Will Our State’s Regulations Kill Mortgage Blogs?

The Dodo - Didus ineptus Raphus cucullatusI recently had a local mortgage originator contact me because his company is requiring that he takes his mortgage blogs off-line.  His employer told the MLO that it was due to recent Washington State regulations.   In my opinion, his employer probably wants one less thing to worry about in this day and age of trying to operate a mortgage company so telling mortgage originators they cannot blog is much easier than making sure their blogs and outside websites are compliant.

Washington State mortgage originators, are you aware of these rules?  WAC 208-660-446 went into effect November 5, 2010.

When I advertise using the internet or any electronic form (including, but not limited to, text messages), is there specific content advertisements must contain?

Yes.  You must provide the following language, in addition to any another, on your web page or any medium where you hold yourself out as being able to provide the services…

(3) Loan originator web page.  If a loan originator maintains a separate home or main page, the URL address to the site must be a DBA of the licensee and the licensee’s name must appear on the web page.  The page must also contain the loan originators NMLS number and a link to the NMLS consumer access web page for the company….

(5) Oversight.  The company is responsible for the web site content displayed on all web pages used to solicit Washington consumers, including main, branch, and loan originator web pages.

I’m fortunate that my employer does allow me to blog.  Back in the Spring of 2010, during a scheduled audit with DFI declared my blog to be an unregistered trade name.   We did register my mortgage blog with the NMLS, which included paying additional licensing fees.

There is so much for consumers to be aware of and I find that blogging actually helps me to be a better mortgage originator.   When you write about various mortgage scenarios as a mortgage blogger, it causes you to research your underwriting guidelines and to stay current.  I’m constantly looking for “the latest” information for new content to share with my readers.  I seriously cannot imagine not being able to blog about mortgages.

I don’t blame this mortgage originators employer for not wanting to manage the content of their employee’s blogs.   However it’s a sad day when a good mortgage blog is removed from the internet.   I can’t tell you how many consumers thank me for writing and sharing reliable information about mortgages.  A quality mortgage blog provide current guidelines and trends to consumers and real estate professionals. 

If mortgage blogs in our state cease to exist, I suppose people will need to rely on what banks want them to think about mortgages, which I’ve found to be misleading on several occasions.

WA State Real Estate Agents are now Brokers.

On July 1, 2010, real estate salespeople in Washington State will become brokers.  It’s taken the Department of Licensing a total of seven years from initial research to the final implementation having started in 2003 on this project. The revisions passed the legislature in 2008 and the law is now in effect. There are many, many questions still to be answered during the rule-making process which makes the transition challenging but not impossible.  Here are some of the higlights:

  • There are now two levels of licensure for individuals: broker and managing broker.
  • The ‘salesperson’ category has been eliminated. The entry-level license for an individual is now “broker.”
  • A person with three years of experience as a broker will now be able to become a managing broker.
  • The 2010 license law requires the licensing of brokerage firms. A real estate firm is any business entity (including a corporation, partnership, or sole proprietorship) that conducts real estate activities.
  • All real estate services contracts are between the client and brokerage firm, instead of between the client and any individual licensee. A listing agreement is the property of the brokerage firm.
  • A designated broker is responsible for meeting all recordkeeping and trust fund requirements, plus he/she has supervisory responsibility over all the firm’s licensees.
  • All first-time broker license applicants must submit fingerprint identification.
  • Those renewing their licenses must also submit fingerprints and have their backgrounds checked every six years.
  • Educational requirements have been increased for first time broker licensees as well as managing brokers. Existing licensees must take a transition course to update them on the licensing law changes.
  • A broker with less than two years’ experience (remember, I’m talking about a new real estate agent, now referred to as a “broker) is subject to one additional responsibility: working under a heightened degree of supervision. He or she must conduct all brokerage activities under the direct supervision of a designated or managing broker, and submit all signed documents to the designated broker for her review, within five days of the signing, and submit evidence of their required education courses to the designated or managing broker.

There are more changes relating to recordkeeping, trust accounts, the role of firms, and property management. The complete law and its rules can be found here.

I highly recommend all real estate agents brokers and other interested stakeholders join the DOL’s listserve. DOL sends out a new set of Frequently Asked Questions each week and has been doing a great job of keeping us up to date during the transition.

