A Small Window of Opportunity for Washington State Unlicensed Loan Originators (Correspondent Lenders aka CLAs)

June 1, 2009 Update:  I just got off the phone with someone in the licensing department at DFI.   They hope to have more information available soon for mortgage originator licensing.  Some details are still being worked out.   From what I could gather from my conversation this morning, the main advantage for licensing now vs. later is that you will have more time to complete the clock hours, take the exams and to be able to spread out the costs for said classes and exams.  I sincerely apologize for misinterpreting DFI’s site on the requirements for LO licensing…I wish I could line out my title of this post!

In April, SHB 1621was signed by Governor Gregoire requiring loan originators employed by correspondent lenders/consumer loan companies to obtain a Washington Loan Originator License  by July 1, 2010.   The State passed SB6471  last summer which had “unintended consequences” causing some loan originators who were regulated by the Mortgage Brokers Practices Act (and therefore licensed) to become defined under the Consumer Loan Act–allowing those LO’s to be “unlicensed”.    With the passage of the SAFE Act, the State is stepping up to National laws which include CLA loan originators.

So my fellow mortgage professionals who are employed at correspondent lenders, here is an opportunity for you:  if you submit your application to become licensed by July 30, 2009; you’ll reduce your education requirements by 12 hours and pass one less exam. 

Here are the requirements to apply for a Washington Loan Originator Licenese from DFI.

All applicants (regardless of when you decide to sumbit your license) must complete Form  MU4 via the Nationwide Mortgage Licensing System and Registry (NMLSR) and submit one fingerprint card, pay $155 licensing fee and…

LO Applications Submitted by July 30, 2009 (in addition the above):

  • Pass the PearsonVue Loan Originator test
  • Complete 8 hours of approved continuing education by December 31, 2009.

Or you can wait until after July 30, 2009 to submit your LO Application and in addition to the above requirements:

  • Pass the State and National exams.
  • Complete 20 hours of approved continuing education by December 31, 2009.

Do you really like to procrastinate?  Opt to delay this process until January 1, 2010 and you still get to pass both exams and complete the 2o hours of CE prior to submitting your license prior to the July 1, 2010 deadline.   (DFI ask that you submit license no later than April 1, 2010 to allow processing time).

Deb Bortner of DFI will be speaking about the SAFE Act and Washington State Loan Originator Licensing at two upcoming events:

  • June 4, 2009 from 4:00 – 8:00pm at The Venue on South Union in Tacoma.   $50 includes dinner and wine from The Three Chicks.  
  • June 19, 2009 from 12:30 – 5:00pm at Safeco Field – Ellis Pavilion in Seattle.  $50 includes a ticket to the Mariner’s Game and lunch.

Both events include presentations on social media for mortgage professionals.  I’ll be one of the speakers at Safeco Field along with David Gibbons from Zillow.   🙂    If you’re interested, you can get more info or register for either event with the Washington Association of Mortgage Professionals (membership to WAMP is not required).

As someone who’s gone through licensing, I can tell you it’s (an important) chore.  Classes will fill up as the deadlines approach and I had the pleasure of being fingerprinted three times before I had a print that was acceptable.   If you fail your exam three times (I wonder how often this happens); you’ll have to wait six months before you can try your luck at the exam again which means no loan originating for you until you have successfully passed your exams.

If you are originating mortgages in Washington State, I would not delay getting your Loan Originator License.

Interview with Jillayne Schlicke – Part 2: The SAFE Act

Earlier this month I shared an interview with Jillayne Schlicke.  Part One addressed LO’s getting ready for 2009.  The second half of my interview touches on The S.A.F.E. ACT which is a part of HR 3221.  The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 is a part of the massive HR 3221.  If you are planning on originating residential mortgage loans in 2009, which is just over a month away, I hope you’ve all ready checked out the NMLS (Nationwide Mortgage Licensing System) site to get your ducks in a row…be sure to have a large bottle of aspirin (or something stronger) handy.  The NMLS states that to assure your information is processed by January 1, 2009, you need to submit the required information to by December 1, 2008.   I just checked the process of my NMLS license and because I filed at 9pm on October 1, 2008, my registration is currently showing as “transition requested” and I’m directed to contact DFI.  DFI is telling me that I registered on October 2, 2008, and they’re working on applicants who applied by October 1, 2008.  I do hope my fellow Washington State Loan Originators were at least a day earlier than I with registering at NMLS to be in compliance with The SAFE Act.   Enough of my griping…my questions to Jillayne are bold and italic.

