Washington State Department of Financial Institutions

News

From Consumer Services

 INFORMATION ABOUT
Washington's Household Finance Settlement

Household News Release 12/15/2003

Household Settlement Administrator 1-888-780-2156
Washington Household Consumer Line 1-877-258-7036


(February 2, 2004) First Alliance Mortgage Borrowers to Receive Another Round of Checks. Get details from the Federal Trade Commission.


For immediate Release: October 23, 2003

TACOMA MAN BANNED FROM DOING BUSINESS IN THE MORTGAGE INDUSTRY

A Pierce County Superior Court Judge declined to stay an order revoking the license of mortgage broker Robert Warnock of Tacoma, president of Allstate Financial Services, Inc. The order was filed by the state Department of Financial Institutions (DFI) on August 28, 2003. In addition to revoking his license, the order imposes a $50,000 fine, grants over $5,000 in restitution to injured consumers, and requires reimbursement to DFI of over $3,000 in investigative costs.

In early 1998, three clients and one third-party service provider contacted the DFI with complaints about Allstate and Warnock. DFI began an investigation and sent a series of requests for information and resolution letters to Warnock. When the requests were ignored and the matters were not resolved, DFI initiated an enforcement action against both Allstate and Robert Warnock. The Department filed a statement of charges in March of 2001 alleging that Warnock:

After a six-day hearing concluding in May 2002, the Administrative Law Judge issued an Initial Decision finding multiple violations and ordering sanctions.  In response to Warnock’s request to review the Initial Decision and Order, the Director of DFI issued a Final Decision and Order adopting the findings and conclusions of the Administrative Law Judge.  Pending the Superior Court appeal, Allstate’s mortgage broker license is revoked, and Warnock is removed as Designated Broker of Allstate and prohibited from participating in the affairs of any licensed mortgage broker or broker subject to the Mortgage Broker Practices Act.

The case is currently under appeal to the Pierce County Superior Court.

Consumers who are in the market for a home loan are encouraged educate themselves about the process. DFI suggests the following:

For more information about finding a mortgage brokers and home loans, visit the DFI web site. www.dfi.wa.gov. Consumers with questions or complaints are encouraged to contact the Department at 1-877-RING DFI (1-877-746-4334).

The Final Decision and Order, Initial Decision and Order of Office of Administrative Hearings Docket, and the Statement of Charges are available at: adminactions.htm


Date changed for Ocean Shores Escrow/Cornerstone Escrow Public Meeting

Olympia (Updated 10/6/03) A public meeting will be held Wednesday, October 29, 2003 in Tumwater by the Department of Financial Institutions concerning the Ocean Shores Escrow/Cornerstone Escrow investigation.  The meeting will begin at 6 p.m. in the Department of Financial Institutions new offices at 150 Israel Rd. SW in Tumwater, Washington.  The following list of recent and pending activities will be delivered to all interested parties attending the meeting.

RECENT ACTIVITY

PENDING ACTIVITY

(More information available HERE.) (File a complaint with the Consumer Services Division HERE.)


12,000 WASHINGTON CONSUMERS ELIGIBLE FOR
STATE’S $21M SETTLEMENT WITH MORTGAGE COMPANY

Olympia (8/14/2003) About 12,000 Washington consumers will soon get information about their eligibility for restitution under the state’s $21.15 million settlement with Household International, a top lender in the subprime mortgage market.

The settlement administrator will mail information August 15 to eligible consumers who obtained real estate secured loans with the company through its retail lending subsidiaries Household Finance, Beneficial or Household Realty Corporation between January 1, 1999 and September 30, 2002.

More than 21,000 Washington borrowers secured loans from Household retail branches during that period. Over 12,000 of those borrowers held loans that subsequently were found to show evidence of misconduct or misrepresentation and are eligible for restitution.

“Our goal is to get the money back into the pockets of people who suffered from Household’s actions, and do it in a way that’s fair and proportionate to the amount of harm each consumer suffered,” Attorney General Christine Gregoire said.

Eligible consumers will have until October 14, 2003 to join the state’s settlement. Restitution payments will range from $11.39 to $25,863.76 depending on the extent they were harmed by Household’s marketing and lending practices, and the size of their loan. Actual amounts may increase, depending on how many consumers choose to participate.

The state estimates that consumers who participate in the settlement will be compensated for about 25 percent of out-of-pocket overcharges from Household’s misconduct.  

“While this settlement cannot fully compensate the victims who were harmed, it provides them some restitution, changes Household Finance’s business practices going forward, and sends a clear message to other companies involved in mortgage lending,” said Helen Howell, director of the Department of Financial Institutions.

The Department of Financial Institutions began investigating Household after receiving about 180 complaints against the company.  Shortly thereafter, the Attorney General’s Office opened its own investigation in response to the more than 160 complaints it received.

The state’s investigation showed that Household and its subsidiaries had violated provisions of the state’s Consumer Protection Act, the Consumer Loan Act, and the Insurance Code by misrepresenting important loan terms and failing to disclose critical information to borrowers.

