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Compliance Tips for the Consumer Loan (CL) Licensee from "the Field"

Do you ever wonder where your loan originators are advertising? Or what types of common violations are found during a CL examination? As examiners in the field, we routinely come across the same types of violations. Many of these violations can be easily corrected by simply taking a few hours to identify and fix the issues. This article is geared toward bringing these types of common violations to light, as well as examiner tips on how to identify and correct the violations. The following are common violations found during examinations:

State Law Findings

1. Failed to Provide a Rate Lock Agreement after Locking the Borrower’s Interest Rate
   
   Examiner Tip: In addition to failing to provide the agreement, we also commonly find that proprietary rate lock agreements fail to contain all the required disclosure elements once the interest rate has been locked. The Department provides a model rate lock agreement satisfying the requirements set forth in the Washington Administrative Code (WAC) which can be found on web page, www.dfi.wa.gov/cs/consumer_loan_forms.htm.
   
   Reference WAC 208-620-510(3).
2. Left Blanks on Documents
   
   Examiner Tip: Review a sample of your files to ensure each document is being accurately completed. We routinely find blanks on Truth-in-Lending Disclosure Statements, Washington One Page Disclosure Summaries, Credit Score Disclosures, Rate Lock Agreements, and Servicing Disclosures.
   
   Reference WAC 208-620-550(7).
3. Failed to Include a Link to the Nationwide Mortgage Licensing System (NMLS) Consumer Access Web Site Page for the Company on the Company’s Webpage
   
   Examiner Tip: This link is also required to be included on loan originators’ web pages should they maintain their own web page. Use internet search engines to your benefit by searching for your loan originators to find out where they are advertising. The NMLS consumer access web page can be found on www.nmlsconsumeraccess.org.
   
   Reference WAC 208-620-622(1)(c), and WAC 208-620-622(4).
4. Failed to Include the Loan Originator’s NMLS License Number Immediately Following their Name on Web Pages, Print Advertisements, and Applications
   
   Examiner Tip: Use search engines to review where your loan originators are advertising, in addition to social media sites and real estate sites such as Zillow. Also review the Company’s main web page and print advertisements.
   
   Reference WAC 208-620-622(1)(b), WAC 208-620-622(4), WAC 208-620-550(15), and WAC 208-620-710(25).
5. Advertised Using the Phrases "Best" and "Lowest" Rates
   
   Examiner Tip: Review the Company’s main web page, loan originators’ web pages, and print advertisements for the use of “best” or “lowest” when describing interest rates.
   
   Reference WAC 208-620-630(5), and RCW 31.04.027(1), (2), and (7).
6. Recordkeeping
   
   Examiner Tip: Review a sample of your files to ensure all documents and disclosures are maintained in the file. Can you follow the file from start to finish with the documents retained in the file? Are changed circumstances adequately documented and easily identifiable? Taking a few hours to review your recordkeeping condition can reduce the amount of examiner time and requests for documents onsite.
   
   Reference RCW 31.04.155.
7. Transacted Business/Advertised using the Trade Name Alone
   
   Examiner Tip: Ensure when your company is conducting business, or advertising, it is using the name on the company’s main office license, or a registered trade name in conjunction with the company’s main office NMLS license number, or main office license name.
   
   Reference WAC 208-620-420, and WAC 208-620-620.

Federal Law Findings

8. Failed to Accurately Complete the Good Faith Estimate (GFE) Important Dates Section
   
   Examiner Tip: We routinely find the GFE is filled out incorrectly either by leaving blanks or failing to accurately enter the information based on the circumstances surrounding the disclosure such as an interest rate lock. Pick a sample of loans to review for this issue. Is the important dates section being completed accurately at application, and on any GFEs provided subsequent to the initial disclosure for a changed circumstance? The most common mistakes we find are:
   • Failing to complete line 1 of the important dates section with the correct interest rate expiration date
   • Failing to enter NA into important dates section line 4 on a GFE provided after locking the borrower’s interest rate
   Reference Regulation X, 3500, Appendix C – Instructions for Completing Good Faith Estimate Form, and the New RESPA Rule FAQs.
9. Failed to Provide a GFE after Locking the Borrower’s Interest Rate
   
   Examiner Tip: Review a sample of your files to ensure you are providing a revised GFE within three business days of locking the borrower’s interest rate, and that this GFE is retained in the loan file. Also ensure the lock period and reason for the re-issuance of the GFE is easily identifiable in the loan file. This can reduce the amount of examiner document requests onsite.
   
   Reference Regulation X, 3500.7(f)(5), and the New RESPA Rule FAQs.