A&B Abstract:

On January 24^th, the Washington Department of Financial Institutions (the “DFI”) conducted its first Mortgage Industry Webinar of 2024 and provided updates in the areas of licensing, examination, and enforcement. Highlights from the Webinar are briefly summarized below.

Licensing Update

The DFI provided the following snapshot of licensing activity as of December 31, 2023:

• Company licenses increased since the prior year.
• Branch licenses decreased due to authorized remote work by mortgage loan originators (“MLO”).
• MLO licenses decreased compared to previous years.
• 70 % of MLOs submitted renewals, representing an increase of 10% from the prior year.
• 30% of reinstatement/late renewals submitted so far this month.
• The DFI approved 230 company applications, 950 branch applications and approximately 3,300 individual applications.

Examination Update

The DFI also provided an overview of the following common violations found during examinations conducted of MLOs, mortgage brokers, residential mortgage loan servicers, and consumer loan licensees:

• Failure to maintain records for 3 years.
• Failure to date mortgage loan applications and/or complete required information.
• Failure to maintain supervisory plans.
• Failure to submit accurate mortgage call reports (“MCRs”) by certain mortgage brokers.
• Failure to complete all required information on license applications.
• Failure to report accurate information to the credit bureaus.
• Failure to conspicuously disclose fees.
• Failure to report mortgage loan payoffs by certain mortgage loan servicers.

Additionally, in response to an inquiry regarding the rating system used by the DFI in conducting examinations, the DFI explained that it uses a rating scale of 1 to 5, where 1 would be the best rating, and 5 would be the worst rating.

Enforcement Update

The DFI also provided an overview of complaints investigated by its Enforcement Unit during the last quarter of 2023 and identified certain common violations under Washington’s Mortgage Broker Practices Act (“MBPA”) and the Consumer Loan Act (“CLA”).

Specifically, the DFI indicated that it saw an increase in:

• Instances where address locations of branches or companies were found to be changed and contact information changed without corresponding updates in the NMLS.
• Complaints alleging unlicensed activity by loan modification companies.
• Complaints alleging advertising violations, such as providing misleading information about interest rates by indicating that a loan is “interest free” without proper disclosure.

Further, with respect to unlicensed MLO activity, the DFI indicated that it examines the actual activity performed by the individual in question, and if the individual’s activity meets the definition of an MLO, then that individual has engaged in mortgage loan activity and must be licensed as an MLO.

Finally, the DFI indicated that its Enforcement Unit closed more than 950 complaints that resulted in (1) $80,000 in restitution granted to impacted consumers, (2) the postponement or halting of at least 10 or more foreclosures, and (3) the granting of several loan modifications.

Takeaway

Licensees under the MBPA or CLA are encouraged to review the issues identified by the DFI against their policies, procedures, and practices to ensure compliance with the requirements under the MBPA and/or CLA.

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