“Our state’s investigation was key in uncovering the abusive lending practices in which Household had been engaging,” Howell added. 

Among its findings, the state found Household used a combination of predatory practices to lock consumers into costly home mortgage refinancing on terms that were often unsuitable to them.  These included high loan fees, extended prepayment penalties, insurance “packing” (a practice of adding various insurance products and financing them over the life of the loan), and loans exceeding the value of the mortgaged property.  When consumers eventually discovered the problems with their loans, these practices made it impossible for them to refinance with other lenders.

"Consumers were often victimized twice," said Insurance Commissioner Mike Kreidler.  "Not only did the packing of the insurance cause their loan payment to skyrocket, but some consumers were unaware they had even purchased insurance on their loans.  We hope with this record settlement that justice is finally served."

Washington was one of nine states that led the negotiations resulting in the landmark $484 million nationwide settlement announced last October.  By December, all 50 states and the District of Columbia had joined the settlement and filed consent judgments in their state courts.

The settlement money being distributed to eligible Household borrowers represents the largest direct award of consumer restitution ever.  The settlement also requires significant changes in the company’s lending practices that are expected to set a national standard for consumer mortgage lending.  These changes include limits on the amount of loan fees and the duration of prepayment penalties, new and clearer loan disclosures, use of an independent loan closer, and the requirement that home loans must actually benefit the borrower.

“This settlement will not return all of the money families lost or compensate for the grief they suffered at the hands of lenders they trusted to finance their homes,” Gregoire said. “But we hope that the new standards this settlement contains will raise the bar for all lenders to follow.”

Consumers who choose not to participate in the state’s settlement may take legal action on their own.  Each loan is unique, so consumers must decide their best option based on their personal situation.   Household borrowers may want to consult an attorney or housing counselor when making this decision.  Consumers with questions about the settlement or their eligibility should contact the Household settlement administrator toll free at 1-888-780-2156.

The state also has established a temporary toll-free call center to answer consumer’s questions about the settlement.  The call center can be reached Monday through Friday 9 a.m. to 4 p.m. at 1-877-258-7036. Additional information is available from the Attorney General’s Office www.wa.gov/ago/householdfinance, the Department of Financial Institutions www.dfi.wa.gov, and the Office of the Insurance Commissioner www.insurance.wa.gov.  (Get all the latest updated (8/14/2003) information on the settlement here, or File a Complaint.)

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CONTACTS

Office of the Attorney General
David Huey, Assistant Attorney General, 253-593-5057
Tammy Firkins, Public Affairs, 360-586-4802
Maureen Scharber, Public Affairs, 360-753-6224

Department of Financial Institutions
Chuck Cross, Acting Director of Consumer Services, 360-902-8700
Scott Kinney, Director of Communications, 360-902-0517 

Office of the Insurance Commissioner
Carol Sureau, Deputy Commissioner for Legal Affairs, 360-725-7050
Sandi Peck, Public Affairs, 360-725-705


New Internet Fraud Surfaces

(Olympia: 06/26/03) — The Internet has proven to be a rich field of operation for con artists, and now fraud reporting organizations are warning Internet sellers about a scam that involves “over-payment” by check for expensive items such as cars, boats, or antiques.  Often, the fraud involves foreign money exchanges via Western Union, which may give the victim some sense of protection but no real security. 

In a typical scenario, the seller is sent a fraudulent check in payment for goods and then asked to return the “change,” which may be thousands of dollars more than the actual price of the item.  Usually, the seller’s refund to the buyer is also in the form of a check – a legitimate one – and only later does the seller find out the original check was bogus. 

The over-payment scheme is also being used in a variation of the infamous “Nigerian Letter” fraud, which attempts to get banking information from individuals in the U.S. on the pretext of using them to transfer large amounts of funds to this country.  In the newest twist on this old scam, the victim is sent a large check by someone in Nigeria (or other foreign country).  The victim is asked to cash the check, keep part of the money as a commission and return the rest.  Again, the victim finds out too late that the original check was no good.

For more information about Internet fraud, visit the Internet Fraud Complaint Center.


CEASE AND DESIST ORDER ISSUED AGAINST
REDMOND ESCROW COMPANY

(Olympia: 05/27/03)— Acting on concerns of illegal transfers of consumer funds from a trust account, the Washington Department of Financial Institutions (DFI) issued a temporary cease and desist order against Washington One Stop, Inc., a Redmond escrow company.

Washington One Stop, Inc. is licensed by DFI as an escrow agent at 2501 152nd Ave., NE, in Redmond. Scott Anderson of Bellevue was licensed with DFI as the designated escrow officer in 1999, but his license has expired.

The company was ordered to cease transacting business until otherwise instructed and all deposits into or out of bank accounts were temporarily halted. The Department identified nearly $75,000 that may have been inappropriately transferred from the trust account.

