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Order Regarding Effective Date of Sponsorship Requirement for Individual Mortgage Loan Originators that are Employees of Loan Servicing Companies

Order
Friday, May 6, 2011
Docket No. 11-021-B
File attachments: 
http://www.dfr.vermont.gov/sites/default/files/Docket_11-021-B_0.pdf

Docket No. 11 -021- B

 

In Re: 8 V.S.A. Chapter 73

Licensed Lender Statute

Act No. 29 (H.171) 2009

 

Order Regarding Effective Date Of

Sponsorship Requirement For

Individual Mortgage Loan Originators That Are

Employees Of Loan Servicing Companies

 

Background

1. Act 29 of the 2009-2010 legislative session modified the Licensed Lender Statute, 8 V.S.A. Chapter 73, to bring Chapter 73 into compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act (the "SAFE Act").

2. The SAFE Act requires that all states license individual mortgage loan originators and Chapter 73 now governs the licensing of individual mortgage loan originators in Vermont.

3. Under the broad definitions in the SAFE Act and in Chapter 73 the loss mitigation employees of mortgage loan servicing companies need to obtain individual mortgage loan originator licenses to continue their loan modification and loss mitigation efforts for loans serviced by the loan servicing company.

4. The federal Department of Housing and Urban Development ("HUD") is currently in the rulemaking process for the SAFE Act and has issued Proposed Rule "SAFE Mortgage Licensing Act; HUD Responsibilities Under the SAFE Act", Docket No. FR-5271-P-01 (the "Proposed HUD Rule").

5. The Proposed HUD Rule indicates HUD's inclination to require individuals who modify residential mortgages to be licensed as mortgage loan originators. The final HUD rule has not been published as of the date of this Order.

6. 8 V.S.A. Chapter 85 requires the licensing of third party loan servicers.

7. 8 V.S.A. §2201(b) requires that each licensed mortgage loan originator must be employed and sponsored by either a licensed lender or a licensed mortgage broker. Section 2201(b) does not presently allow a licensed mortgage loan originator to be employed and sponsored by a third party loan servicer.

8. Under current law a licensed third party loan servicer must obtain an additional lender license or an additional mortgage broker license in order to sponsor its licensed mortgage loan originator employees engaged in loan modification and loss mitigation activities.

9. The Department has found that requiring a licensed third party loan servicer to obtain an additional lender license or mortgage broker license in order to sponsor its mortgage loan originator employees engaged in loan modification and loss mitigation activities has not worked well.

10. A bill is currently pending in the Vermont legislature that would allow a licensed mortgage loan originator engaged in loan modification activities to be employed and sponsored by a licensed third party loan servicer, provided the “loan modification” activity is limited to an adjustment or compromise of an existing residential mortgage loan and does not include a refinancing transaction. It is anticipated that the bill will be enacted and will become effective on passage.

11. Act 29, Sec. 3, provides that the commissioner may extend the date for compliance with any provision of the Act provided the extension is permitted or approved by HUD.

12. Given the current difficult circumstances in the residential mortgage market and the number of homeowners potentially facing foreclosure or having difficulty making their mortgage payments; and in order to avoid any disruption in foreclosure prevention efforts, to encourage loan servicing companies to increase staff to meet the loss mitigation and loan modification needs of borrowers, and to promote a smooth transition to third party servicer sponsorship of mortgage loan originators, it is appropriate to delay the date by which a mortgage loan originator employed by a third party loan servicer and engaged in loan modification activities must be employed and sponsored by a licensed lender or mortgage broker.

Order

13. Subject to the limitations and criteria in this Order, it is hereby ordered that prior to December 1, 2011 a mortgage loan originator employed by a third party loan servicer does not need to be licensed and sponsored by a licensed lender or mortgage broker to engage in loan modification activities.

14. It is anticipated that the pending legislation allowing a mortgage loan originator engaged in loan modification activities to be employed and sponsored by a licensed third party loan servicer will be enacted and will be effective prior to December 1, 2011.