The following links are from the Department of Licensing
Frequently Asked Questions


During the Transition Course, I’ve been asking my students at the end of class if they believe the new law changes will help the industry, hurt, or make no difference.  The majority of students believe the changes will help the industry raise the bar.  The three biggest changes they are happy with are: 1) the increased level of supervision required of new licensees;  2) the mandatory fingerprint/background check; and, 3) the increased level of required prelicensing education for new agents brokers.

As a side-note, I’ve had more than a handful of students ask what kinds of conviction on the background check would dis-qualify them from keeping their real estate license.  For the answer to that question, follow this link and scroll down to the section on “fingerprinting.”

Predatory Short Sale Negotiators

I received a call the other day from a consumer who was in the process of purchasing a short sale home.  The homeowner has defaulted on her mortgage and the trustee sale auction has been postponed a few times now that this buyer’s firm offer has finally reached the lender’s loss mitigation decision-maker.  Once the offer was accepted by the seller, the homebuyer was surprised to learn that there’s a third party involved, a “Short Sale Negotiator” who is charging an additional $9,000 fee on top of the real estate commissions paid to both the agent for the seller and the agent for the buyer. The Short Sale Negotiator is demanding that the homebuyer sign an agreement that the homebuyer will be responsible for paying the $9,000 fee.  The homebuyer emailed me asking what I thought of this additional fee and could I offer some advice. 

The first thing I did was to find out the name of the Short Sale Negotiator company, the owner of the company, and the person who is doing the short sale negotiating. I discovered that the negotiation company is owned by the same person who also owns the real estate firm where the listing agent works.  I also ran the name of the short sale negotiator and discovered that this person IS a licensed real estate agent. 

Readers please note that WA State’s regulators recently changed the real estate licensing laws and there’s a great FAQ section here that answers the question: Does a Short Sale Negotiator have to be a licensed real estate agent? The answer is yes, or a licensed loan originator or otherwise exempt from licensing such as an attorney. (Clicking through from the link, scroll down to “doing business” and see the second question.)

So we have a licensed real estate agent who is earning money as a short sale negotiator who works for a company owned by the same person who owns the listing agent’s real estate company.

There are a couple of things that come to mind here. First of all, isn’t there a bit of a conflict of interest for the real estate broker/owner of that company?  Where are your duties? To the home seller, whose listing you’re charged with overseeing, or are your duties to the buyer, a client who signs the agreement to pay your other company $9K?  What are the duties of disclosure to BOTH the seller and the buyer?

For example, if I’m the seller in this transaction, charging a buyer an extra $9,000 out of pocket might preclude a number of qualified buyers to make an offer….unless I hold back this information until after the buyer has emotionally fallen in love with the home and is already arranging the furniture in his/her mind.  That seems manipulative.  Why not tell all possible prospects up front what the short sale negotiator’s fee is: Make it mandatory to display this extra fee in the PUBLIC comment section of the multiple listing service. 

You might be thinking: “Yes we could disclose this god-awful fee to the public this but that’s not in the best interest of the home seller.”  Well, okay but what happens if you end up attracting a lot of buyers but they all walk when told of this high third party fee? Now the listing agent has wasted everyone’s time.  It’s like if someone asks me out on a date and then later he tells me he’s married.  Come on! Hey, some women might say yes and it’s nice to know up front how big of an a-hole a guy is.   I say the listing agent would actually be attracting the right kind of buyer if they disclosed that their Short Sale Listing comes with baggage.  It seems to work fine for the married guys who post personal ads on craigslist day after day.

More: If there is an affiliated business arrangement going on between the two companies that are owned by the same person/people, then a RESPA-required Affiliated Business Arrangement disclosure form should ALSO be required so that the home seller and home buyer are aware of the dual company ownership. Part of that AFBA disclosure form should state that the homebuyer understands that buying this home means he/she does NOT have to use this particular short sale negotiation firm and is free to select another short sale negotiation company to do the same or similar work.  However, since a ‘short sale negotiator fee’ might not necessarily be classified as a “settlement service” then this rule might not apply. HUD are you listening? It’s highly possible that the next time a federal regulator makes it out to Washington State, the Seahawks will have won the Superbowl. Knowig this, we should look to the state regulators for assistance.