Each escrow company operating in Washington uses a single “pooled” account maintained for the benefit of all of its customers involved in escrow transactions such as purchases, refinances, or collections.

“When shortfalls or irregularities are identified within the account, it affects the balances held for all consumers,” said Mark Thomson, DFI Consumer Services Division Director.

“Any further funds paid out of the account create more shortfalls and deposits into the account are automatically compromised.” In cases such as this, he explained, DFI has no choice but to freeze all activity within the accounts pending further investigation.

DFI is asking consumers with complaints or questions about accounts with Washington One Stop, Inc. to contact the Department at 1-877-RING DFI (1-877-746-4334).


CALIFORNIA MORTGAGE LENDER FINED $457,575;
$712,000 TO BE RETURNED TO WASHINGTON BORROWERS

(Olympia: 02/10/03)—The Office of Administrative Hearings has issued a final order calling for fines of $457,575 for various violations of the Mortgage Broker Practices Act by a California mortgage broker.  In addition, the broker has been ordered to return more than $712,500 to 120 Washington state borrowers.
Dennis A. Dellwo, the reviewing officer, upheld almost all of the findings of the administrative law judge who heard the Department of Financial Institutions’ case against Nationscapital Mortgage Corporation of Orange, CA, in February 2002.

The mortgage broker, which conducted business in Washington in the 1990s, was cited for engaging in deceptive practices, failing to make disclosures, using bait and switch practices, engaging in trust accounting violations, failing to maintain records as required, violating certain federal regulations, and operating unlicensed locations.

In addition, fines of more than $290,000 were levied against Nationscapital owner and president Jamie Chisick. The California resident is prohibited from conducting business as a mortgage broker in Washington State for 20 years. Four other Nationscapital corporate officers and employees are also prohibited from conducting business as mortgage brokers in Washington. The final order revokes the license of Nationscapital to do business in the state of Washington and levies investigation fees of $29,000. Also, Chisick is jointly liable for the $712,000 funds due to the Washington state borrowers.

Nationscapital operated as a mortgage broker in Washington from an office at 800 Bellevue Way NE, from May 1995 to May 1998, when the corporation surrendered its license to the state. It was the company’s practice to solicit Washington consumers by phone from California, then dispatch a Bellevue-based representative to the consumer’s home to get documents signed, and later to close the deal. All documents were then sent to California.

Consumer complaints led to an investigation by the Department of Financial Institutions (DFI) in June 1997. The investigation spanned several months, culminating with the Department charging Nationscapital with deceptive practices, failure to make proper disclosures, and imposing prohibited overcharges.
Legal proceedings continued, and in 2000, 40 days of hearings were held before Administrative Law Judge Elmer E. Canfield. His order, directing the corporation to make restitution and pay fines, was issued in February 2002.


The Department of Financial Institutions regulates a variety of financial service providers such as banks and credit unions, mortgage brokers and consumer loan companies, and securities issuers and salespersons. The Department’s mission is to regulate the state’s financial services industry to provide economic vitality and protect consumers.


ARCHIVED NEWS RELEASE UPDATED

(OLYMPIA 12/16/02) States file formal settlements with Household Finance;
Washington homeowners to share in Household International predatory lending settlement.;
Read the terms of the settlement; Get all the latest updated (8/14/2003) information on the settlement here, or File a Complaint.


Spokane's Century Mortgage Company charged with
defrauding mortgage borrowers and lenders

 (OLYMPIA 8/28/02) The Department of Financial Institutions entered charges this week against Century Mortgage, Inc. of Spokane, for allegedly overvaluing properties and falsifying papers to defraud borrowers and lenders.  Also named in the charges were three co-owners and six loan officers.  The charges allege numerous violations of the state's Mortgage Broker Practices Act. 

An investigation by the state agency revealed a pattern of defrauding mortgage lenders and mortgage borrowers by using falsely inflated property values, “phantom” second mortgages, and false down payments.  The three co-owners named in the charges are Ronald Burger, Dale “Sage” Gibbons, Dwaine Klein and a former owner, Gene Taylor.

Century Mortgage Company had its offices at 3401 Division in Spokane, and has been licensed to do business as a mortgage broker since October 30, 1997. Century makes residential mortgage loans or helps borrowers to obtain loans.

Century's affiliate, B&G Properties, which is owned by two of the three owners of Century Mortgage, was the seller in half of the 22 mortgage loans that are detailed in the statement of charges.  Seven of the loans originated by B&G went into foreclosure within two years of purchase by unsuspecting borrowers.  According to the state agency's charges, the reason for the high rate of foreclosure was a scheme to inflate property values and make loans targeting borrowers with poor credit, bankruptcies and outstanding judgments against them.

DFI contends that Century's representatives submitted false personal checks and business checks to support homebuyers' loan applications -- without the knowledge of the borrowers -- to convince lenders to make the loans. "With these fictitious 'phantom' payments or gifts, borrowers with marginal credit could qualify for much larger loans," says  Mark Thomson, Director of DFI’s Division of Consumer Services.