Which loan originators are impacted by the SAFE Act?

All LOs will be impacted by the SAFE Act, some more than others.  Looking up the chain of command, mortgage brokers and consumer loan lender manager/owners will also be impacted because this adds a layer of administration at the federal level that was previously not in place.  Today, brokers and owners can call their state licensing regulators and receive an answer to their licensing questions in a reasonable amount of time.  Networking with the federal regulators back in Washington DC may or may not offer broker/owners the same level of prompt service and hours of operation for those on the west coast.

Non-depository lenders and brokers must take a 20 hour prelicensing class and 8 hours of continuing education every year.  Some states already have these provisions in place and other states go above and beyond this level.  STates that have pre and post education requirements that are less than what’s required under the SAFE Act must raise their standards to the federal level.

The banks asked for and received exemption from the prelicensing and continuing education requirements mandated by the SAFE Act.  It’s quite possible that FDIC insured banks pointed out they already have ongoing training in place for their employees.

All LOs, no matter where they work, must become registered.

Even with the additional costs and time, this is a step in the right direction for our industry.  It’s time to support the framework that will lead to the eventual repair of consumer confidence in our lending system that must begin at some point.  This is a good place to start.

How will the SAFE Act impact your business?

I’ve been thinking about this for several months.  The 20 hour prelicensing mandate will have very little effect on educators at this time.  There are very few people interested in becoming loan originators right now because the income potential for a new licensee who knows relatively little about the complexities of the industry have dropped dramatically in 2008.

The 8 hours of required continuing education is only 2 more hours per year than Washington State’s 6 hour requirement.

Instead of higher revenues, the changes that will impact continuing education will be that of curriculum development and approval.  It appears right now that the states are going to defer to NMLS to approve our courses and to approve course providers, although this has not been confirmed.  Dealing at the state level is always preferred to dealing at the federal level because the states tend to be more responsive.  We can go to regular scheduled meetings and talk directly to our regulators, we can schedule meetings with them and drive to Olympia if needed, to voice concerns and receive direct answers.

I already see a difference.  When asking questons of the NMLS folks they pawn me off to the states.  The state says to call NMLS.  The whole system is suppose to be ready to go in 2009 yet at no point has the NMLS  communicated to us (course providers) what the guidelines will be for approving providers and courses.

The other problem educators face is the mandate on curriculum.  But that’s another topic for another interview.  🙂

Are Washington Consumers Safer Working with DFI Regulated Lenders?

I’ve always thought so and you may say I’m biased since I work for a company that is regulated by Washington State Department of Financial Institutions.  At the very least, home owners who have been wronged by a loan originator under DFI’s watch can rest assured that the company has much higher odds of having actions taken.  When a borrower contacts me because they want a second opinion or they have a complaint about their lender, the first step is trying to figure out what type of lender they are (mortgage broker, mortgage banker, correspondent lender…) and determine who regulates them.   It’s a mess and there are no innocents.  Bankers are not more ethical than brokers or vice versa.

Here’s an example, from the front page of this morning’s Seattle PI:

In a typical case in late 2002, state bank examiners believed that National City Mortgage was violating the state’s Consumer Loan Act by charging extra fees on mortgages…when asked to explain the costly “discount loan fees, underwriting fees, processing fees and marketing fees,” National City Mortgage sought intervention from federal regulators, records show.

The investigation was stopped by federal decree….the federal Office of the Comptroller of the Currency wrote National City a letter…saying the state had no right to examine or even visit its offices.  Because National City’s parent bank…was chartered with the OCC, the federal agency preempted the state’s authority….

