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Mortgage Industry Webinar Agenda

Thursday May 17, 2018 9:00 a.m.

Call In #: 1-855-929-3239 Meeting #: 807 848 259 Password: May172018

1. Welcome

The information provided during this webinar is for informational

purposes only and is not legal advice. You should contact an

attorney to obtain advice with respect to any particular business

practice. The opinions expressed during the webinar are the

opinions of the individuals and may not reflect the opinions of the

department. The information provided may not be applicable in

all situations or under all circumstances. You are ultimately

responsible for compliance with state and federal law.

2. Licensing Update – Maureen Camp

3. Examination Update – Alan Leingang

4. Enforcement Update – Steve Sherman

5. Question/Answer Session – Cindy Fazio / Devon Phelps

This webinar is being recorded and will be available on our website shortly after the meeting has concluded.

Licensing Unit Report - Mortgage Program Mortgage Industry Webinar

May 17, 2018

License Types Apr 2015 Apr 2016 Apr 2017 Apr 2018

Total Change

Mortgage Broker Main 277 271 281 287 +10

Mortgage Broker Branch 152 176 184 186 +34

Consumer Loan Main 513 542 604 649 +136

Consumer Loan Branch 1,812 2,016 2,249 2,515 +703

MLOs (Active & Inactive) 11,754 14,816 16,685 17,342 +5,588

429 447 465 473

2325 2558 2853 3164

1175414816

16685 17342

2015 2016 2017 2018

Mortgage Licensing Trends

Mortgage Brokers Consumer Loan MLOs

Licensing Trends

Number of mortgage licensees still growing, MLOs the largest licensee group

o Counts reflect net growth, new licensees offset by licensees closing\

o Growth slowing in MLOs, at least compared to this time year to year

Company licensees grew about 8% in 20171, MLOs grew by about 7.6%

1 Source: 2017 Q4 Mortgage Update

1369

11621339

10791193

1081994 1075

1405

Q1 Q2 Q3 Q4

MLO Applications By Quarter

2016 2017 2018

3237

30

394036

303434

Q1 Q2 Q3 Q4

Co. Applications by Quarter

2016 2017 2018

Application Trends

Large increase in MLO applications since beginning of year

o Some previously Washington licensed, but many are first time licensees

o Increase in MLO applicants not eligible due to criminal or regulatory history

Steady amount of company applications

o Higher than usual under the Mortgage Broker license type

o Mostly mortgage-related Consumer Loan applications, but some non-mortgage

2018 Renewal Recap

23,348 licenses eligible for renewal, including Mortgage Brokers, Consumer Loan

companies, MLOs and expansion industries like Money Services entities

o 8% increase from 2017 renewal period

o 18% increase from 2016 renewal period

On December 31

o 99% of MLO renewals processed

o 99% of Mortgage Broker renewals processed

Licensing-Related Information for Licensees

Electronic Surety Bonds (ESB)

Past deadline to convert paper surety bond to ESB in NMLS for all mortgage companies

o Mortgage Brokers – 5 companies haven’t completed the process

o Consumer Loan – 142 companies haven’t completed the process

Once bond converted to ESB, don’t forget:

o All bond materials issued and delivered through NMLS (riders, cancellations, etc)

o Data not listed on the bond don’t require riders to change (trade name, address)

o Bond materials, except cancellations & reinstatements, delivered by licensee

Student Education Loan Servicers

Implementation of E2SSB 6029 which amends the Consumer Loan Act

Requires Student Education Loan Servicers to license

Department will begin accepting applications on July 16, will use NMLS for applications

More information via GovDelivery and DFI’s website

NMLS 2.0

NMLS being rebuilt to improve its operations and enhance user experience

Stakeholder Engagement is underway

o Used to develop the vision, concepts, and relevant policy issues

o Goals & guiding principles published on NMLS Resource Center

o Industry Engagement Opportunities ongoing

Visit: http://mortgage.nationwidelicensingsystem.org/Pages/NMLS20Information.aspx

CS - Examination Unit Report Consumer Loan and Mortgage Broker Programs

Mortgage Industry Meeting May 17, 2018

Examination Summary – Consumer Loan 148 Exams completed for October 2017 – March 2018