Century and its representatives earned illegal fees off the top of each inflated mortgage, according to DFI's investigators, and borrowers ended up purchasing properties for far more than  the original selling prices or actual current values.

"Century was a go-between for would-be borrowers and the mortgage lenders who do business throughout the country," explains Thomson.  Among the lenders doing business with Century were First Franklin Financial Corporation and Investors Mortgage Company Limited Partnership, both with offices in Bellevue.

"In the process of funding mortgage loans," Thomson says, "mortgage lenders rely on borrowers and the companies representing them to be honest and comply with the law.  We're all damaged when information is falsified, and lenders and borrowers are misled."

The company and individuals named in the charges stand to have their licenses revoked and face being banned for up to 20 years from doing any further business in Washington in the mortgage industry.  In addition, Century Mortgage and the individuals named in the charges face a combined total of $1,854,450 in fines and may be ordered to pay back $442,268.30 in restitution to individual borrowers, a real estate appraiser and the mortgage lenders they defrauded.

Consumers with questions concerning Century Mortgage Company or B&G Properties should contact the Department of Financial Institutions at 1-877-RING DFI (1-877-746-4334).


$586,000 Refunded to Washington borrowers by Household and Beneficial Finance

(OLYMPIA 5/23/02) Washington borrowers have received refund checks totaling just over $586 thousand from Household Finance Corporation (HFC) and Beneficial Washington, Inc. (Beneficial Finance).  The Consumer Services Division of the state Department of Financial Institutions uncovered violations of the state's Consumer Loan Act during a routine examination of the companies performed last year.  The violations were technical in nature and resulted from flaws in the companies’ computer systems.

An internal audit prompted by the examination found 3100 accounts in Washington in which refunds were due, with the borrowers receiving refunds located throughout the state.  Household refunded $162,189.27 to 851 borrowers.  Beneficial refunded $424,089.29 to 2,249 borrowers.  The refund checks sent out at the end of last month ranged in size from less than one dollar to $782.

The companies are refunding overcharges resulting from new loans or increased credit lines for previous borrowers.  Although the state's examination cited only non-real estate accounts, the companies are voluntarily conducting internal audits to identify all affected real estate (second mortgage) accounts, as well.  Refund checks found to be due to borrowers in this second round of audits are expected to be sent out by May 31.

The companies will provide a complete accounting of the second round of refunds to the Consumer Services Division once the refunds have been issued.

HFC and Beneficial Finance are both subsidiaries of Household International, Inc.


OCEAN SHORES ESCROW AND CORNERSTONE
ESCROW RECEIVER IS APPOINTED

By order of the Grays Harbor County Superior Court, a temporary receiver has been appointed for Ocean Shores and Cornerstone. 

Cease and Desist Order Issued Against Two Escrow Companies
 in Thurston, Grays Harbor Counties

(Oympia, April 29, 2002)  Acting on concerns of illegal transfers of consumer funds from their  trust accounts,  the Washington Department of Financial Institutions (DFI) issued a temporary cease and desist order April 26, 2002 against two escrow companies and their owner.

The two companies, Ocean Shores Escrow, Inc. of Grays Harbor County and Cornerstone Escrow, Inc. of Thurston County were ordered to cease transacting business until otherwise instructed and all deposits into or out of bank accounts were temporarily halted.  The department identified as much as $174,000 that may have been inappropriately transferred from the trust account.

Each escrow company operating in Washington uses a single "pooled" account maintained for the benefit of all of its customers involved in escrow transactions such as purchases, refinances, or collections.

"When shortfalls or irregularities are identified within the account, it affects the balances held for all consumers," said Mark Thomson, acting director of DFI.  "Any further funds paid out of the account create more shortfalls and deposits into the account are automatically compromised."  In cases such as this, he explained, the department has no choice but to freeze all activity within the accounts pending further investigation.

Consumers with questions concerning accounts with either Ocean Shores Escrow, Inc. or Cornerstone Escrow, Inc. should contact the Department of Financial Institutions at 1-877-RING DFI (1-877-746-4334).


Washington borrowers may be due payments
 in 'Predatory Lending' settlement

(Olympia, April 22, 2002) Washington consumers who got home mortgage loans from First Alliance Mortgage Company have been notified by Washington state's Department of Financial Institutions (DFI) that they may be eligible for compensation in a predatory lending settlement announced by the Federal Trade Commission (FTC).

The settlement with the California firm and its owner, Brian Chisick, culminated a lawsuit brought by the FTC and five states in 2001.

"We fully support the FTC's actions to stop lenders who prey on consumers," said Mark Thomson, DFI's Acting Director, in praising the FTC for its work on the case. "They moved quickly and did an excellent job for consumers all across the nation."

In 1999, the Department of Financial Institutions filed separate charges against First Alliance Mortgage Company, which resulted in revocation of the company's license and a halt to its doing business in Washington. The company filed for bankruptcy in 2000.