For a home buyer, a big red flag would be if the listing agent demands that you use this affiliated short sale negotiator. Demanding that a buyer use a real estate broker’s affiliated company is a licensing law violation as well as a violation of federal law when those companies are a title, escrow, appraisal company, and so forth. So why not a short sale negotiations company also?

Even more: Is the listing agent receiving part of that $9,000 fee? One way of structuring this is for the owner of both companies to promise the listing agent something like this: “if the lender cuts your commission, don’t worry, I’ll give you a portion of that $9,000 negotiator fee.”  Unearned fees are not allowed under RESPA.

Even worse: Is the short sale negotiator splitting the $9,000 with the home seller?  How fast can you say “Mortgage Fraud is now a Class B Felony in Washington State?”

The other logical problem that comes up for me when I see an additional fee of $9,000 is this: what work is being done for NINE THOUSAND DOLLARS?  That’s an awful lot of money. I could install all new vinyl windows in my 1959 house with that kind of money. I could put this in my teenager’s college fund. I could accomplish a lot with $9,000 so why would I want to pay that kind of money to a short sale negotiator?  Is this like extortion/payola in order to get that particular house for that price? 

Maybe not.  What is this third party negotiations company doing for their $9,000?  Wait, let me go find out. I’ll read their website.  Gee, there’s nothing on the website telling a consumer what their company actually does for that fee but the pictures of their team tell me they’re all good looking guys under 30. Not that there’s anything wrong with doing business with good looking guys under 30 but it should make us wonder how much experience the negotiator has at short sale negotiating.  In 2009 I believe we added ten million “short sale experts” in the real estate industry.

My advice to the consumer: Negotiate that fee down to somewhere around $1,000 to $2,000.  If the home is that close to the auction date, tell your real estate agent that you’re going to buy the home at the auction if the lender won’t approve the short sale and if the negotiators won’t go for a reduced fee.  Most of the third party short sale negotiators out there are paid much less than $9,000. 

Here’s some help with the math:  I asked the consumer to ask the short sale negotiator how many hours he’s spending on this file v. how many hours he’s working on those biceps. Consumer says the SSN said he’s spent 10 hours so far on this transation! !! !!! Wow! Well! Okay then, let’s divide $9,000 by 10 hours.  That’s a going rate of $900 per hour. That’s probably close to the hourly rate charged by the Johnnie Cochran law firm for litigation cases and I’m fairly certain that this licensed real estate agent negotiator doesn’t have as much experience or education as the JC legal team.  Counter back with $100/hour and settle around $200/hour max.

I am betting they’ll take the $2k.

Ask for the negotiator’s $2K to be put on the HUD I Settlement Statement as a seller’s closing cost.  There’s a chance the lender will pay it.  If not, the buyer needs to as himself: Is this house worth $2k out of pocket at closing?  It’s also important for the buyer’s new lender to know about this additional fee. Insist that it’s paid out through escrow and shows on the buyer’s side of the HUD I Settlement Statement if the lender refuses to pay it as a seller’s cost.

Buyers: do not agree to pay any money after closing, on the side, without disclosing this additional amount to all parties including the lender. 

Predatory Short Sale Negotiators: The world is watching you.  I wonder if your dreams are haunted the way I was haunted after watching The Hurt Locker.  Soon your predatory fees are going to explode in your face. Oh, and loan mod salesmen thinking that being a short sale negotiator is the next big way to “make six figures with no experience,” please go back to the used car lots. I’m sure there are some openings at the Toyota dealerships.

New Construction — does that property even legally EXIST?

This post is not legal advice. For legal advice, consult an attorney in person and not via a blog.

I recently had the opportunity to submit an offer on behalf of a client for a new construction home. The price was right and the clients really liked the house. However, in preparing the offer it quickly became apparent that the developer had yet to record the short plat used to create each of the new parcels that contained the new construction (there were a total of three new parcels, each with a SFR).

