Washington State DFI just came down with a huge hammer on Countrywide with a plethora of charges, based on a sample of 600 hundred examined loan files, including (but no limited to):

• Charging higher fees and interest rates to borrowers of protected ethnicity than others with similar situations.
• Inaccurate reporting of HMDA.
• Good Faith Estimates and Federal Truth in Lending not provided within 3 days of application along with violations of other disclosure forms.

The State has also charged that Countrywide has understated their loan volume from 2002 – 2007 and are requiring Countrywide to pay $5,594,785.78 in back assessments.

If DFI’s Deborah Bortner and Governor Gregoire have their way, Countrywide will have their license to provide mortgages revoked and be banned for 5 years from operating as a liscened consumer loan company in Washington State plus an additional $1 million in various fees and fines.

DFI’s STATEMENT OF CHARGES and NOTICE OF INTENTION TO ENTER AN ORDER TO REVOKE LICENSE, IMPOSE FINE, ORDER RESTITUTION, PROHIBIT FROM INDUSTRY, AND COLLECT ANNUAL ASSESSMENTS, EXAMINATION FEES, AND INVESTIGATION FEES. Whew!

Governor Gregoire’s  Press Release

Last but not least, Jillayne Schlicke’s post at Rain City Guide:  What do Governor Gregoire’s actions mean for local Countrywide employees and short selling homeowners?

I have to wonder with the pending merger with Bank of America, how this will be impacted?  Is it still valid?  (I believe that Countrywide will no longer be under the Consumer Loan Act once it becomes Bank of America).   This drama is far from over.

On June 12, 2008, many new laws went into effect in the State of Washington.   You’ve all ready heard me rant about the ridiculous legislation that was passed causing Correspondent Lenders to become licensed under the CLA.   Did you know that during this time our busy State legislatures passed a law that will make it more challenging for distressed home owners to sell their home?  The Seattle Real Estate Bells blog has done an excellent job conveying how damaging this harmful law may be.  No sense in me regurgitating it…just click here and read their post.

Yesterday I attended the Mortgage Broker’s Commission Meeting at Bellevue City Hall.  It was more tame than the one I was at the previous week which focused on the new issues facing Correspondent Lenders becoming licensed under the CLA…I think that’s partly because we were under-represented and that many mortgage brokers with warehouse credit lines attended last week’s meeting.  Jillayne Schlicke of CE Forward did a great job taking live notes and you can read them here.  This legislation is all based on defining if a mortgage company is "making a loan": mortgage brokers are not–lenders with a credit line are.  DFI and WAMB are working on a more precise definition.

From WAMB President, Dave Erickson:

On April 24 at 11:00 AM, a curve ball was thrown at our industry in the form of an explanation of a change to licensing requirements resulting from the recently-passed Senate Bill 6471.

But unlike most pitches from the mound, where you can study the pitcher and watch the ball as it comes at you, this curve ball came from left field. 

We never saw the windup, because there wasn’t one. We never got to swing the bat.  Due to no fault of our own, we took the pitch and Strike One was called.

There will not be a Strike Two.

As of June 14, 2008, Senate Bill 6471 requires that any company who is deemed to be "making loans" in the State of Washington become licensed under the Consumer Loan Act (CLA).

Due to the way the Bill was written, many mortgage brokers are finding themselves falling under the definition of "making loans." The implication of this Bill is that these mortgage brokers and loan originators now licensed under the Mortgage Broker Practices Act must now become licensed under the Consumer Loan Act (CLA)….

Upon receipt of DFI’s notification, WAMB scheduled a meeting with DFI officials to explain our concerns and demonstrate how this legislation will harm our industry and consumers.  We explained the implications on mortgage brokers and loan originators and came out of the meeting with several items of agreement:

• WAMB needs a definition on what constitutes "making a loan" for the purpose of keeping as many mortgage brokers and loan originators as possible under the regulatory purview of the Mortgage Broker Practices Act.
• WAMB will work with DFI via the rules process to create or clarify rules about how businesses are regulated under the Consumer Loan Act with the intention of lessening the onerous compliance requirements of the Act.
• WAMB will work with DFI via the rules process to discuss issues including:  bond requirements, annual fee assessments, clarification of fees charged to consumers that may or may not be allowed under the CLA, revisiting the examination component of the CLA which differs from the Mortgage Broker Practices Act and attempt to lessen the burden of compliance to the detriment of our industry and the consumers we serve.

DFI has committed to providing a Policy Statement by Friday, May 16^th regarding the definition of "making a loan" for the purpose of clarifying who must comply with the new law by the June 12 deadline. 

DFI’s Policy Statement will also provide guidance regarding which aspects of licensing must be completed by June 12 and what areas may be pushed out until the rules process is completed.

DFI has conveyed to WAMB that they wish to move as quickly as possible via the rules process.  DFI seeks to complete the rules process by November 4 which would provide ample time to formulate a legislative response for the start of the next legislative session, should one be necessary….

Stay tuned. 

Thanks to Jillayne Schlicke for posting this because I personally didn’t receive anyword from DFI (I do receive emails regarding the Mortgage Broker Commission meetings)…this one hits close to home as the company I work for, Mortgage Master, is a Correspondent Lender.   DFI did send an email to the President of our company however NOTHING was on their site when she told me about this.