Nationwide, nearly 18,000 borrowers could receive as much as $60 million dollars in compensation under the settlement terms. The settlement creates a consumer redress fund that will include all the remaining assets of First Alliance and its affiliates, as well as a payment of $20 million from Chisick and his wife. The settlement amount is one of the largest consumer protection recoveries in FTC history.

Washington consumers who got home mortgage loans from First Alliance between January 1992 and March 23, 2000 may be eligible for a payment. The settlement, however, must still be approved by a federal district court in Santa Ana, California.

The FTC advises that, at present, there's nothing that borrowers who may be eligible for payment should do. They will be sent notices by the court and the FTC explaining the process and how the settlement funds will be distributed.

This settlement represents the latest law enforcement action in the FTC's efforts to combat fraud and deception in the "subprime" market, which includes homeowners with poor credit ratings who may not be able to qualify for conventional loans. In the last three years, the Commission has brought 15 enforcement actions against subprime lenders allegedly engaged in unlawful practices.

For more information about the settlement, consumers may call the FTC's First Alliance Consumer Hotline, toll free, at 877-862-0886 or access the FTC website at http://www.ftc.gov.


$712 Thousand to be Returned to Washington Borrowers

Olympia 2/19/02 - A California mortgage lender has been ordered to return more than $712 thousand to 120 Washington state borrowers.  The order by an administrative law judge in Olympia was issued to Nationscapital Mortgage Corporation of Orange, California, which conducted business in Washington in the late 1990s.

The order also levies fines of nearly $495 thousand against the corporation and $245 thousand against its owner, Jamie Chisick, also of California. In addition, the order prohibits Chisick from conducting the business of a mortgage broker in Washington for 20 years and his top officers for five years.

Nationscapital operated as a mortgage broker in Washington from an office at 800 Bellevue Way NE, Suite 400, from May 1995 to May 1998, when the corporation surrendered its license to the state.  It was the company’s practice to solicit Washington consumers by phone from California, then dispatch a Bellevue-based representative to the consumer’s home to get documents signed, and later to close the deal.  All documents were then sent to California.

Consumer complaints led to an investigation by the Department of Financial Institutions (DFI) in June 1997. The investigation spanned several months, culminating with the Department charging Nationscapital with deceptive practices, failure to make proper disclosures, and imposing prohibited overcharges.  Legal proceedings continued, and in 2000, 40 days of hearings were held before Administrative Law Judge Elmer E. Canfield.  Canfield’s order, directing the corporation to make restitution and pay fines, becomes final February 18, 2002.  Either party may request a review of the judge's ruling.  2/19/02


Washington Borrowers Get $79,000 in Refunds
From California Mortgage Lender

Olympia 2/12/02 - Checks totaling more than $79,000 have been sent to 242 Washington consumers this month by the Consumer Services Division of the Department of Financial Institutions. The checks are refunds of inappropriate charges and fees collected by Unicor Funding, Inc., a California-based mortgage lender with offices in Portland, Oregon. Consumers receiving refunds reside primarily in King, Snohomish, Pierce, and Kitsap counties.

The size of the checks ranges from $125 to $3272, with the average check amounting to $327. The total amount being refunded is $79,331.95. Cities where the recipients live include Marysville, Federal Way, Renton, Kent, Auburn, Tacoma, Puyallup, Silverdale, Bremerton, and Seattle.

During a routine examination of the company's books, department auditors found that the company charged inappropriate loan fees not allowable under Washington law. The department asked Unicor to search its records for all loans made with fees not allowed under Washington’s Consumer Loan Act and make sure that refunds were made to all affected consumers.

Under department scrutiny, licensees usually provide refunds directly to consumers. When Unicor failed to do so, the department took the refund money from the surety bond the company had posted as a requirement of doing business here. The company is no longer doing business in Washington.

"We are pleased to be able to return these funds to Washington consumers," said Mark Thomson, acting director of the Department of Financial Institutions. "State law protects consumers from such overcharges, and the Legislature has wisely required all licensees to maintain a bond," he said.

The Division of Consumer Services regulates mortgage lenders and consumer loan companies and conducts periodic reviews of their books and records to make sure they comply with applicable state and federal lending laws. The division also regulates mortgage brokers, escrow companies, and check cashers and sellers.  2/12/02


Memo sent to licensees regarding fee increases

MEMORANDUM

DATE: May 29, 2001
TO: Licensees and Interested Parties
FROM: Whittier Johnson, Program Manager
SUBJECT: Fee Increase

As you know, the Department of Financial Institutions recently amended the regulations implementing all of the statutes it administers, increasing fees and assessments across all programs.  The amendments to the regulations were made available to all entities regulated by the Department, hearings were held, comments were received, revisions were made to the proposed rules, and the revised amendments to the regulations were adopted.  Beginning July 1, 2001 as a part of the new amendments to the regulations, the Division is required to publish on each June 1st, the new fees and assessments that will be in effect in the upcoming fiscal year.

