California is leading an interstate regulatory task force that is investigating an alleged “education fraud scheme” committed by a company suspected of allowing mortgage lenders to evade pre-licensing and continuing education course requirements.
V The Safe Mortgage Licensing Act requires government licensed mortgage lenders must complete at least 20 hours of pre-training and at least eight hours of continuing education annually using suppliers approved Nationwide Multi-State Licensing System (NMLS).
Mortgage organizers, who have complied with this requirement through Real Estate Educational Services (REES) in Carlsbad, California, were recently ordered to provide regulators with details of the courses they took from 2017 to 2020.
Regulators want to know if REES certified loan officers who completed eight hours of classroom training actually attended these classes in person. Licensees were also instructed to list any online pre-licensing or continuing education courses “for which you received course credit, but did not and did not take in person.”
Regulators requested this information through an online survey, which also required copies of invoices, certificates of performance, and exchanges of information with REES or its owners, Danny and Wendy Yen.
“This [is] a mandatory survey, which gives you the opportunity to disclose information about your participation in the above-mentioned scheme, ”the regulators informed the recipients. “Failure to provide information or complete a regulatory survey, or provide false or incomplete information in your response to a regulatory survey, may result in more severe coercive action by your state regulator on you and your mortgage license. … “
The review says it is part of an investigation by an interstate regulatory task force mandated by the Conference of State Banking Supervisors, which owns and operates the Nationwide Multi-State Licensing System (NMLS).
In the survey, which was provided to lenders by July 31, licensees were also asked to indicate whether they are prepared to resolve any potential violations through an order of consent or settlement.
The investigation was the first Reported by Rob Chrisman of Mortgage News Daily, who said there could be “hundreds, if not thousands,” of lenders who have relied on REES to meet their educational requirements since 2017.
Those involved “are at best faced with the need to retake their 2020 and 2021 NMLS classes, as well as a recommendation to suspend their license until they retake the 2020 course,” Chrisman said. “All operating systems under consideration face the possibility that the NMLS may recommend the government to revoke the operating system licenses. Some of those involved could face jail time. “
A spokesman for the California Department of Financial Protection and Innovation confirmed to Inman via email that DFPI is the lead agency in the investigation, but said he could not comment on any details.
REES and its owners, Danny and Wendy Yen, did not immediately respond to requests for comment via phone number and email related to the business. REES is no longer listed as an NMLS approved course provider, and the company’s former website is inactive.
In addition to completing the required coursework, mortgage lenders seeking a government license must complete 115 questions. SAFE test for the initiator of the mortgage loan designed by the NMLS with a rating of 75% or higher.