15. Prior to December 1, 2011 a licensed mortgage loan originator may engage in loan modification activities without being employed and sponsored by a licensed lender or mortgage broker, provided the individual and the third party loan servicer meet all of the following criteria:

a. The individual must be licensed as a mortgage loan originator in the State of Vermont;

b. The company must be a licensed third party loan servicer in the State of Vermont; and

c. The individual mortgage loan originator must be an employee of the licensed third party loan servicing company.

d. Neither the individual nor the third party loan servicing company receives any direct or indirect compensation from the borrower for providing the loan modification or any related foreclosure mitigation services.

e. Notwithstanding the provisions of subparagraph 15 d, the lender, the third party loan servicing company, and the borrower may receive incentive payments from a federal or state government, or an agency or department thereof, for participating in the federal Home Affordability Modification Program or in a similar state or federal foreclosure prevention program.

16. For purposes of this Order, the term “loan modification” is limited to an adjustment or compromise of an existing residential mortgage loan. The term “loan modification” does not include a refinancing transaction.

17. This Order is necessary and appropriate to:

a. Avoid any disruption in foreclosure prevention efforts, including loss mitigation and loan modification efforts by third party loan servicers, during the current difficult circumstances in the residential mortgage market; and

b. Allow an orderly transition for mortgage loan originators to be employed and sponsored by licensed third party loan servicers and to make any necessary adjustments to their filings with the Nationwide Mortgage Licensing System and Registry.

18. Based on the current information and guidance from HUD, the Commissioner believes that the extension permitted by this Order is consistent with HUD’s current guidance.

Margaret (Peggy) Cottrell

Order
Monday, December 13, 2010
Docket No. 09-109-B
File attachments: 
http://www.dfr.vermont.gov/sites/default/files/Order-09-109-B.pdf

Docket No. 09-109-B

IN RE: MARGARET B. COTTRELL

 

HEARING OFFICER'S PROPOSED DECISION AND

COMMISSIONER'S FINAL DECISION

This matter is a contested administrative case before the Commissioner ("Commissioner") of the Department of Banking, Insurance, Securities, and Health Care Administration ("Department") brought by the Banking Division ("Division") of the Department against Respondent, Margaret Cottrell ("Respondent") initiated by the filing of administrative charges dated September 11, 2009 to which Respondent filed her response dated October 1, 2009.

Attorney Christina Rouleau, duly appointed Hearing Officer, heard the contested hearing on June 25, 2010. The Hearing Officer's Proposed Decision is set forth below. Respondent requested oral argument before the Commissioner on the Hearing Officer's Proposal for Decision, which was granted. The Division filed written exceptions to the Hearing Officer's Proposal for Decision with the Commissioner. Oral argument before the Commissioner was held on October 27, 2010. Attorney Kimberly Cheney represented Respondent during the contested case hearing and appeared at oral argument on behalf of Respondent. Attorney Peter Young represented the Division during the contested case hearing and appeared on behalf of the Division at oral argument. Respondent also appeared at oral argument and addressed the Commissioner after being given the opportunity to do so by the Commissioner.

The Division took exception to the Hearing Officer's proposed administrative monetary penalties of two hundred dollars ($200.00) per count as set forth in paragraphs 1 through 5 of the proposed administrative sanctions section of the proposal for decision. The Division argues that the administrative monetary penalties should be one thousand dollars ($1,000.00) per count for reason that Respondent intentionally misled lenders while working as a licensed lender in an industry in which integrity and accuracy are of critical importance.

Upon consideration of the arguments, and analysis presented at oral argument by the Division and Respondent, the comments made at oral argument by the Respondent herself, the evidence, legal argument and analysis presented to the Hearing Officer, the Commissioner's Final Decision is herby issued.

 

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND PROPOSAL FOR DECISION

INTRODUCTION

This matter involves a contested administrative hearing on charges dated September 11, 2009, that were brought against Margaret B. Cottrell ("Respondent") by the Banking Division ("Division") of the Vermont Department of Banking, Insurance, Securities and Health Care ("Department"). In response, Respondent filed with the Department her Response to Administrative Charges dated October 1, 2009.