I have enclosed a copy of the fees and assessments that will become effective on July 1, 2001.  These fees and assessments represent a 2.79% increase over the fees and assessments that were in effect.  The listed fees and assessments will be in effect for fiscal year 2002, the period from July 1, 2001 to June 30, 2002.

Updated forms are available from our website at http://www.dfi.wa.gov/cs.  If you have questions regarding these fees and assessments, please contact me by phone at 360-902-8755 or via e-mail at wjohnson@dfi.wa.gov 6/5/01

Fee increase history

Mortgage Brokers

Since 1993, license applicants and licensees have seen no fee increases.  Fee structures changed in 1996 so that DFI charged $35 an hour to review license applications.  This resulted in a reduction of the average amount paid to have an application processed.  Annual Assessments for Mortgage Brokers have remained at $500 since the program came under DFI regulation.

Consumer Loan Companies

License application review fees have remained at $90 per hour since 1993.   Consumer Loan licenses have remained at $100 per location since 1993.  In 1993 the surety bonding requirements for licensees were set at $100,000 per branch location up to five locations and $10,000 for each office beyond the fifth location.  Examination fees have remained unchanged at $65 per hour per employee since 1993.  Since 1993 the Consumer Loan annual assessment calculation factor has been .000169792 multiplied by the adjusted total Washington loan value.

Check Cashers/Sellers

License application fees have been $65 per hour since 1997.  Since 1997 annual assessments have remained at $500 per year for licensees with a volume of checks cashed or sold, or small loans made exceeding $1 million.  Examination fees have remained at $65 per hour per employee since the program was initiated in 1997.  Bonding requirements have remained unchanged.

Escrow Agents/ Officers

All fees have remained unchanged since 1996.  The fee for taking the escrow officer test has remained at $150.  License fee and license renewal fees remain at $160.  Fees to transfer a license, name or address have remained at $25 since 1996.  Application and original certificates are $345.  The escrow program has never assessed examination/audit fees.

Inflation Note:

The total US increase in inflation since 1993 has been 24.5 percent.

During the period from 1996 to 2003 DFI’s Consumer Services Division expects expenditures to increase a total of 15.61 percent.  This is below the 16.1 percent national inflation increase during the period from 1996 to 2001.

Consumer Loan Companies

Projected Fee Increases

(Using an annual fiscal growth factors of 2.79% & 2.98% )

Applications and certificates – processing charges - Consumer Loan license, branch location, relocation of office, notice of change of control, opinions…

Present July 1, 2001 July 1, 2002
$90 $92.51 $95.2

Examinations – Hourly fee per person conducting an examination of a Consumer Loan licensee.

Present July 1, 2001 July 1, 2002
$65 $66.81 $68.8

Annual Assessment Fee for Consumer Loan Licensees – based on the total loan value

Present July 1, 2001 July 1, 2002
.000169792 .000174529 .00017973

Amendment fees. Fee for Consumer Loan license reprints, address changes, name changes etc…

Present July 1, 2001 July 1, 2002
$100  $102.79 $105.85 

Check Cashers/Sellers

Projected Fee Increases

(Using an annual fiscal growth factors of 2.79% & 2.98%)

Application review and investigation fee/ per employee hour

Present July 1, 2001 July 1, 2002
$65  $66.81 $68.80

Annual Assessment if the volume of checks cashed or sold or small loans made is over $1 million

Present> July 1, 2001 July 1, 2002
$500 $513.95 $529.27

ESCROW - AGENTS/OFFICERS

Projected Fee Increases

(Using an annual fiscal growth factors of 2.79% & 2.98%)

Escrow Officer test.  Retest.
Present

July 1, 2001

July 1, 2002

$150

 $154.19

$158.78

Application review and original license.  Each branch office license and renewal

Present

July 1, 2001

July 1, 2002

$345

$354.63

$365.19

Escrow Officer application review and renewal.

Present

July 1, 2001

July 1, 2002

$160 

$164.46

$169.37

License transfer, DEO, Escrow Officer, & Address change.

Present

July 1, 2001

July 1, 2002

$25

$25.70

$26.46

Late Renewal with Penalty

Present

July 1, 2001

July 1, 2002

$517.50

$531.93

$547.79

Mortgage Brokers

Projected Fee Increases

(Using an annual fiscal growth factors of 2.79% & 2.98% )

Applications and certificates per hour processing charges – Mortgage Broker main and branch location,

Present

July 1, 2001

July 1, 2002

$35

$35.98

$37.05

Examinations – Hourly fee per person conducting an examination of a Mortgage Broker licensee.

