I’ve been receiving phone calls from mortgage loan originators from different states, asking what they should do if they have a criminal conviction in their past. The federal SAFE Act, enacted in 2008, provided minimum standards for the licensing of mortgage loan originators. Included in those requirements is a blanket prohibition on applicants who have been convicted of, pled guilty, or pled nolo contendere (no contest) to a felony if the felony was a crime involving fraud, dishonesty, breach of trust, or money laundering. There is a seven-year disqualification if the felony conviction was for any other type of crime.
If you have been denied approval of your mortgage loan originator license application because of a criminal conviction in your past, you have a couple of options. The first is that you can challenge your denial. Each state agency who issues decisions on license application has a set of procedures for challenging these decisions. Usually, it involves a hearing before someone else in the same agency or perhaps a hearing in front of an administrative judge. The procedures differ for each state. If you wish to challenge the denial of your license application, you must follow the rules for that agency. If you will be hiring a lawyer to represent you, you want to hire a lawyer who practices administrative law in the state in which the licensing agency exists. If your license was denied by the Massachusetts Division of Banks, you need a Massachusetts-licensed attorney. If your license was denied by the Illinois Department of Financial and Professional Regulation, you must hire an Illinois-licensed lawyer. If there are time limits for filing a challenge, you must not delay filing the challenge. If your challenge is filed too late, it is barred forever.
Your other choice is to try to find employment with a depository institution as the SAFE Act has different rules for mortgage loan originators employed by banks. If your felony conviction is for a dishonesty crime, you may never be a loan originator again.
Showing posts with label loan officers. Show all posts
Showing posts with label loan officers. Show all posts
Tuesday, March 15, 2011
Monday, September 27, 2010
Will Your Mortgage Loan Originator's Criminal Record Prevent Him From Getting Licensed?
The SAFE Act requires all mortgage loan originators (MLOs), also known as loan officers, to create a record that will become part of the Nationwide Mortgage Licensing System (NMLS) registry. Part of the record deals with disclosures about an MLO’s criminal background. To verify the information that the MLO is providing in his NMLS record, the SAFE Act requires criminal background checks for all loan officers.
The questions asked in the NMLS MU4 record concern criminal convictions for a felony, pleading no contest to a felony, pleading guilty or no contest to a misdemeanor involving a financial-services crime, fraud, theft, perjury, forgery, or having control over an organization that pleaded guilty or no contest to these dishonesty crimes.
Questions come to me from loan officers who have been pleaded guilty to drunk driving, to issues when they were stockbrokers, to juvenile crimes that have or have not been expunged from the record. These loan officers ask me what to do and whether these past issues are now a current problem.
I cannot counsel anyone who is not my client so I will not give specific answers in this blog. My general advice is, when in doubt, disclose and explain. Many times criminal convictions that should have been expunged will somehow show up in a criminal database. If you decide not to disclose and the conviction or no contest plea shows up, you look like you are trying to hide something. I always fall on the side of honesty and disclosure.
When you disclose your conviction or no contest plea, the licensing reviewer may have some discretion to still approve your license application, depending on the type of crime and when the conviction or no contest plea happened. The SAFE Act has explicit disqualifiers for license approvals. The SAFE Act prohibits the licensing of an MLO if the applicant has ever been convicted of a felony involving an act of fraud, dishonesty, breach of trust, or money laundering, or convicted of any felony in the seven year period before filing an application for a license. If you are outside of the seven year period, you should be fine.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you need help with your licensing (company or MLO). I’ll keep what you tell me confidential but I cannot give you any specific legal advice until you become a client of the firm. This is done by written agreement only.
The questions asked in the NMLS MU4 record concern criminal convictions for a felony, pleading no contest to a felony, pleading guilty or no contest to a misdemeanor involving a financial-services crime, fraud, theft, perjury, forgery, or having control over an organization that pleaded guilty or no contest to these dishonesty crimes.
Questions come to me from loan officers who have been pleaded guilty to drunk driving, to issues when they were stockbrokers, to juvenile crimes that have or have not been expunged from the record. These loan officers ask me what to do and whether these past issues are now a current problem.
I cannot counsel anyone who is not my client so I will not give specific answers in this blog. My general advice is, when in doubt, disclose and explain. Many times criminal convictions that should have been expunged will somehow show up in a criminal database. If you decide not to disclose and the conviction or no contest plea shows up, you look like you are trying to hide something. I always fall on the side of honesty and disclosure.