The contested hearing in this matter was scheduled for June 25 and July 1, 2010. Peter Young, Assistant General Counsel for the Department, represented the Division. Kimberly B. Cheney, Esq. represented Respondent. Christina Rouleau, Esq. was designated to serve as Hearing Officer for the hearing.

The parties presented testimony through witnesses and submitted documentary evidence through exhibits on June 25, 2010. Additionally a Stipulation of Parties to Supplement Evidentiary Record dated July 1, 2010 was tiled. Parties were given until July 30, 2010 to tile legal briefs and proposed findings of fact and conclusions of law, if any, for consideration. The Division filed its Legal Brief and Request for Findings of Fact and Conclusions of Law and the Respondent filed a Post Hearing Memorandum with proposed Findings of Fact, both dated July 30, 2010. Respondent also filed a Supplemental Memorandum dated August 25, 201 0.

The undersigned has considered each proposed finding submitted by the parties. Any proposed finding not expressly incorporated in this Proposal for Decision has been rejected.

After consideration of all the material submitted in this matter, the Hearing Officer submits to the Commissioner the following Findings, Conclusions, and Proposal for Decision.

INITIAL RULING ON RESPONDENT'S MOTION TO DISMISS

In Respondent's Post Hearing Memorandum she moves for the dismissal of the Administrative Charges. For reasons set forth in this proposal Respondent's Motion to Dismiss is DENIED.

FINDINGS OF FACT

1. Respondent is a resident of Petersburg, New York. (Response to Administrative Charges, 4; Tr. p. 70)

2. Respondent was employed by CTX Mortgage Co., LLC ("CTX") in Bennington, Vermont from June of 2005 through April of 2008 and has worked in the mortgage loan industry for approximately 20 years. (Tr. pp. 70-71)

3. Respondent was hired by CTX as a branch manager to oversee and manage the Bennington office and to originate loans. (Tr. pp. 16, 71-72, 136)

4. At all relevant times Respondent was an employee authorized to act as both a mortgage broker and a licensed lender under licenses held by CTX. (Response to Administrative Charges, 4)

5. At all relevant times and until the termination of her employment, Respondent conducted business subject to Lender License #5656 and Mortgage Broker License #0645MB issued to CTX by the Department. (Response to Administrative Charges, 6)

6. Respondent's responsibilities while employed by CTX included assembling documentation required for the application process, evaluating the documentation, and then submitting that file into processing for processing and underwriting. (Tr. p. 17)

7. As part of Respondent's duty to originate loans, Respondent collected information for consumers' mortgage applications including, but not limited, to uniform residential loan applications. (Tr. p. 73)

8. Underwriters use documentation assembled by loan officers to verify that a borrower qualifies according to the investor guidelines and confirm the accuracy of the information presented in the application (Tr. pp. 19-20, 22); underwriters and investors rely on the information presented in these documents. (Tr. pp. 20-21)

9. CTX paid Respondent a commission on loans that she originated. Respondent only received a commission if the loan closed. (Tr. pp. 38, 78)

10. As part of Respondent's duties as loan officer, she was required to verify the information from loan applicants through documentation or third parties, such as by W -2 forms, pay stubs, and bank statements. (Tr. pp. 17-18, 82)

11. Respondent submitted loan documentation to processors and underwriters at CTX with knowledge that this documentation would be relied upon by others. (Tr. pp. 90-92)

12. As part of the application process, gift verification forms are required of applicants and donors, which require the signatures of both the donor(s) and persons verifying donor assets. Other forms and letters similarly require signatures from applicants or third parties. (Tr. pp. 83-85, 90)

13. Underwriters rely on the information presented by loan officers, and approvals of applications are contingent on receipt of appropriate documentation. (Tr. pp. 21-23, 92)

14. Respondent signed an agreement with CTX in June, 2007 which, among other things, prohibited the submission of false and misleading information. (Ex. 19; Tr. pp. 157-158)

15. Respondent retained altered loan documents in files she kept for her own use in her office at CTX in Bennington, Vermont. (Tr. pp. 68, 127)

