Letter from Deb Bortner

I can imagine that this feels like a tough time to be a mortgage broker. Laws and licensing practices are changing quickly at both the state and federal level while the market continues to be volatile.

At DFI, our mission is to help you be successful from a regulatory and compliance perspective which we hope translates into a better experience for Washington consumers.

To that end, we are stepping up our industry communications at every level. Our Web site, listserv operations, mailing lists and phones are on full steam trying to communicate the many changes coming your way--we hope you find the information useful and pass it on to those folks who may not already be in the communication channels.

We also hope you will feel free to contact us any time with your questions, concerns or ideas about how we can work better together.

Sincerely,

Deb Bortner
Division Director

Brokers May be Impacted by SB 6471

As you may already know, new laws passed during the 2008 Washington legislative session impacts companies who lend money in Washington. Specifically, you can no longer lend to Washington residents under the Mortgage Broker Practices Act (MBPA), chapter 19.146 RCW.

Senate Bill 6471 (chapter 78, Laws of 2008), passed by the legislature, and signed by the Governor on March 19, 2008, requires that all lenders doing business in Washington be licensed by the Department of Financial Institutions under the Consumer Loan Act (CLA), chapter 31.04 RCW. The law becomes effective June 12, 2008.

For links to SB 6471 and other important bills, visit the Mortgage Broker Web page.

DFI Joins the NMLS

The Department has joined a national licensing initiative called the Nationwide Mortgage Licensing System (NMLS). Some of you may have already joined the NMLS because you are licensed as a mortgage broker in a state that joined the NMLS in January of this year. As a mortgage broker, you will be able to join the system beginning July 1, 2008. All mortgage broker licensees must transition on to the system by October 1, 2008.

The Department has created a number of resources for you on our Web site. View NMLS resources.

You can preview features of the NMLS online by visiting the NMLS Web site.

Unfair Or Deceptive Practices Under The Mortgage Broker Practices Act

The Mortgage Broker Practices Act (MBPA) prohibits mortgage brokers and loan originators from engaging in any unfair or deceptive practice towards any person. See RCW 19.146.0201(2) and WAC 208-660-500(3)(b). The following information should help you avoid problems in this area.

The words “unfair” and “deceptive” have specific meaning in this context. Looking at synonyms for these words, we could add unjust, dishonest, and unethical to “unfair,” and misleading to “deceptive.”

The phrase “unfair practice” has specific meaning as well. A practice is unfair if it causes (or is likely to cause) substantial consumer injury; could not reasonably be avoided by the consumer; and is not outweighed by countervailing benefits to consumers or competitors. Unfair practices also include those which offend public policy, or are immoral, unethical, oppressive, or unscrupulous. While the definitions are a bit cumbersome, they give you the idea of the breadth of what constitutes an “unfair practice.” An unfair practice does not have to actually cause substantial consumer injury to violate the provision; it is sufficient that the unfair practice was likely to cause substantial consumer injury.

The phrase “deceptive practice” is defined a bit more narrowly. A practice is deceptive if it has the capacity or tendency to mislead (or deceive) a substantial portion of the public. Again, a deceptive practice does not have to actually deceive a customer to violate this provision; it is enough that the practice at issue has the capacity to deceive.

The most common violation of these provisions occurs when brokers advertise. Some good rules of thumb to remember when advertising are:

• Don’t use advertising with envelopes or stationery that contains an official-looking emblem designed to resemble a government mailing or that suggests an affiliation that does not exist.
• Always disclose the APR in a manner that is as or more prominent than the other rates disclosed.
• Only advertise rates that are actually available.
• Quote the annual percentage rate and other terms of the loan if you give an oral quote of an interest rate to the borrower.
• Do not advertise rates as “lowest” or “best.”
• Do not solicit using advertising that suggests or represents that you are affiliated with a state or federal agency, municipality, federally insured financial institution, trust company or building and loan association.

For compliance assistance with any provision of the Mortgage Broker Practices Act or rules, feel free to contact DFI’s Consumer Services Examination Unit at 360-902-8703. While we cannot provide you with legal advice, and do not review advertising in advance of publication, we can provide technical assistance and best-practices guidance.