When you disclose your conviction or no contest plea, the licensing reviewer may have some discretion to still approve your license application, depending on the type of crime and when the conviction or no contest plea happened. The SAFE Act has explicit disqualifiers for license approvals. The SAFE Act prohibits the licensing of an MLO if the applicant has ever been convicted of a felony involving an act of fraud, dishonesty, breach of trust, or money laundering, or convicted of any felony in the seven year period before filing an application for a license. If you are outside of the seven year period, you should be fine.
Contact Robin Gronsky at Robin@Mortgagelicensesolutions.com if you need help with your licensing (company or MLO). I’ll keep what you tell me confidential but I cannot give you any specific legal advice until you become a client of the firm. This is done by written agreement only.
Tuesday, April 13, 2010
Should Your Mortgage Broker Company Stick It Out or Find A Different Opportunity?
I read an article in a Buffalo newspaper that quoted a spokesman from the New York Banking Department who revealed that 315 mortgage brokers gave up their licenses last year. The number of licensed mortgage broker companies and loan originators is down in every state. There are a number of reasons for this situation. I’m sure you’ve experienced many of them.
The requirements of the SAFE Act have caused many loan originators who cannot meet its qualifications. There were loan originators who had criminal pasts, bankruptcies, bad credit, or no knowledge of federal and state laws who were working as loan originators. Many of these people have left or will be leaving the business as all of the loan originator licensing requirements become effective (no later than December 31, 2010). There are many loan originators who don’t deserve to be in the mortgage business, with their backgrounds, but I have spoken to many, who may not be able to stay in the business because of stupid decisions made when they were young or bad luck with their finances.
Others in the industry have spoken to me about their frustration with the requirements that the lenders are placing on them. Many lenders only wish to take applications from the highest volume brokers. But, volume is down all over the country. Most consumers are too nervous about their job situation to go out and buy a new house. Other consumers want to buy but cannot sell their existing home. Many brokers cannot bring the kinds of volume that the lenders insist on.
The new regulations are also causing mortgage companies to close up shop. Licenses cost more, surety bond requirements have gone up so the premiums cost more and the annual assessments have gone up as the need for banking department income is spread among a smaller number of licensees.
So, do you close up your business and work for a lender? Become a net branch? Leave the business? If you became a mortgage broker to make a lot of money, then the opportunities of being a net branch or working for a branch may make sense to you. After all, loan officers working for banks don’t need to be licensed as mortgage brokers or loan originators. You make the money without the headaches. Or you affiliate with another mortgage broker or lender and you are one of their branches. They worry about surety bonds and license fees. You just bring them loan applications and they pay you for them. There are many ways to stay in the business without necessarily maintaining your own mortgage broker business. There are companies out there that are looking for good brokers. You may want to explore every possibility out there and make a change to your employment situation.
But, if you feel that you provide a valuable service to consumers and you want to retain your independence, you need to hang on and educate your past and future customers about why an independent mortgage broker is better for them than their going to a bank. Mortgage brokers have not done the job they need to do to convince consumers that they are worth the fee that they are charging. The comments that were posted after that article that I read largely charged mortgage brokers with allowing fraud (if they didn’t cause it themselves) and with putting borrowers into loans that made the most money for the broker, not the loans that made sense for the borrowers. Are you doing anything to counteract these types of opinions? Can you give a borrower any reason why they should use a mortgage broker rather than going to a lender or a bank?
Some of you will hang in there because this is what you have been doing for the last 10-15 years. You feel that you are helping people, you like being your own boss and you believe that the shakeout in the industry will leave the strongest surviving and that will include you. If that is your reason for staying in business, go out and make your customers want your services. Show them how you help them when they are dealing with one of the biggest financial transactions of their lives.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
The requirements of the SAFE Act have caused many loan originators who cannot meet its qualifications. There were loan originators who had criminal pasts, bankruptcies, bad credit, or no knowledge of federal and state laws who were working as loan originators. Many of these people have left or will be leaving the business as all of the loan originator licensing requirements become effective (no later than December 31, 2010). There are many loan originators who don’t deserve to be in the mortgage business, with their backgrounds, but I have spoken to many, who may not be able to stay in the business because of stupid decisions made when they were young or bad luck with their finances.
