Three more states are toughening regulations as mortgage licensees across the country face disciplinary actions. One branch operation that has faced regulatory actions in multiple states appears to be out of business.
Lawmakers in Colorado, one of the country’s fraud hotbeds, have enacted legislation that “creates a duty of good faith and fair dealing” for mortgages brokers in their dealings and communications with borrowers, according to Lotstein Buckman, a Washington and lobbying firm that tracks the mortgage industry.
The law also includes a controversial suitability standard — a duty by brokers not to put borrowers into mortgages that do not have a “reasonable, tangible net benefit” to the borrower.
An Alaska bill that goes into effect July 1 implements “broad and substantive mortgage lending requirements,” Lotstein Buckman said in an e-mail. The bill establishes requirements for a mortgage license holder’s principal place of business.
For instance, if another business is operating in the same office as a mortgage lender, broker or originator the nature of that business must be disclosed on the application for a state mortgage license.
According to a statement from Alaska lawmakers, the bill also requires mortgage brokers, originators and lenders to pass a competency exam “on duties, laws, regulations, and general knowledge of the loan process.” They must also be bonded.
And the state has greater authority under the law to regulate the industry, lawmakers said.
“We license working Alaskans from tattoo artists and hair stylists to lawyers and real estate agents, yet the people who help guide you during one of the most important decisions you will ever have to make -Â buying a home -Â currently do not,” said Rep. Bob Lynn, the Anchorage Republican that sponsored the bill.
“HB 162 corrects this problem,” Lynn said in a statement.
Montana has a new law that establishes “substantive licensing, record keeping, disclosure and renewal requirements” in the mortgage industry, Lotstein Buckman said in the e-mail. It takes effect Oct. 1.
In North Carolina, mortgage broker Challenge Financial Investors Corp., a net branch operator, has agreed to pay $848,000 to settle allegations of poor supervision and controls in its mortgage operations, the state’s Office of the Commissioner of Banks said in a statement.
The state accused Challenge Financial of soliciting and accepting more than 100 mortgage applications by loan officers “who were unlicensed to do business in North Carolina.”
Challenge Financial, which is based in St. Petersburg, Fla., is also required to “continue efforts to put in place stringent safeguards to gain full supervision and control over its business operations,” the state said.
“We will not allow mortgage companies to play fast and loose with our licensing requirements,” state Banks Commissioner Mark Pearce said in a statement.
Challenge is under increased scrutiny in Florida over the management role of an employee because of his criminal record and involvement with a failed savings and loan in 1988. Two other employees with felony records have already cost the company a Georgia license while an Ohio originator for the company lost a license due to a mortgage fraud indictment.
Georgia financial regulators have issued final cease and desist orders against three brokers for making misrepresentations in loan files: Yolanda Padua of Lawrenceville; James Noble of Buford, who worked for Home Loan Masters; and Kenwar Singh of Kennesaw.
The Georgia Department of Banking and Finance also revoked the license against Dana Capital Group, which according to a statement, employed a felon, operated an unapproved branch, failed to maintain proper records and did business with unlicensed brokers.
In 2004, the company was fined $10,000 and received a cease and desist order from the Nevada Mortgage Lending Division when it mailed a direct marketing piece to the home of the regulatory agency’s commissioner from California — in direct violation of the state’s laws.
Subscribers have since written in that Dana has collapsed — though this could not yet be confirmed with the company or California regulators.
A visit to Dana’s Irvine, Calif., headquarters last month yielded confirmation of empty offices. A reported sign on the company’s door about its collapse had been taken down by the building’s management — who refused to comment on the company.