The federal agency didn’t go after the mortgage fee complaint because it had no authority to enforce state consumer protection laws

Also from this article:

Banks are governed by a patchwork of federal and state laws, which are notably weak at the federal level in areas of predatory lending and consumer protection, according to  to law professors, attorneys and other experts.  Some states…have passed tougher predatory lending laws with provisions holding Wall Street liable for financing bad loans.  But the two federal agencies in recent years have increasingly shielded their chartered banks…from state laws.

What really frustrates me is to hear the media and our elected officials wrongly use the term “mortgage brokers” when discussing the current mortgage crisis we are in.   It’s clear that there was not enough regulation and enforcement for all mortgage originators (regardless of type of institution they are employed by).

The federal OCC took about a dozen formal enforcement actions against banks for “unfair and deceptive practices” in the current decade, agency spokesman Robert Garsson said.  The other federal agency, OTS, took about half as many, in “the five to six range,  OCC Cheif Operating Officer Scott Polakoff said.   States…took 3,694 enforcement actions against mortgage lenders and brokers in 2006 alone…

The feds were set up as rivals.  Bank oversight is “the only place I know where regulated entities get to pick their regulators,”said Kathleen Keest, with the Center for Responsible Lending.

Last year, in a case involving Wachovia, the Supreme Court ruled that “the OCC has the absolute right to insist on exclusive oversight without states intervening.

According to the Seattle PI article, Barney Frank has indicated he might try to overturn the current system…until then, it’s my opinion that consumers are more protected by selecting lenders who are regulated by DFI rather than relying on the Fed or the banks to look out for them.   Our State’s system is not perfect but atleast a consumer can visit DFI’s site and verify on a local level if a loan originator or their company is licensed or has had actions taken against them.

With the recent passage of HR 3221, the SAFE ACT was passed to help protect our nation from unsavory mortgage originators.   Once again there are different rules for originators who work for banks and those who work for state regulated institutions.   On a comment at RCG, “DFI Examiner” confirmed that “LO’s with FDIC insured banks and credit unions need to register, but they don’t need to be licensed.”   Ahh…but that’s a whole post on it’s own!

What do Governor Gregoire's actions mean for local Countrywide employees and short selling homeowners?

Is Governor Gregoire just a little too late in regards to Countrywide’s lending tactics? Aren’t we merely days away from the Bank of America takeover?

As I drove back to the office today after teaching yet another short sale class, I heard the news on KIRO 710 AM that Governor Gregoire is seeking to pull Countrywide’s lending license because of an investigation that uncovered predatory lending practices aimed at minorities.  WA State will fine Countrywide 1 million dollars for discriminatory lending practices and attempt to collect an additional 5 million for back assessments due.

From Governor Gregoire’s website:

DFI is required to examine every home-lender licensed in the state of Washington. The agency conducted its fair lending examination of Countrywide last year. At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington’s minority communities. The agency also found significant underreporting of loans during its investigation.

“The allegation that Countrywide preyed on minority borrowers is extremely troubling to me,

Washington State Loan Originator Licensing Update

[photopress:LOLicensing_1_2_3_4_5.jpg,thumb,alignright]As of November 14th we had roughly 15,000 loan originators who had received an interim license during the year 2007. These licenses expire on Dec 31, 2007 and license renewal is conditioned upon them passing their competency exam and completing two continuing education courses, one of which must be an ethics course. At the November 14th Mortgage Broker Commission meeting, we were told that out of 15,000 LOs, there were only about 5,000 who had taken their competency exam.

The new loan originator exam was introduced in June andthe exam candidates were given a 600-question study guide along with the answers to the test questions. The LO exam is 100 questions long and candidates must pass with a 70%. One to two percent of the students that attended my exam prep course had actually read the entire 600 question study guide. Less than half of one percent of the exam candidates that came through my classroom had read the state law to which they’re subject to, the Mortgage Broker Practices Act. The pass rate for the LO exam currently sits at 89%. This means the exam is too easy. For those that did not pass the first time, the second try pass rate for them was 71%.