Others in the industry have spoken to me about their frustration with the requirements that the lenders are placing on them. Many lenders only wish to take applications from the highest volume brokers. But, volume is down all over the country. Most consumers are too nervous about their job situation to go out and buy a new house. Other consumers want to buy but cannot sell their existing home. Many brokers cannot bring the kinds of volume that the lenders insist on.
The new regulations are also causing mortgage companies to close up shop. Licenses cost more, surety bond requirements have gone up so the premiums cost more and the annual assessments have gone up as the need for banking department income is spread among a smaller number of licensees.
So, do you close up your business and work for a lender? Become a net branch? Leave the business? If you became a mortgage broker to make a lot of money, then the opportunities of being a net branch or working for a branch may make sense to you. After all, loan officers working for banks don’t need to be licensed as mortgage brokers or loan originators. You make the money without the headaches. Or you affiliate with another mortgage broker or lender and you are one of their branches. They worry about surety bonds and license fees. You just bring them loan applications and they pay you for them. There are many ways to stay in the business without necessarily maintaining your own mortgage broker business. There are companies out there that are looking for good brokers. You may want to explore every possibility out there and make a change to your employment situation.
But, if you feel that you provide a valuable service to consumers and you want to retain your independence, you need to hang on and educate your past and future customers about why an independent mortgage broker is better for them than their going to a bank. Mortgage brokers have not done the job they need to do to convince consumers that they are worth the fee that they are charging. The comments that were posted after that article that I read largely charged mortgage brokers with allowing fraud (if they didn’t cause it themselves) and with putting borrowers into loans that made the most money for the broker, not the loans that made sense for the borrowers. Are you doing anything to counteract these types of opinions? Can you give a borrower any reason why they should use a mortgage broker rather than going to a lender or a bank?
Some of you will hang in there because this is what you have been doing for the last 10-15 years. You feel that you are helping people, you like being your own boss and you believe that the shakeout in the industry will leave the strongest surviving and that will include you. If that is your reason for staying in business, go out and make your customers want your services. Show them how you help them when they are dealing with one of the biggest financial transactions of their lives.
Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at Robin@Mortgagelicensesolutions.com. Thank you!
Tuesday, July 22, 2008
Paying Your Loan Officers a Commission
Do you pay any of your loan officers a commission when a loan is closed? Are you aware that state law may control the details of when a commission must be paid, whether you can deduct any costs or expenses from the commission, or what commissions, if any, are due to a loan officer who leaves your employ before the loan closes? In some states, you must pay their commissions no later than the last day of the month following the month in which these commissions are earned. In other states, such as California, commissions must be paid on the next regular payday after they have been earned and are "reasonably calculable." An employer has the flexibility to deem commissions earned either when the sale is made or when the customer pays for the service.
Some states, such as New York, generally prohibit an employer from deducting any sum from an employee's commissions and other wages, except for deductions for the benefit of the employee (e.g., pension, health benefits). Examples of prohibited deductions are deductions for spoilage or breakage, cash shortages or losses, and fines or penalties for lateness, misconduct, or quitting by an employee without notice. The reasoning is that the employer should bear the risk of such losses rather than the employee. This means that you may not deduct anything from a loan officer's commission if there is any reason that the full fee on a particular loan cannot be collected.
The largest source of conflict regarding the payment of commissions occur when a loan officer leaves before a loan closes. Certain states require you to pay the wages, including earned commissions, no later than the regular payday for the pay period during which the termination (voluntary or involuntary) occurred. In other states, employees who are discharged, or who resign with 72 hours' notice, are entitled to all wages due at the time of termination. If the resigning employee fails to provide notice, the employer has 72 hours after the resignation to make payment. In those states, an employer may not wait until the customary time for calculating the commissions of current employees, nor delay payment of earned commissions until the next regularly scheduled pay date.
You must have a policy as to when commissions are earned if the loan officer leaves your employ before the loan closes. The policy should be in writing and each new loan officer should be made aware of it. Remember, once a commission is earned, it cannot be forfeited, even if the loan officer was terminated for cause or left you with no notice.
If your policy is badly drafted, you will ultimately find yourself dealing with the Labor Department in your state. You will be answering the complaint of an unhappy ex-employee. In addition to awarding the commission that you disputed, the Labor Department can also assess penalties for your "willful misconduct." It can get very expensive if a complaint is filed against you. Subsequent complaints will be even more expensive.
