Highlights from a recent webinar by the Washington Mortgage Industry Department of a financial institution | Allston and Bird

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A&B ABstract: At a webinar earlier this month, the Washington Department of Financial Institutions provided an update on licensing, rulemaking and recent audit findings.

On June 2, the Washington Department of Financial Institutions (DFI) hosted a webinar on state mortgage news. Topics discussed included:

Licensing updates

From May 2020 to May 2021, DFI saw a significant increase in licensing transactions related to the issuance and renewal of mortgage loans for both mortgage originators and companies, including temporary MLO mandates to operate.

Rule Updates

On June 15, DFI will hold a meeting with industry stakeholders to consider amending the rules in line with Consumer Credit Act (“CLA”, WAC 208-620) and Mortgage Brokers Practice Act (MBPA, WAC 620-660) Allow MLO to work from home without a residency license as an affiliate. The proposed rules will implement the adopted Senate Bill 5077 (Washington State Act 2021, Act 15)which takes effect on 25 July.

Exam updates

During the first quarter of 2021, UFI conducted audits for the reporting period from October 2020 to April 2021. The most commonly reported violations were:

To service a mortgage loan:
  • Failure to submit accurate annual estimates;
  • Failure to suppress adverse credit reporting for CARES abstinence, most commonly in the first months of abstinence;
  • Failure to keep records (usually involving subservices);
  • Inaccurate information about changes in the regulated rate (for example, incorrect margin or index); as well as
  • Inaccurate consolidated annual reports.
To issue a mortgage loan in accordance with the CLA:
  • Failure to update the surety amounts in accordance with the requirements of WAC 208-620-320;
  • Failure to meet the filing date for a home mortgage loan (original and revised) as required by WAC 208-620-550 (18);
  • Lack of license for day-to-day operations managers as MLO; as well as
  • Lack of written supervision plan.
To issue a mortgage loan under the MBPA:
  • With respect to Quarterly Mortgage Status Reports (“MCRs”), late filing and / or failure to submit accurate MCRs;
  • Failure to develop and implement an adequate anti-money laundering program;
  • Failure to provide updated blocking agreements when blocking conditions change;
  • Failure to link to the company’s NMLS website for consumer access to all advertisements on the Internet; as well as
  • Advertising violations, such as the use of prohibited phrases (for example, “best” or “lowest” when describing rates, fees and programs) or advertising “no final costs” or that something is “free”.

conclusions

The webinar suggests the pandemic has triggered both a surge in license applications and renewals and an increase in mortgage loans for Washington licensees.

The results of the review serve as a reminder for Washington State licensees to remember their own compliance and quality control processes to ensure they conduct business in accordance with all laws and regulations (including the CLA and MBPA).

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