a consultation, and take the first step toward a streamlined, compliant, mortgage licensing experience.
Mortgage Call Reports
We can help you with the completion and submission of your quarterly mortgage call reports.
The Mortgage Call Report (MCR) is a financial reporting requirement for mortgage companies, mandated by state regulators who require quarterly filing on the Nationwide Mortgage Licensing System and Registry (NMLS). The purpose of the MCR is to provide state and federal regulators with important financial and operational information about mortgage companies and loan originators. The reports are due quarterly, within 45 days of the end of the calendar quarter:
- Q1 data (January 1 – March 31) is due May 15
- Q2 data (April 1 – June 30) is due August 14
- Q3 data (July 1 – September 30) is due November 14
- Q4 data (October 1 – December 31) is due February 14
- The MCR Financial Condition Report is due annually, within 90 days of your company’s Fiscal Year end.
Late filings can result in administrative penalties and fines. Ask us how we can help you with compliant MCR filings for your mortgage company.
Loan Originator Compensation
Are you perplexed about finding a compliant way to pay your MLOs?
We can help you to understand the Loan Originator Rule – aka – Loan Originator Compensation Rule, and establish compliant policies and agreements for your compensation of your sponsored MLOs. Including understanding the difference between compliant borrower-paid and lender-paid compensation, bonuses, branch manager compensation, and much more.
- According to the CFPB, “in the aftermath of the 2008 mortgage crisis, regulators and lawmakers began focusing on the influential role that loan originators, such as mortgage brokers and bank loan officers, play in helping consumers choose their loans. In particular, there was significant concern about the incentives that loan originators have to steer consumers into more expensive loans in order to increase their own compensation. Since the mortgage crisis, regulators and lawmakers have imposed a number of requirements concerning loan originators’ licensing and registration, training, screening, and compensation practices. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), adopted new requirements that built on some of these earlier initiatives, and expanded upon and clarified earlier regulations adopted by the Board of Governors of the Federal Reserve System (the Board) to restrict certain compensation practices.”
- It is critical that mortgage companies establish compliant written compensation practices that are consistent with the company’s origination, payroll records, and practices.
RESPA, Affiliated Business Arrangements, Marketing Services Agreement (MSA) Compliance
Let us help you expand your business opportunity through compliant referrals.
- Referrals are a great way to grow your mortgage company. However, such referrals cannot be based on kick-backs or arrangements that provide “a thing of value” for the referral. For example, affiliated businesses may work together to provide settlement services to the consumer, so long as the affiliated business arrangement complies with The Real Estate Settlement Procedures Act (RESPA) and the return on ownership interest is the only “thing of value” received as a result of the affiliated business arrangement. Also, companies may enter into marketing services agreements (MSAs) if such MSAs are compliant, and do not violate RESPA, sections 8, (a), (b), (c). For all referral relationships, the analysis under RESPA Section 8 depends on the facts and circumstances, including the details of how the referral relationship is structured and implemented.
Mortgage Company Policies and Manuals
We can create customized policies and manuals for your mortgage company.
- Effective policies and procedures are one of the ways in which a well-run mortgage company demonstrates strong internal controls and robust operational risk management. Management must ensure that its policies support a culture of compliance, provides clear guidance of acceptable and unacceptable conduct by its employees, communicates its loan documentation standards, and emphasizes the highest levels of consumer protection. A mortgage company’s policies should indicate management’s commitment to compliance by its established control systems and monitoring functions designed both to prevent misconduct, and to detect operational vulnerabilities. When used effectively, a company’s policies will discourage noncompliant and fraudulent behavior and prevent the company from being used by bad actors for non-compliant conduct; in the event of such bad-acts however, the company’s policies should be designed to identify such activity, effect corrective action and enforce its policy requirements.
Consumer Complaint Management
We can help you to compliantly manage and respond to consumer complaints:
- Even the best run mortgage companies and the most effective loan officers may encounter complaints from consumers from time to time. The worse approach a company or MLO can take is to ignore the consumer and hope that the issue goes away. A well-run mortgage company must establish a consumer complaint policy and must be able to demonstrate that it takes consumer feedback seriously. Consumer complaints are important to regulators because the primary role of mortgage regulators is to protect consumers from unfair, deceptive, or abusive acts and practices in the mortgage industry. Consumer complaints serve as a valuable source of information about potential problems and issues that borrowers are facing with mortgage companies. Regulators often use consumer complaints as part of their ongoing monitoring efforts to ensure that mortgage companies are complying with existing laws and regulations, and to identify those companies that may be noncompliant. By addressing consumer complaints promptly and effectively, mortgage companies and MLOs can demonstrate to their regulators that consumers are treated fairly and have access to safe and affordable mortgage products.
EPO and Premium Recapture
If you are a mortgage broker or lender facing an EPO demand or other Premium Recapture demand, we can help:
- Resolving EPO (Early Payment Default) or premium recapture demands from a wholesale lender or investor can be a challenging process for a mortgage company. It goes without saying that the best solution is to avoid this situation in the first place, and to ensure your processes and procedures are designed to comply with the lender or investor’s funding requirements and industry best practices. Training your staff and implementing robust quality control measures can help prevent EPOs and recapture demands, but if you are facing such a demand, it is essential to address the issue immediately. EPO and premium recapture demands are generally time sensitive, and the mortgage company must respond promptly and professionally to maintain a good relationship with the lender or investor, and to protect your business. It is important to have the support of a law firm that understands the process and can help you navigate the issue, protect your interests, and achieve meaningful resolution.
Wholesale and TPO relationship management
Whether you are creating a new relationship with a wholesale lender or renewing an existing relationship, we can help.
- Managing the wholesale lender relationship effectively is crucial for mortgage brokers to mitigate risks and ensure a smooth and successful business operation. For example, if you need help with completing the documentation requirements required for wholesale lender relationships for third-party origination activities, we are here for you. We can assist with your review and understanding of the terms and conditions of your TPO contracts or agreements with wholesale lenders and investors, with particular emphasis on provisions related to EPO and premium recapture, buybacks, repurchases, or other recourse applicable to the relationship. We can also assist if you encounter legal or compliance issues, and can provide guidance on how to navigate and resolve these matters. Our firm also works to clarify your research and aid selection of wholesale lenders that align with your business goals and values, based on factors such as reputation, financial stability, product offerings, customer service, and underwriting guidelines.
Need Assistance With Mortgage Compliance?
At The Bernard Law Group, our attorneys have the experience, knowledge, and dedication to client service to make sure your mortgage lending or broker operation is in compliance with applicable state and federal compliance requirements. Call us today to see what our mortgage compliance attorneys can do for you.