Composite Rating Number of Licensees Avg. Billable Hrs. Avg. Exam Cost

1 13 77.11 $5,321

2 30 121.10 $8,356

3 15 149.67 $10,327

4 3 182.58 $12,598

*N/A 87 13.67 $943

*Desk Review/Initial Compliance exams are not assigned a rating, also includes one Advertising exam

55 Desk Reviews (not billed)

31 Initial Compliance Review and 1 Advertising Exam (billed)

**Examination Summary – Mortgage Brokers 39 Exams completed for October 2017 – March 2018

Composite Rating Number of Licensees Avg. Billable Hrs. Avg. Exam Cost

1 0 N/A N/A

2 2 N/A N/A

3 15 N/A N/A

4 6 N/A N/A

*N/A 16 N/A N/A

*Desk Review/Initial Compliance exams are not assigned a rating or billed **Mortgage Brokers are not billed for exam hours unless under orders by the Department

Common Origination Violations Failure to Accurately Complete the Privacy Policy. Company’s often use the model privacy form. Institutions seeking to obtain the safe harbor by using the model form may modify it only as described in Appendix A to Regulation P. Examiners often find that model forms have not been completed as prescribed in Appendix A, contain blanks, or inaccurate information. See Appendix A to Part 1016 – Model Privacy Form. Failure to Complete the Rate Lock Agreement. Both the Mortgage Broker Practices Act and Consumer Loan Act require the rate lock agreement disclosure to state if the rate lock agreement is guaranteed, and if so, if guaranteed by a company other than your company, to

provide the name of that company. Examiners are finding the guarantee language missing from rate lock agreements provided to borrowers. WAC 208-660-430(3) and WAC 208-620-510(3). Failure to develop an adequate Anti-Money Laundering policy. Many licensees have established anti-money laundering policies, however, they are not putting those policies into practice. For example, the policy will state that it will be tested annually, when in fact, the policy has never been tested. See 31 CFR Part 1029.210. Failed to Accurately Complete the Notice of Action Taken. Examiners are finding notice of action taken disclosures that have not been completed in compliance with Regulation B. Notices of action taken should contain a statement of the action taken, name and address of the creditor, a statement notifying the applicant that ECOA prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, and age, as well as the name and address of the federal agency that administers compliance. Licensees can find the applicable agency in Appendix A to Regulation B. See Regulation B 1002.9(a)(2) and (b), and Regulation B, Part 1002, Appendix A. Examination Procedures We are currently piloting some revisions to our examinations program. We are continually seeking ways to make our examinations more efficient so we can concentrate on companies that appear to be a risk and need assistance with compliance. Residential Mortgage Loan Servicing Update Of the 61 rated examinations conducted in the last semester, 30 were mortgage servicing examinations, with 27 of those conducted off-site. Two of the 30 examinations received a “3” rating, the remainder exhibited better compliance with ratings of “1” or “2.” The two most common servicing violations are not allowing 30 days to appeal a denial of a loss mitigation application and failure to accurately complete the Consolidated Annual Servicing Report, which is due to the Department by the first of March each year. Washington Administrative Code (WAC) 208-620-900(6)(b)(iii) and 208-620-900(6)(c) say the servicer must give the borrower 30 days from your written notice of denial to request an appeal unless the denial is due to: “(A) An ineligible mortgage; (B) An ineligible property; (C) The borrower did not accept the offer; or (D) The loan was previously modified.” Many servicers are only allowing 14 days to appeal a loss mitigation denial. While this is acceptable in federal regulation, Washington State regulation is more restrictive, which is allowed unless the federal law specifically pre-empts state regulations. WAC 208-620-430 requires consumer loan licensees to file the annual report. When the report is filed a company representative is required to attest to the accuracy of the information. Most mistakes occur in the portfolio breakdown. The instructions ask whether the licensee holds the MSRs, and whether they service them directly or contract with a subservicer. The report also allows a licensee to report if they are a subservicer only (do not hold the MSRs). Examiners receive a list of Washington State loans when an examination of a company begins. We frequently see companies that report they are directly servicing their MSRs when they use a subservicer, or, when directly servicing some loans and using a subservicer for other loans, they report all loans in one category or the other.