Before I go further, and in case anyone is wondering “What’s a short plat?”: Generally speaking a short plat is the division of an existing legal parcel of land into smaller parcels. Depending on the jurisdiction (e.g., King County, City of Seattle, City of Bellevue, etc.) a short plat can consist of up to 9 new parcels. A short plat must be approved by the jurisdiction in which the property is located. Once approved and recorded, the short plat creates the new legal parcels of land.

So what’s the big deal in buying a property BEFORE the short plat is approved and recorded? Well, in that instance you’re buying property that is not yet a legal parcel. If for some reason the short plat is not approved or recorded, then you could be in for a real hassle in terms of paying taxes or dealing with the city or county in regards to your property. To be perfectly frank, I don’t know exactly howthat might play out, but I do know it would be a pain (and if you have to hire a lawyer, expensive). On the other hand (and perhaps a title insurer or escrow agent will weigh in here) its possible that the transaction would not close until the plat had been recorded.

But there is at least one other issue as well: A short plat can create additional legal interests (such as easements) in or restrcitions on the property. If you commit to buying the property before the short plat is recorded (by signing a purchase and sale agreement, which certainly can happen before the plat is recorded) you may be in for an unpleasant surprise. For example, what if you discover that you have a shared driveway?

The bottom line: Be careful in buying property that legally does not exist when you sign the purchase and sale agreement. At a minimum, any purchase and sale agreement for property that does not legally exist should include a contingency allowing the buyer to receive and approve the recorded short plat before closing.

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.

WA Loan Originator Licensees Drops to 5335

At the end of 2007, Washington State had 13,722 loan originators licensed under a mortgage broker.  At the end of 2008, that number fell to 8739.  As of May 5, 2009, we’re at 5335.  This number also includes inactive licensees. Based on the number of LO students who tell me that they already have a full time job elsewhere and are just keeping their license active “just in case” they want to originate a deal for a friend or family member, I’d say the number of active licensees is below 5335. 

In 2008, many mortgage brokers were forced to re-license as consumer loan companies due to changes in state law. Subsequently, many of those LOs let their license go in 2008. LOs who work for a consumer loan company will start their licensing process in August and we will be able to better track the number of consumer loan company LOs licensed in WA State.  As more lenders begin using the National Mortgage Licensing System to verify if the person who originated the loan is licensed in that state, perhaps some of the unlicensed, out of state shadow LOs will start being counted.

Let’s discover what “Lending with Expertise” means to Paramount Equity

Paramount Equity has settled their case with the Washington State Department of Financial Institutions. Read the Consent Order here.  The Statement of Charges outlined many, many violations of state and federal law:

  • Using the term “mortgage bank

Foreclosure Rescue Scammer or AG Victim: You be the Judge

In order to go into the foreclosure rescue business, foreclosure rescuers must make themselves believe that they are helping the homeowner. This is done in a cognitive way, by attending many foreclosure seminars, reading lots of books and memorizing scripts that can be played back inside the foreclosure rescuer’s head over and over again until it becomes real and true to them.

Similar to how we fool ourselves over and over again when we say to ourselves “it’s only one drink,” “it’s only a cookie” and “it’s not really sex.”  Self deception is very powerful and it appears to be working well with foreclosure rescuers.  I hear many phrases over and over again such as, “it’s perfectly legal,” “homeowners want to stay in their homes,” and “if it wasn’t for me, then….”  With the case of Joe Kaiser, we are starting to hear a different song. It’s the whine of the victim.  You know the type of person I’m talking about who constantly complains about being victimized to the point where they transform into victim.

Joe Kaiser (doing business as PreFlop, LLC, G. Hobus Investments, LLC, Bobo Buys Real Estate, and Unclaimed Funds, Inc.) makes money selling foreclosure rescue sales courses and books (examples: ‘The Subterranean Marketplace in 2009″ for $997. “Learn How to Day Trade in Real Estate Online Using Craigslist for $667.) though not everyone has been a satisfied customer.  Joe buys and sells homes in foreclosure but not just any kind of foreclosure: tax foreclosure.  Some of you will remember fine movie, “The House of Sand and Fog” very well acted by Sir Ben Kingsley, Jennifer Connelly, and the beautiful Shohreh Aghdashloo. I assign this movie as extra credit for my college students because of all the possible title insurance issues surrounding the tax foreclosure plot.  This movie should be required viewing for anyone thinking about entering the world of tax foreclosures.