Present

July 1, 2001

July 1, 2002

$45

$46.26

$47.63

Annual Assessment Fee for Mortgage Broker Licensees per licensed location

Present

July 1, 2001

July 1, 2002

$500

$513.95

$529.27


More News from Consumer Services

Washington Consumers Receive Checks from California Loan Company's Surety Bond

During a routine examination of the company's books, department auditors found that the company had charged loan fees in excess of those allowed under Washington law.  The department notified LFG of their findings and told the company to issue refunds.  During a follow-up examination, it was discovered LFG still had not made any refunds.  The examination team obtained copies of the documents to successfully claim against the bond.  Legend Financial Group no longer conducts business in Washington.

Checks averaging $1,560 each were sent to 109 Washington consumers this week by the Consumer Services Division of the Department of Financial Institutions. The checks are refunds of inappropriate charges and fees by Legend Financial Group (LFG) of San Diego. Consumers receiving refunds reside in King, Snohomish, Pierce, Thurston, Kitsap, Skagit, Clark, Spokane, Whatcom, and Yakima Counties.

“We are pleased to be able to return these funds to Washington consumers," said John Bley, director of the Department of Financial Institutions.  "State law protects consumers from such overcharges, and the Legislature has wisely required all licensees to maintain a bond," he said.  “Without the bond," he added, "it is unlikely these consumers would have received refunds.”

The Division of Consumer Services regulates consumer loan companies, conducting periodic reviews of their books and records to make sure they comply with applicable state and federal lending laws.  The division also regulates mortgage brokers, escrow companies, and check cashers and sellers.  If you've had a loan from Legend Financial Group in the past and think you may be due a refund, contact the Consumer Services examination team in Olympia at 360-902-8811.

2/2/01


Financial Institutions Director calls for
"surgical" attack on predatory lending

A three-pronged attack on predatory lending was urged by John Bley, Washington state's Financial Institutions Director, at a Federal Reserve Board hearing yesterday in San Francisco. Saying that his department had been waging a front-line battle with predatory lending long before it became a national issue, Bley called for correcting the problem "surgically."

The three-fold approach Bley proposes includes simplified loan disclosure statements, new laws prohibiting unfair and deceptive trade practices in mortgage lending, and aggressive enforcement with harsh penalties for those found guilty.

Predatory lending isn't a new problem, Bley told the hearing on home-equity lending, it's just that the name has changed. "What was once called mortgage fraud is now called predatory lending," he said, adding that, "Under either name, our mission to investigate violations and enforce the law has remained the same.

Bley was invited to a hearing before Federal Reserve Board Governor Edward M. Gramlich to address proposed changes to regulations enforcing the Home Ownership and Equity Protection Act (HOEPA) amendments to the Truth in Lending Act. But Bley said his department's experience was that the amendments had very little impact on predatory mortgage lending practices, and the proposed changes weren't likely to get to the problem either.

Bley said he defines predatory lending as the "use of deceptive or fraudulent sales practices in the origination of a loan secured by real estate." Federal disclosures are too complex for many borrowers, he said, and borrowers trust loan officers to explain the terms of their loan. When a loan officer commits deception by abusing this trust, predatory lending becomes possible.

"The Federal Reserve Board shares some of the responsibility for creating an environment in which the only thing most borrowers can do is to trust the loan officer to tell them their rates and terms," He called current mandatory disclosures "so voluminous and so confusing that borrowers don't understand them." Complex federal regulations, Bley said, "lay traps and create uncertainty in disclosure by mortgage companies." He called for "simple disclosures, simply provided and simply explained."

He also called for new statutory provisions prohibiting the use of unfair and deceptive sales practices in the origination of mortgage loans, saying they may be the only true solution to predatory lending. Such provisions, he said, could also refer to a state's consumer protection law and perhaps open the way for more private actions against predatory lenders.

"We remain perplexed," Bley testified, "at the existence of federal criminal penalties for any consumer defrauding a lending institution, while the penalties against lenders for defrauding consumers are for the most part administrative and financial in nature. Some lenders," he said, "see no downside to the undertaking of mortgage fraud. At worst, the penalty is to stop enriching themselves."

The harm realized directly by consumers from predatory lending is far greater than the harm realized by financial institutions as victims, Bley emphasized. "How can we compare the emotional devastation, impairment of access to credit and loss of home to a bottom-line corporate write-off?" he asked.

Bley said his department encourages harsh penalties for acts of predatory lending, including restitution, monetary fines, permanent injunctions from lending, and criminal convictions with prison time for violators, if warranted. In the past five years, he said, his department has conducted more than 100 enforcement actions to correct abusive practices and forced the return of over $1.2 million to Washington consumers.

9/8/00


Bankruptcy of First Alliance Mortgage won't stop state's actions

First Alliance Mortgage Company, which had been in business in Washington since 1994, was one of the subsidiaries affected when First Alliance Corporation announced today that it and several of its subsidiaries were filing a petition for bankruptcy. The operating license for First Alliance's Bellevue office was surrendered to the state this week, just prior to an administrative hearing on efforts by the Department of Financial Institutions to revoke it.

