Regulators fine mortgage LOs for skipping a class

More than 400 mortgage originators will pay penalties after a multi-state investigation alleged they falsely claimed to have completed an annual continuing education requirement.

LOs in 42 states who have settled with state regulators will pay an average of about $2,700 each — $1,000 for each state in which they are licensed — for skipping the annual eight-hour course. They must also turn in their licenses for three months and complete additional educational programs.

The survey of the 26 states, which the California Department of Financial Protection and Innovation conducted, identified deviations using a digital tool to verify compliance with NMLS requirements. The effort revealed that loan officers had not completed a continuing education requirement, which varies by state, aimed at strengthening consumer protection and reducing fraud.

The LOs involved in the investigation have all paid for educational programs from the Carlsbad, Calif.-based company. Real estate educational services (REES), the regulators said. The company, owned by Danny Yen, was licensed to provide education to the National Multi-State Licensing System, but instead orchestrated two education programs.

For more than 600 loan officers, state regulators allege Yen took the classes in exchange for compensation or gave them class credit without requiring LOs to show up for class. State agencies in California, Maryland and Oregon have taken separate administrative action against Yen, and he could face fines of up to $3.4 million, officials said. Conference of State Banking Supervisors and CDFPI during a briefing on Tuesday.

According to the REES website, a three-hour online course giving a “basic understanding of fair housing and discrimination law” can be purchased for $19. Yen was only allowed to teach in person, CSBS officials said.


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Calls to REES and Danny Yen on Tuesday afternoon went unanswered.

Although the survey revealed that 608 LOs failed to meet their requirements, only 441 have concluded agreements so far. States have already taken disciplinary action against 14 of the 167 LOs who refused to settle with the task force. Regulators said additional actions would be filed in the coming months.

Although loan officers who have settled with state regulators face a three-month “cooling off” period, mortgages that LOs have already taken out are not at issue. State regulators said the loans were “valid” because the LOs had valid NMLS licenses at the time. Officials said there was “no indication of consumer harm”.

But less is known what will happen to the mortgages loan officers currently have in their pipelines. Mortgage companies with loan officers who were part of the settlement and have outstanding loans should contact their appropriate state regulator, officials said.

Loan officers span 44 states and represent a broad swath of the mortgage industry, said CDFPI senior deputy commissioner Ed Gill. LOs were not focused on any particular market segment and included a wide range of companies, Gill added. No action is taken against companies that have employed LOs.

“Mortgage originators are responsible for guiding consumers through the biggest financial transaction of their lives,” said DFPI Commissioner Clothilde Hewlett.

Hewlett added that these actions “remind the mortgage industry of its obligations to be ethical, honest and forthright.”