The other common error is not reporting all servicing activity for the year. The report asks for the balance on January 1st of the subject year, or the boarded balance if boarded in the subject year. If a loan pays off or is transferred during the year it still must be reported. A loan may no longer be in the servicing portfolio at the end of the subject year, but it still gets reported if it was active at any time in the year. All too often, examiners notice large discrepancies when comparing NMLS mortgage call report numbers and examination loan list numbers to the Consolidated Annual Servicing Report filed by the company. For some reason (?) the vast majority of the discrepancies result in under reporting annual volume, which leads to under paying the annual servicing activity assessment. Under reporting cases are referred to the Department’s enforcement unit for resolution, and may result in penalties in excess of any money “saved” by under reporting. Licensees must carefully read the instructions in order to file and attest to an accurate Consolidated Annual Servicing Report.

Mortgage Industry Enforcement Unit Report October 1, 2017 – March 31, 2018

Complaints for this period

MBPA

CLA All

Industries

Received 21 315 581

Closed 18 278 530

Open as of 3/31/2018 (all industries)

N/A

N/A

221

Investigations

Investigations – Open (MBPA only) 35 Investigations – Open (CLA only) 51 Investigations – Open (all industries) 94

Enforcement Actions for this period

CCSA 0 CLA 28 EARA 0 MBPA 21 UMSA 0

Enforcement Actions for this period – Mortgage Broker Practices Act

Statements of Charges 13 (5 pertaining to U/L Loan Modification services)

Total Consent Orders & Consent Agreements 4 (2 pertaining to U/L Loan Modification services)

Temporary Order to Cease and Desist 0

Criminal Referrals 0

Final Orders 4 (3 pertaining to U/L Loan Modification services)

Civil Actions (injunction, enforce subpoena) 0

MBPA Agreed Orders

C-16-1968-18-CO01 R. Todd Jensen, P.C. d/b/a Loan Modification Associates d/b/a LMA Mods 3/26/2018

• $1,000 Investigation fee

• $3,000 Fine

• 5 year ban

C-16-1987-17-CO01 Galaxy Lending Group, LLC; Harold A Perkins 10/11/2017

• Withdraws Final Order FO01

• $5,000 Financial Literacy & Education

• $576 Investigation fee

• $10,475 Restitution to 2 consumers

C-17-2135-18-CO01 AmericaWest Financial, LLC; James M Rendahl 3/22/2018

• 2 year license revocation STAYED

• Compliance exam in 18 months

• $1,700 Investigation fee

• $48,300 Fine -$8,300 due, $40,000 STAYED

MBPA Final Orders

C-14-1513-18-FO01 Diana Joline Merritt 2/28/2018

C-15-1719-17-FO02 Jones & Associates; Ken Jones 2/20/2018

C-16-1871-18-FO01 Stanford Law Group d/b/a PinePoint Law Group; Kevin Liu 3/14/2018

C-16-1905-17-FO01 Homestead Financial Services, LLC; Dana Todd Fabian 11/6/2017

MBPA Statements of

Charges

C-16-1871-18-SC01 Stanford Law Group d/b/a PinePoint Law Group; Kevin Liu

C-16-1956-17-SC01 Security Pacific Mortgage, Inc.

C-16-2018-17-SC01 Homelink Mortgage, Inc.; Amy Hsin Ju Wong

C-17-2153-17-SC01 Sean Ferrero d/b/a Nationwide Rapid Refunds Corp and

iwillsaveyourhome.com C-17-2166-17-SC01 Seattle Mortgage Brokers, LLC; Michael J

Gilbert, Bruce P Hills, Steve R Gilbert C-17-2169-17-SC01 NF Enterprises, Inc.; Masoud

Sedghinasab

C-17-2173-18-SC01 Mahshid Homayounfar Kashani d/b/a American Mortgage Services d/b/a

amsmortgageservices.com

C-17-2219-18-SC01 NorthWest Funding Group, Inc.; Stanton Taylor Berkey

C-17-2265-17-SC01 Nordstrom Leiren & Associates, Inc.; Ingunn Leiren

C-17-2298-18-SC01 Wilson Financial Group, Inc.; Eric Allan Wilson

C-17-2309-17-SC01 Kevin E Gardner, Inc.