You need to know what your state's law requires you to do when you create a compensation policy for your employees. You should have the assistance of a lawyer who is well-versed in employment law if you insist in drafting your own agreements. Make sure that you specify when and how a commission is earned and when that commission will be paid. Your agreement should also state when and how any draws against commissions earned will be reconciled, as well as how and when all commissions will be paid if the employee leaves. If you are doing business in more than one state, your agreements might differ in each state, depending upon the law in each state. One form of agreement may not be sufficient.
Some states, such as New York, generally prohibit an employer from deducting any sum from an employee's commissions and other wages, except for deductions for the benefit of the employee (e.g., pension, health benefits). Examples of prohibited deductions are deductions for spoilage or breakage, cash shortages or losses, and fines or penalties for lateness, misconduct, or quitting by an employee without notice. The reasoning is that the employer should bear the risk of such losses rather than the employee. This means that you may not deduct anything from a loan officer's commission if there is any reason that the full fee on a particular loan cannot be collected.
The largest source of conflict regarding the payment of commissions occur when a loan officer leaves before a loan closes. Certain states require you to pay the wages, including earned commissions, no later than the regular payday for the pay period during which the termination (voluntary or involuntary) occurred. In other states, employees who are discharged, or who resign with 72 hours' notice, are entitled to all wages due at the time of termination. If the resigning employee fails to provide notice, the employer has 72 hours after the resignation to make payment. In those states, an employer may not wait until the customary time for calculating the commissions of current employees, nor delay payment of earned commissions until the next regularly scheduled pay date.
You must have a policy as to when commissions are earned if the loan officer leaves your employ before the loan closes. The policy should be in writing and each new loan officer should be made aware of it. Remember, once a commission is earned, it cannot be forfeited, even if the loan officer was terminated for cause or left you with no notice.
If your policy is badly drafted, you will ultimately find yourself dealing with the Labor Department in your state. You will be answering the complaint of an unhappy ex-employee. In addition to awarding the commission that you disputed, the Labor Department can also assess penalties for your "willful misconduct." It can get very expensive if a complaint is filed against you. Subsequent complaints will be even more expensive.
You need to know what your state's law requires you to do when you create a compensation policy for your employees. You should have the assistance of a lawyer who is well-versed in employment law if you insist in drafting your own agreements. Make sure that you specify when and how a commission is earned and when that commission will be paid. Your agreement should also state when and how any draws against commissions earned will be reconciled, as well as how and when all commissions will be paid if the employee leaves. If you are doing business in more than one state, your agreements might differ in each state, depending upon the law in each state. One form of agreement may not be sufficient.
Thursday, October 11, 2007
Starting Your New Business (Part II)
Before you even open your doors, you must have a marketing plan in place. This requires you to sit down and assess your competition and decide how you will be different from your competitors. Are you going to specialize in one segment of the population? Are you going to specialize in only a few products? How will you find your customers? What will be the budget for your marketing and how will it be spent? The more you write down about the research you have done and the specific plans you have for the first year, first three year and first five years of operations, the more likely your chances are that you will succeed. The climate for new mortgage companies is very difficult right now. All over the country existing mortgage businesses are shutting down. You must have a strategy for getting new business.
You must also plan for how loans will be processed and closed once you or your loan officers bring the new business in the door. Will this function be done in-house or will it be outsourced? Do you have the knowledge to do everything yourself in order to keep costs down? Do you know which software to buy? Do you have a source for credit reports, appraisers, relationships with title companies, and real estate lawyers? It is imperative that you do your research before you start your business. Otherwise, you will be throwing your money away as you learn on the fly.
When you have done your research, set up your systems and your license has been approved, you are ready to open for business. Good luck and I hope you reach your goals.
You must also plan for how loans will be processed and closed once you or your loan officers bring the new business in the door. Will this function be done in-house or will it be outsourced? Do you have the knowledge to do everything yourself in order to keep costs down? Do you know which software to buy? Do you have a source for credit reports, appraisers, relationships with title companies, and real estate lawyers? It is imperative that you do your research before you start your business. Otherwise, you will be throwing your money away as you learn on the fly.
When you have done your research, set up your systems and your license has been approved, you are ready to open for business. Good luck and I hope you reach your goals.
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