16. Respondent did not anticipate the tiles she retained for her own use would be looked at by anyone else. (Tr. p. 127)

17. At a meeting held on April 29, 2008, Respondent's immediate supervisor asked Respondent if she was responsible for cutting and pasting signatures on documents contained in the K.S. tile that was discovered in Bennington. (Tr. pp. 27, 33-34)

18. Respondent had not sought or received permission from CTX to af1ix a borrower's signature on documents. (Tr. pp. 100-102, 155-156)

19. Respondent accepted responsibility for the cutting and pasting of signatures in the

K.S. file at the time of this April 29, 2008 meeting, and has not denied responsibility at any time since. (Tr. pp. 34, 114-115, 152)

20. Respondent was terminated by CTX for her misconduct. (Tr. p. 34)

21. Respondent admitted responsibility for altering documents other than those enumerated in Counts I-V below while employed at CTX. (Tr. p. 161)

22. At hearing Respondent testified that she is currently employed at Wells Fargo in Bennington, Vermont as a home mortgage consultant, an originator of home mortgages. (Tr. p. 70)

23. The Division alleges that Respondent's conduct as charged violates 8 V.S.A. § 2204(a)(1)(A) and 8 V.S.A. § 2241(1), (2) and (9).

COUNT 1 (K.S.)

24. Respondent was the loan officer for K.S. and was responsible for taking the application and collecting the necessary documentation. (Tr. pp. 108-109)

25. The signature contained on line 17 of State's Exhibit 2, titled "Request for Verification of Gift/Gift Letter," was taped onto said document. 1 (State's Exhibit 2)

26. The signature contained on Line 12 of State's Exhibit 4, titled "Request for Verification of Gift/Gift Letter," was taped onto said document. (State's Exhibit 4)

27. The borrower, K.S., was required to sign State's Exhibit 5, titled "Uniform Residential Loan Application," at page 3 at the time of application. (Tr. pp. 73-75)

28. The area where the borrower's signature would have been placed on State's Exhibit 5 at page 3 has been cut out of that document; it is unknown whether this cut-out was used elsewhere on documents associated with the K.S. mortgage loan. (State's Exhibit 5; Tr. p. 62)

29. Other documents contained in Respondent's copy of the K.S. file evidence altered signatures. (See Exhibits 3 & 4- source of signature on line 17 is Exhibit A).

30. Respondent admitted responsibility for the altered documents contained in the K.S. file that she retained for this borrower (Tr. pp. 33-34, 94-95, 111-112)

COUNT II (R.P.)

31. Respondent was the loan officer for R.P. and was responsible for taking the application and the collecting the necessary documentation. (Tr. p. 93)

32. The area where R.P.'s signature would appear on State's Exhibit 7 has been cut from that document. (State's Exhibit 7)

33. Addendum A to State's Exhibit 9, which is the CTX commitment letter sent to

R.P. and dated September 26, 2007, at ¶ 6 requires that the borrower provide a signed statement indicating recent credit inquiries have not resulted in any undisclosed debt. (State's Exhibit 9)

34. The signature of R.P. was taped onto State's Exhibit 6, which purports to be the required verification signed by R.P. that R.P. had no undisclosed debts. (State's Exhibit 6)

35. The signature of R.P. was taped onto State's Exhibit 8 at line 8, titled "Request for Verification of Gift/Gift Letter." (State's Exhibit 8)

36. Respondent admitted responsibility for the taped signatures appearing on State's Exhibits 6 and 8. (Tr. p. 98)

COUNT III (D.T.)

37. Respondent was the loan officer for D.T. and was responsible for taking the application and collecting the necessary documentation. (Tr. p. 99)

38. Respondent cut the borrower's signature from State's Exhibit 10 at page 4, titled "Uniform Residential Loan Application" and contained in the D.T. file, and pasted it to State's Exhibit 11, which purports to be verification concerning federal withholding taxes. (State's Exhibits 10 & 11; Tr. p. 100)

COUNT IV (C.H.)