C-17-2315-18-SC01 Inter-MC, Inc.; Susan A Ohanessian

C-18-2388-18-SC01Coast 2 Coast Home Services; Alin M Ybarra, Ronnee Lyn Walton

Enforcement Actions for this period – Consumer Loan Act

Statements of Charges 11

Consent Orders & Consent Agreement 11

Temporary Order to Cease and Desist 0

Criminal Referrals 1

Final Orders 5

Civil Actions: (injunction, enforce subpoena) 0

CLA Agreed Orders

C-15-1629-18-CO01 Partners for Payment Relief DE III d/b/a Partners for Payment Relief, LLC; David Van Horn, John Edward Sweeney, Robert Mark Paulus 3/14/2018

• Cease & Desist

• Transfer all WA residential loans to appropriate servicing entity within 60 days

• $100,000 Fine

• $3,985.33 Investigation fee

• $35,000 Financial Literacy & Education

C-15-1716-17-CO01 Ed Lewis Rounds 12/8/2017

• MLO License permanently surrendered

• Permanent ban

• Update NMLS within 7 days

C-15-1745-17-CO01 Podium Mortgage Capital, LLC 12/21/2017

• $20,000 Fine

• $4,000 Investigation fee

• $15,000 Financial Literacy and Education

C-16-2037-17-CO02 CentralBanc Mortgage Corp; John W. Delaney 12/6/2017

• $150,000 Fine -$75,000 due, $75,000 STAYED

• $10,000 Investigation fee

• CentralBanc 2 year revocation STAYED

• Compliance exam within 2 years

C-16-2037-18-CO03 Karen Aragdon Reyes

• MLO license voluntary and permanently surrendered

• Banned until 1/12/2023

• Update NMLS

C-16-2109-17-CO01 Trinity Financial Services d/b/a T Financial Services LLC; Don Allen Madden III 10/20/2017

• $10,000 Fine - $5,000 due, $5,000 STAYED

• $14,000 Investigation fee

• Update relevant disclosures on NMLS

C-17-2163-18-CO01 RealTrust IRA Alternatives, LLC; Mark Hodges 1/30/2018

• Transfer servicing duties on all loans to a licensed loan servicer

• $8,000 Fine

• $2,600 Investigation fee

C-17-2182-17-CO01 Dovenmuehle Mortgage, Inc. 12/4/2017

• $1,000 Investigation fee

• $150,000 Financial Literacy and Education

C-17-2229-17-CO01 HighTech Lending, Inc.; Erika Macias, Vena Marie Currie, Don Anthony Currie 1/12/2018

• $200,000 Fine - $100,000 due, 100,000 STAYED

• $10,000 Investigation Fee

C-17-2311-17-CO01 Home Partners Credit Corporation 11/02/2017

• $276.04 Investigation Fee

CLA Final Orders

C-16-2046-17-FO01 Christopher Douglas Hess 3/2/2018 C-17-2282-18-FO01 Vanguard Funding LLC 1/23/2018 C-17-2282-18-FO02 Matthew Voss 1/23/2018 C-17-2282-18-FO03 Brian Seth Ofsie 1/23/2018 C-17-2357-18-FO01 Fred Boyd Ramey 2/26/2018

CLA Statements of

Charges

C-15-1629-17-SC01 Partners for Payment Relief DE III d/b/a Partners for Payment Relief LLC C-16-2048-18-SC02 Troung Quoc Luu C-16-2101-17-SC01 Skyline Financial Corp; Freeman Todd Sawyer C-17-2163-17-SC01 RealTrust IRA Alternatives, LLC; Mark Hodges C-17-2229-17-SC01 HighTech Lending, Inc.; Erika Macias, Vena Marie Currie, Don Anthony Currie C-17-2241-18-SC01 Butt, LLC; Kristy Butt, Charles Butt C-17-2282-17-SC01 Vanguard Funding, LLC; Matthew Voss, Brian Seth Ofsie C-17-2311-17-SC01 Home Partners Credit Corporation C-17-2321-17-SC01 Mortgage Brokers Services, Inc.; Dean Raymond Eulberg C-17-2339-18-SC01 Jeff Harold Behrman C-17-2357-18-SC01 Fred Boyd Ramey