So this is another shout out to all the mortgage brokers in Washington State, especially those impacted by SB 6471, which in my opinion seems to have been passed this quite conveniently by telling WAMB this would not impact mortgage brokers.   WRONG.  Mortgage brokers who have a warehouse line (correspondent lenders) are going to be dramatically impacted by this law.

Meeting Of The Mortgage Broker Commission To Discuss The Impacts Of SB 6471
May 7, 2008, at 1:00 p.m.
Renton Community Center, Banquet Room (100 max capacity)
1715 Maple Valley Highway
Renton, WA (Driving Directions)

Please attend and pass the word!

Did you receive the notice from DFI last Thursday regarding new licensing requirements impacting Correspondent Lenders?  Here’s a portion of the email I received from Deborah Bortner, Director of the Division of Consumer Services.

"Senate Bill 6471 (chapter 78, Laws of 2008), passed by legislature, and signed by the Governor on March 19, 2008, requires that all lenders doing business in Washington be licensed by the Department of Financial Institutions under the Consumer Loan ACT (CLA), chapter 31.04 RCW.  The law becomes effective June 12, 2008."

I’m still digesting all of this…it’s my understanding that if lenders wish to retain their status as a Correspondent Lender in Washington State, they will need to apply for (an expensive) Consumer Loan License.   Gee, I guess that means we can all do loans with double digit interest rates now–how is this helping the consumer?  It certainly doesn’t help lenders…it IS more money for the Evergreen State.

WAMB responded the following day via email:

Many of you received an email from the Department of Financial Institutions on Thursday regarding new licensing requirements for Washington State Lenders.  This email was a result of the passage of Senate Bill 6471 concerning consumer finance companies.  Please know we were not aware of this issue until we also received the notification by email from DFI yesterday.

During the legislation session we were made aware of Senate Bill 6471 and were told that the intent of this legislation was to require that all Consumer Finance Companies who were operating as Mortgage Brokers become licensed.  We were advised that it was not a mortgage broker concern.

Apparently the passage of this legislation has created some unintended consequences for brokers.  The legislation would require any mortgage broker with a correspondent line to also become licensed as a consumer finance company.  We know that if this legislation is put into effect on June 12, it will have an impact on a large segment of WAMB’s membership.   WAMB is working with the Mortgage Broker Commission to minimize these consequences through the Rules Process…."

Well my lending Brothers and Sisters, I highly recommend that you attend the next Mortgage Broker Commission Meeting…it’s sure to be a doozy and we, few and proud, Correspondents must be heard.

Mortgage Brokers Commission Meeting:  Tuesday, May 13, 2008 beginning at 9:00 a.m. – 11:00 a.m. at Bellevue City Hall’s Council Chambers.  Bellevue City Hall, 450 110th Avenue NE, Bellevue, WA 98009.   DFI wants you to fax your RSVP’s with your name, company name, address, phone & fax number to Elizabeth Stancil at 360-586-5068.  Here is a form you can use to RSVP: Download MortgageBrokersCommissionMeetingMay13.pdf

I hope to see you there.  RSVPs are needed by May 9, 2008.

Last Friday, Governor Gregoire signed SB 6381 into law giving fiduciary duties to mortgage brokers.  This new law does not apply to loan originators who work for bank-mortgage companies (like WaMU, Countrywide, Wells Fargo, Chase, Bank of America, etc).   

Here are some of the highlights of what the law spells out for loan originators who work for mortgage brokers:

• A mortgage broker must act in the borrowers best interest and in the utmost good faith towards the borrower
• A mortgage broker shall not accept, provide, or charge any undisclosed compensation or realize any undisclosed remuneration that inures to the benefit of the mortgage broker on an expenditure made for the borrower.
• A mortgage broker must carry out all lawful instructions provided by the borrower. 
• A mortgage broker must disclose to the borrower all material facts of which the mortgage broker has knowledge that might reasonably affect the borrowers rights, interest or ability to receive the borrower’s intended benefit from the residential mortgage loan.  
• A mortgage broker must provide an accounting to the borrower for all money…received from the borrower.

All of the above seems pretty straight forward to me and SHOULD all ready be happening when consumers work with a mortgage professional.  I have always put my clients best interest first–above mine.   The next two points are more surprising:

• A mortgage broker may contract for  or collect a fee for services rendered if the fee is disclosed to the borrower in advance of the provision of those services. 

This will allow mortgage brokers to charge a fee for consultation, credit repair, working on preapprovals.  This could change how a Washington State mortgage broker is paid and how much they charge in origination.    

• The fiduciary duty in this section does not require a mortgage broker to offer or obtain access to loan products and services other than those that are available to the mortgage broker at the time of the transaction.

I see this last point as a conflict with the entire bill.  What if the best loan for a consumer is FHA or VA and the mortgage broker does not have those loans available so they shoe-horn them into a loan they do have access to?  How is that acting in the clients best interest?  The other side of the coin is that if a mortgage broker has never provided a certain product (such as FHA or VA mortgages); how would they know if the consumer would be better off with these loans?

Note to Consumers and Real Estate Agents:  If you are a first time home buyer, have credit scores below 700 or are putting less than 20% down; ask your mortgage broker if they are able to provide FHA financing.  Those who have served our country should ask if VA financing is available. 

Jillayne Schlicke wrote an interesting post on this earlier this month at Rain City Guide.   This law is yet another reason why consumers may want to select a loan originator classified as a licensed loan originator working for a mortgage broker over a loan originator who works for mortgage-bank.