39. Respondent was the loan officer for C.H. and was responsible for taking the application and collecting the necessary documentation. (Tr. p. 103)

40. Respondent cut the borrower's signature from State's Exhibit 12, titled "SPECIAL ADDENDUM To Contract dated 6/3/06" and contained in the C.H. file, and pasted it to State's Exhibits 13 and State's Exhibit 14, the Uniform Residential Loan Application. (State's Exhibits 12, 13 & 14; Tr. p. 104)

COUNT V (J.C.)

41. Respondent was the loan officer for J .C. and was responsible for taking the application and collecting the necessary documentation. (Tr. p. 105)

42. Respondent affixed the buyer's signature to State's Exhibit 15, which purports to be a letter signed by the buyer addressing two items CTX requested clarification on. (State's Exhibit 15; Tr. p. 107)

CONCLUSIONS OF LAW

1. In this administrative hearing the Division has the burden to prove its case by a preponderance of the evidence. In re Smith, 169 Vt. 162, 168 (1999) ("preponderance of the evidence is the usual standard of proof in state administrative adjudications").

2. The assessment of witness credibility and the weight to be given witness testimony is a matter for the special expertise of the administrative body. In re V.S.E.A., 162 Vt. 277, 280 (1994); Cameron v. Double A. Services, Inc., 156 Vt. 577, 582 (1991).

3. The Commissioner has the authority, in addition to other powers conferred by statute, to issue orders as shall be authorized by or necessary to the administration of Title 8, and to carry out the purposes of such title (8 V.S.A. § 15(a)).

4. The Commissioner has the authority to deny, suspend, revoke, condition, or refuse to renew a license, or order that any person or licensee cease and desist in any specified conduct (8 V.S.A. § 2210(a)(b)), and to enjoin or prohibit any person from engaging in the financial services industry in this state (8 V.S.A. § 2210(b)(4)).

5. The Commissioner has the authority to impose an administrative penalty of not more than $10,000.00 for each violation upon any person who violates or participates in the violation of Chapter 73 of Title 8. Each violation is a separate and distinct violation (8 V.S.A. § 2215(a)(1) and (b)).

6. 8 V.S.A. § 2241, titled "Prohibited acts and practices," prohibits a person from directly or indirectly employing any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person (8 V.S.A. § 2241(1)).

7. 8 V.S.A. § 2241(2) prohibits a person or individual from engaging in any unfair or deceptive practice toward any person.

8. 8 V.S.A. § 2241 (9) prohibits a person or individual from making, in any manner, any false or deceptive statement or representation, including with regard to the rates, points, or other financing terms or conditions for a mortgage loan.

9. 8 V.S.A. § 2204(a)(l)(A) requires that an applicant seeking to obtain a license as a lender must possess the financial responsibility, experience, character and general fitness necessary to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently within the purposes of Chapter 73 of Title 8.

10. The plain language of the statute does not support Respondent's suggestion that the reference in§ 2241(2) to an "unfair or deceptive practice" is imported from the Consumer Fraud Act and requires material harm. Regardless, it is duly noted that under the CFA deception is measured by an objective standard focusing on risk of consumer harm in a particular case. Actual injury need not be shown. See Peabody v. P.J 's Auto Village, Inc., 153 Vt. 55 (1989). In this matter the risk of harm resulting from the alteration of mortgage loan documents by a licensee in support of a mortgage loan cannot be understated. Such a practice undermines not only the integrity of the altered document(s) and associated mortgage loan, but also the integrity of the mortgage loan industry Respondent serves.

11. Whether or not the Respondent had permission from an individual to affix that person's name to the documents at issue in this proceeding, a conclusion unsupported by the evidence, is immaterial to a determination as to whether her actions constituted prohibited acts and practices as set forth in § 2241 of Title 8.

12. Whether or not the substance of the information set forth in the documents that contained altered signatures was accurate is not germane to a determination as to whether her conduct caused the lender to rely on the authenticity of what was in fact an altered document, in violation of8 V.S.A. § 2241(1), (2) and (9).