Mark Thomson, head of the agency's Consumer Services Division, emphasized that "the bankruptcy action will not affect the state's determination to press forward with its charges against the company. Our department remains involved in discussions with the Attorney General's Office regarding a cooperative effort to bring action under the Consumer Protection Act."

Thomson advised consumers who have had problems with the company to contact an attorney immediately to establish whether they have a valid claim and to investigate what means are available to them for protecting their claim in the bankruptcy. He said, "Consumers with concerns about their loans with First Alliance may contact our department by calling us at 1-877-RING DFI (1-877-746-4334)."

Thomson said that existing loans from the company held by Washington consumers would not be affected by the bankruptcy filing. "One potential outcome of the bankruptcy is that the loans may be sold to another mortgage service company," he added, "but if that happens, the terms of the loan should remain the same.

3/23/00


First Alliance Mortgage Company surrenders license

A California-based mortgage company doing business in Washington since 1994 is no longer authorized to make mortgage loans in Washington, according to the Department of Financial Institutions (DFI). First Alliance Mortgage Company, which has written hundreds of mortgages for Washington residents, has surrendered its consumer loan license.

The action was the latest move in an ongoing dispute between the company and the DFI, in which the state sought to have the company's license revoked. The company surrendered its license Monday, March 20, on the eve of an administrative hearing that was to be held on charges made by the state agency against it. Consumers who feel they may have problems with loans made by the company are now being urged to get in touch with state regulators.

According to Mark Thomson, director of DFI's Consumer Services Division, charges were filed against First Alliance last April after a routine examination of the company. In its charges, the department alleged that First Alliance failed to comply with it’s request for records, had operated from unlicensed locations, and failed to make reports required under the federal Home Mortgage Disclosure Act.

"Under the Consumer Loan Act," says Thomson, "we go in about every two years and do an examination to determine whether the licensee is doing business in compliance with our statutes. We requested a group of loan files and they gave us some, but not all of them. They also failed to give us other information we asked for," he added.

"We believe that, despite the license surrender, the company has continuing obligations under the law to provide us with access to books and records to investigate complaints about loans that were made when they had a license," said Thomson.

Thomson adds that the department is now trying to determine what its next step should be to best protect Washington consumers. "In our view, this matter is not resolved. Any consumer with concerns about their loan should contact us by calling 1-877-RING DFI (1-877-746-4334)."

First Alliance is also under investigation by the U.S. Department of Justice, and is currently being sued by the AARP, as well as regulators in four other states. In Washington state, nearly 50 complaints have been filed against the company since October 1995.

Thomson said that consumers had complained about the First Alliance's marketing and sales practices, that the company had charged excessive fees, and that the buyers did not fully understand the fees they were being charged.

Although First Alliance Mortgage Company is headquartered in Irvine, California, it operates nationwide and operated in this state out of a single licensed location in Bellevue. According to Department of Financial Institutions' records , the company wrote in excess of 600 mortgage loans in Washington between early 1995 and December 1998.

3/23/00


Washington residents get $143,000 in refunds
from bond of bankrupt Oregon loan company

The state Department of Financial Institutions has sent refund checks to 155 Washington residents who were overcharged or wrongfully charged by an Oregon loan company. Mark Thomson, director of the department’s Consumer Services Division, said his staff was able to get nearly $143,000 in refunds for consumers.

"The money comes from the surety bond covering the company’s operations, rather than the company itself," explains Thomson, "because the company --- Southern Pacific Financial of Lake Oswego, Oregon -- declared bankruptcy after our examiners found substantial problems in their consumer accounts."

The refunds, for overcharges and inappropriate fees charged by the company, range in size from $22 to more than $4,300. About a fourth of the people getting refunds live in the Seattle-Everett-Tacoma area. Most of the rest live in other areas of Western Washington, while 24 are residents of Eastern Washington.

An initial examination by Consumer Services Division staff found a number of violations by Southern Pacific Financial of state laws and regulations, including the Consumer Loan Act. The company was also found to be in violation of the federal Truth in Lending, Real Estate Settlement Procedures, and Equal Credit Opportunity acts.

"Most of the violations had to do with disclosure of loan origination fees, the amounts financed, the finance charges, the 'good faith estimate,' and other requirements placed on lenders," said Thomson. "We found that the company was often charging a flat rate for a service that was in excess of the maximum allowed under the Consumer Loan Act," he added, "and charging ‘administration,’ ‘tax service,’ or other fees it was not authorized to charge."

After Southern Pacific Financial filed for bankruptcy, three examiners from the Department’s staff went through the company’s paperwork to determine how many customers were due refunds. Once the refund amounts were calculated, the bonding company was contacted to make payment.

Financial Institutions Director John Bley said, "These refunds are due to the hard work of Supervising Examiner Ed Burgert and his staff, who negotiated the settlement with the bonding company and Washington consumers.

"This case demonstrates the Legislature's wisdom in requiring a surety bond to conduct this type of business," said Bley. "Without the bond, and the Department's claim on behalf of consumers, these refunds would never have been made."

1/24/00