In a very methodical way, described in his books, Joe locates homeowners who are delinquent on their real property taxes, and also have equity in their home.  This is a bit like a needle in the haystack kind of work today but during the bubble run-up, as others swarmed the trustee sales, Joe focused on tax foreclosures. Interestingly, several of his victims have Hispanic surnames but I digress. Le’ts read the public records documents:

The Court found that Mr. Kaiser violated the Consumer Protection Act by soliciting homeowners with false promises to help them keep or save their home when partial interest deals do not actually result in the homeowner keeping or saving their home.  The Court also found that, in the course of creating partial interest deals, Mr. Kaiser violated the Consumer Protection Act by falsifying real property excise tax affidavits and by acting as both trustee and co-beneficiary seeking a profit from the trust.

Kaiser solicits homeowners facing tax foreclosure and induces them to place their home in a trust, with Kaiser, through his business entities, as trustee and co-beneficiary.  Mr. Kaiser does not pay the homeowner for their homes. Once title to the home is in Kaiser’s control, he pays the delinquent property taxes and stops the sale of the home.

The land trust…that Kaiser created give him complete title and control over the homes and leave the former owners with only two tenuous rights: 1) the right to some percentage of the sales proceeds if Mr. Kaiser chooses to sell the property, and 2) the right to occupy the property for one to three years, provided the former owner pays rent. These two rights are tenuous because the documents contain hair-trigger default provisions which void these rights if the former homeowner is even five days late on a rental payment or violates any of the other terms contained in the numerous documents Mr. Kaiser has them sign.

Mr. Kaiser testified that every partial interest deal he has created is actually in default…therefore, none of the former homeowners maintains their right to possession of the property or a percentage of the proceeds if Kaiser chooses to sell it.  By virtue of the lease provisions and other contractual provisions for reimbursement of all of Mr. Kaisers expenses, his terms entitle him to receive either the entire home vacant or his share of the home’s equity without having ultimately paid any money….Homeowners who enter the transactions believing they are saving their homes are actually stripped of any ownership interest and are not even given a right of first refusal to buy back their home.  No fully informed person, not acting under compulsion would enter a transaction with such onerous terms.

There is much more in the Findings of Fact and Conclusions of Law and if you want to learn how to “Negotiate Foreclosures Like a SWAT Team Leader” then by all means, meet Joe here.

There are some investors who feel sorry for Joe.  Joe feels like he has been attacked by the AG’s office and is blogging about his new role as a victim. Let’s see if this logically works.

In the F&G M. transaction, Mr. Kaiser claimed he saved F&G’s home…What Kaiser actually did was purchase the home at the foreclosure sale and then had Mr. M. sign over his rights to the overage money from the foreclosure sale. As a result, Kaiser obtained both the house and the $45,428.47 in overage money he had paid at the auction. Kaiser never sold the house back to Mr. M. even when Mr. M. obtained a Realtor and made an offer. Kaiser then sent Mr. M. an eviction notice demanding Mr. M. immediately pay $2700 in rent or vacate the property.

I’m trying to work up some tears but they’re just not coming.  Now it’s your turn: is Joe Kaiser a posterboy foreclosure rescue scammer, a victim, a sociopath, a combination thereof, or am I too  justice oriented to become a real estate investor guru?  I just can’t look at someone, flat-out lie to them, and steal their house and money.  If that’s what it takes to be a real estate investor guru, count me out.

JBA Financial Group: Get Licensed or Get Out of Washington State

I heard a radio ad on KIRO 973.FM on Monday, April 13, 2009 at 11:45 AM during the Dave Ross show and again on Tuesday, April 14, 2009 at 6:02PM on the Ron and Don show.  The company was JBA Financial Group and they are advertising their loan modification services.  JBA Financial Group is not licensed to do business in Washington State, and they are not licensed as either a mortgage broker or consumer loan company according to the DFI database which is updated as of today.  I called JBA Financial. Here is how the conversation went:

Jillayne: “Hi, I’m a Washington State homeowner and I just heard your ad on KIRO 97.3FM here in Seattle.  I was wondering if you are licensed to do business in Washington State.”
JBA: “Well you sure sound happy. My name is X, what’s your name?”
Jillayne: “Jill.”
JBA: “Hi Jill, yes, we are licensed by the department of real estate and licensed by the department of corporations to do business in all 50 states.”
Jillayne: “Well on your website, it just says DRE-California. With all the news reports about predatory loan modifications, I want to be sure I’m dealing with a legitimate company.”
JBA: “That’s very smart of you.  As you can see on our website, we’re licensed to do business through the Department of Real Estate and that’s good for all 50 states.”
Jillayne: “No, I don’t think so. It just says “California” on your website, not “all 50 states.”
JBA: “Well you can call the department of real estate yourself and check us out.”
Jillayne: “No thank you, good bye.”

Newsflash for  JBA: The California Department of Real Estate does not give you approval to do loan modifications in all 50 states.

Isn’t there something in the contract KIRO radio signs with advertisers that they have to be sure the company is following state law?  I asked KIRO this question and here is what a KIRO representative, who refused to be identified, said on Monday: Listener concerns should be directed to the attorney general’s office. KIRO has left a message for JB Financial to inquire about the status of their ability to do business in Washington State.  On Tuesday, the same KIRO representative emailed me confirmation that JBA has the authority to do loan modifications in all 50 states, which they received from the owner of JBA.  Here is the document.  There is nothing in this document that allows JBA to claim that it can do loan modifications in all 50 states.  If I can easily figure this out, why can’t KIRO or it’s parent company, Bonneville?

I also put in a call to JB Financial Group’s owner, letting him know that I was preparing this blog post. I received a phone call from their vice president, who informed me that JBA’s primary business is real estate investments and they only recently began doing loan modifications.  He did not know if JBA is licensed to do loan mods in Washington State. He referred me to the company’s CFO, “the strictest compliance person you will ever meet.”  The CFO was not able to talk long because he was, no kidding, in the middle of recording another radio commercial, so the president called me back. He said that he believes the California Department of Real Estate gives them approval to perform loan modifications in all 50 states unless a state contacted them and told them otherwise. Wow, so much for strict compliance.   He believed that because his company is “attorney assisted” they didn’t need to be licensed. I informed him that WA State gives his company no such exemption.  

I’ll be happy to update this post once I find out that JBA Financial  Group is actually licensed in Washington State to perform the services that they are advertising on the radio. 

During the last decade we had hundreds and maybe thousands of predatory lenders roaming around Washington State.  In some of our state’s investigations, there were NO consumer complaints filed against lawbreakers such as the case of Liza Bautista. It will take a village to shut down the predatory loan mod companies.  I’m hoping that the legitimate loan mod companies as well as radio advertising decision-makers will help.  The closest we can come to “legit” is to make sure they are, at minimum, licensed with the Department of Financial Institutions working under either a mortgage broker OR licensed as a consumer loan company, or otherwise exempt from the act such as attorneys and free HUD-approved housing counseling agencies.

DFI Releases Guidelines on Loan Mods and Sets Limits on Fees

Washington State Department of Financial Institutions has released an updated interpretive statement on loan modifications late this afternoon. People who perform loan modification services for Washington State homeowners must be licesed as a loan originator and under the supervision of a broker, or be working under a licensed consumer loan company.  Attorney have a limited exemption and non-profit housing counseling agencies are also exempt.  Real estate agents are not exempt.

 Licensees that charge a fee for loan modification services in advance of the services being provided must obtain a signed fee agreement for loan modification services from the borrower. Any fees paid in advance of services provided must go into the company’s trust account prior to disbursement, or be submitted to an independent escrow or title company to be held until disbursed at the instruction of the parties consistent with the fee agreement. Licensees are prohibited from collecting fees via direct access to a borrower’s bank account or via use of the borrower’s credit card.

A loan modification normally begins with a hardship analysis which is an examination of the borrower’s current mortgage, income, expenses, and ability to repay. The hardship analysis includes meetings or conversations with the borrower(s) and a determination of the borrower’s eligibility for a modification based on the particular lender’s eligibility requirements or the eligibility requirements of a federal modification program. The hardship analysis, sometimes referred to as “Phase I services,