13. By cutting and pasting signatures to documents associated with and necessary for a residential mortgage loan Respondent employed a scheme, device, or artifice to mislead a lender, engaged in an unfair or deceptive practice and made a false or deceptive statement or representation in connection with the mortgage loan application of K.S. as set forth in Count I above, in violation of8 V.S.A. § 2241(1), (2) and (9).

14. By cutting and pasting signatures to documents associated with and necessary for a residential mortgage loan Respondent employed a scheme, device, or artifice to mislead a

lender, engaged in an unfair or deceptive practice and made a false or deceptive statement or representation in connection with the mortgage loan application of R.P. as set forth in Count II above, in violation of 8 V.S.A. § 2241 (1), (2) and (9).

15. By cutting and pasting signatures to documents associated with and necessary for a residential mortgage loan Respondent employed a scheme, device, or artifice to mislead a lender, engaged in an unfair or deceptive practice and made a false or deceptive statement or representation in connection with the mortgage loan application of D.T. as set forth in Count III above, in violation of8 V.S.A. § 2241(1), (2) and (9).

16. By cutting and pasting signatures to documents associated with and necessary for a residential mortgage loan Respondent employed a scheme, device, or artifice to mislead a lender, engaged in an unfair or deceptive practice and made a false or deceptive statement or representation in connection with the mortgage loan application of C.H. as set forth in Count IV above, in violation of8 V.S.A. § 2241(1), (2) and (9).

17. By cutting and pasting signatures to documents associated with and necessary for a residential mortgage loan Respondent employed a scheme, device, or artifice to mislead a lender, engaged in an unfair or deceptive practice and made a false or deceptive statement or representation in connection with the mortgage loan application of J.C. as set forth in Count V above, in violation of 8 V.S.A. § 2241 (1), (2) and (9).

18. Section 2204 of Title 8 requires the Commissioner to make certain findings regarding the financial responsibility, experience, character and general fitness of an applicant before issuing a license. Respondent's actions as set forth herein fully support a finding that she lacks the financial responsibility, experience, character and general fitness to command the confidence of the community and to warrant belief that she will operate in the mortgage lending business in an honest, fair and efficient manner as required by 8 V.S.A. § 2204(a)(l )(A). The Commissioner has the authority to ensure the integrity of the mortgage loan industry is maintained, and there is nothing in the plain language of the statute to support Respondent's assertion that he is restricted to considering only an applicant's credit and criminal histories in determining whether an applicant satisfies the statutory criteria noted above.

PROPOSED DECISION AND ADMINISTRATIVE SANCTIONS

The Division has referenced in its post-hearing memorandum two cases that involved the alteration of mortgage loan documents for consideration in determining an appropriate penalty. The first such case, Commonwealth of Pennsylvania Department of Banking, Bureau of Compliance, Investigation and Licensing v. NorthStar Mortgage, LLC, Paul Fenelle, Leonardo D'Elia, Owners. Keith Douglas Buchanan, Kimberly Friedman, Duane Beers. Michael Gilbert and Jenique Chang, Pennsylvania Dept. of Banking, Docket Nos. 070017, 070027, 070028, 070029, 070033, 070035, resulted in the entry of a Final Order dated July 3, 2008 ("NorthStar"). In NorthStar a loan officer fabricated the substance of certain mortgage loan documents, which led to criminal charges being brought against him.2 After pleading guilty to one felony count of forgery the loan officer's employment at NorthStar continued, and the Department of Banking subsequently moved to suspend and refuse to renew NorthStar's license pending a full hearing on a license revocation. While not minimizing in any way Respondent's conduct in this case, the egregious conduct of the loan officer employed by NorthStar is not analogous to the charged conduct in this proceeding. As such the Final Order in NorthStar has not been taken into consideration in the preparation of this Proposal for Decision.