As of December 19th, WA State Department of Financial Institutions (DFI) reported that only 1,900 loan originators had renewed their license. At this point, we can try to project attrition numbers before the actual figures are released from the state which will likely be at the next Mortgage Broker Commission meeting, date TBD.

If there were 10,000 LOs who had not tested between mid November and now, and if we know that 1833 LOs are not physically located in WA state and could likely find a Promissor testing center near their city, then we’re left with 8,167 LOs that needed to take their exam before Dec 31st. I suppose if every testing center across the state was filled with exam candidates between Nov 14th and today, they all could have made it. I think not.

LOs were reporting up until mid December that many of the testing sites were not completely booked when they took their exam. I had been predicting LO attrition to be about 2,000 since the meltdown began. Now I believe we could see further LO attrition, up to 4,000. This will consist of LOs who haven’t closed a loan in many months and who have found other employment, LOs who were only originating subprime, LOs who have chosen to work for a retail bank or consumer loan lender not subject to licensing, LOs who were not able to pass the background, fingerprinting, and felony checks, and LOs who have just simply de-prioritized the licensing renewal requirements.

LOs who do not pass their exam, complete their two required courses, and renew their license online must stop originating (scroll down to numbers 18-22) at midnight on Dec 31, 2007 and transfer all files in process to their broker or another licensed loan originator. LOs will have 45 days to pass the exam and complete the required CE classes while originating NO loans. After Feb 14, 2008, if a LO has not passed the exam and completed his or her required CE, the interim license will expire and the LO will need to start the application process all over again from the beginning and must wait until their new license arrives from DFI before being able to do the job of, and earning fees from loan origination. There are no exceptions; not even one loan. New LOs entering the industry on Jan 1, 2008 may not originate until they pass their exam and receive their license from DFI.

I receive an interesting phone call from a student late Sunday afternoon. She was once again canceling her attendance at the Dec 31st ethics class, and for the third time, was asking me to move her into another class. I made sure she realized that if she didn’t finish up by midnight on Dec 31st that she would have to stop originating. Here’s what she said; “Oh, yeah, I know. I haven’t taken my test yet either. Can you put me into a Jan class please, and sorry to have to reschedule on you again.

Quick Update on Loan Originator Licensing


Since I’ve covered Loan Originator licensing before on Rain City Guide, I thought I should provide this update.   Apparently DFI is loosening up on their previous decision to not allow LOs to take loan applications if they did not submit the required information prior to the original January 31, 2006 deadline.  

So if a Loan Originator did not follow the new simple rules before January 1, 2007, they can still practice business if they just complete DFI’s online application, the MU4 form and submit their fingerprints for the background check.    As a Licensed Loan Originator who was able to take time out of my busy schedule to comply with DFI’s requirements, I’m just a little concerned and I hope this is not a trend.



Licensed to Loan

This New Year brought significant changes to the mortgage industry. Loan Originators who provide residential loans in Washington State are now required to be licensed. This legislature applies primarily to Mortgage Brokers and not LOs who are employed by banks or credit unions. As I am employed by a Mortgage Broker (technically, we are a Correspondent Lender…I’ll save that for a later article), I thought I would share some tidbits of what I’ve found so far during the first two weeks into the licensing period.

I completed my online application with DFI, submitted my MU4 forms and 2 sets of fingerprints all prior to the due dates so that my background check to determine that I am not a felon and do not have any gross-misdemeanors can be performed. DFI is inundated with applications and they are posting the list of licensed loan originators on line. I’ve been checking the list daily for my name and license number. As of Tuesday, DFI is showing 9,913 licensees from 123 Cash to Zippy Cash. Loan Originators must display their license number on their business cards, loan applications, marketing and websites. This seems kind of odd to me. Realtors and Escrow Officer’s (L.P.O.) do not have to attach their number to their name for the public to see…don’t they trust us?

Currently, Loan Originators who have completed the required steps of the online application, MU4 and fingerprints are operating under an “interim license