A second case more closely aligned with this matter, captioned In Re: Lowell T Burnett, North Carolina Commissioner of Banks, Docket No. 06:093 :MMB, resulted in the entry of a Voluntary Surrender and Order dated December 11, 2006. In Burnett the Respondent admitted to, inter alia. cutting and pasting documents together in an effort to have a certain loan approved and accepted by a lender to whom he was going to broker the loan. Respondent admitted this conduct was misleading and a violation ofNorth Carolina law. In addition to the voluntary surrender of his mortgage loan officer license, it was ordered that no re-application for licensure as a mortgage broker, lender or loan officer would be considered and Respondent was permanently barred from engaging in the mortgage loan lending business in North Carolina in any capacity.

In this case Respondent's actions were a consistent pattern of practice as evidenced by the number of altered documents associated with several mortgage loans over a period of time. An individual desirous of being candid and truthful would ensure there was an adequate disclosure that the individual whose name appeared on an altered document had not personally signed that instrument. Respondent made no such disclosure, and by her actions she instead misrepresented the authenticity of documents associated with and necessary for residential mortgage loans. In so doing Respondent personally benefited as she received a commission on mortgage loans that closed.

Respondent's assertion at hearing that she kept the cut and pasted documents in her personal mortgage files she retained in her office so that a record would exist of all alterations, and that if she truly felt her conduct was wrong she would have put the altered documents in the shredder, is not considered credible given her admission that she did not expect her personal files would be viewed by anyone else. Additionally, Respondent's retention of the altered documents does not negate the fact that her actions caused the lender to rely on her false or deceptive representations concerning the file documentation. Finally, Respondent claimed at hearing that she had the permission of the persons whose names were the subject of the charged conduct to affix their signatures to documents. As stated above such permission, had it been given, would not negate the fact that it is the lender who Respondent deceived. Regardless, Respondent's testimony that she had such permission amounts to inadmissible hearsay and no admissible evidence to this effect substantiates her claim that she believed she could affix a person's signature to a document if she had permission to do so from that individual.

Based on the above-stated Findings of Fact and Conclusions of Law, this Hearing Ot11cer proposes that the Commissioner impose the following administrative sanctions:

1. Respondent be assessed a monetary penalty in the amount of Two Hundred ($200.00) Dollars for the conduct outlined in Count I above.

2. Respondent be assessed a monetary penalty in the amount of Two Hundred ($200.00) Dollars for the conduct outlined in Count II above.

3. Respondent be assessed a monetary penalty in the amount of Two Hundred ($200.00) Dollars for the conduct outlined in Count III above.

4. Respondent be assessed a monetary penalty in the amount of Two Hundred ($200.00) Dollars for the conduct outlined in Count IV above.

5. Respondent be assessed a monetary penalty in the amount of Two Hundred ($200.00) Dollars for the conduct outlined in Count V above.

6. Respondent's authority to act as a mortgage broker and/or a licensed lender be revoked.

7. Respondent be permanently enjoined and prohibited from engaging in the mortgage lending business in Vermont in any capacity.

RIGHT TO FILE WRJTTEN EXCEPTIONS

"Any party adversely affected by the proposal or decision of the hearing officer shall have 1 0 days from the date of service to file written exceptions, legal briefs or request oral argument before the Commissioner." Regulation No. 82-1 (Revised), Section 7(c). The parties, by written stipulation, may waive these opportunities. Regulation No. 82-1 (Revised), Section 7(d).


COMMISSIONER'S FINAL DECISION

Upon Consideration of the entire record in this matter, the Commissioner hereby ADOPTS the Hearing Officer's proposed Findings of Fact and Conclusions of Law contained in the Proposal for Decision.

Respondent represented at oral argument that she did not have any fraudulent intent when she pasted or affixed signatures onto loan documents or allowed signatures to be pasted or affixed onto loan documents that she was responsible for. She further stated that all of the documents that the Hearing Officer found to have affixed or pasted signatures contained information and representations that were true and that her only intent was to move these loan applications along for the customers who could not come to her place of business to sign these documents. The Division argued that the applicable statute, 8 V.S.A. § 2241, prohibits Respondent from deceiving lenders and pointed out that there was no finding that Respondent disclosed

that the documents submitted to lenders were not actually signed by the persons whose signatures appeared on the documents. Respondent's conduct, the Division argues, makes it impossible for lenders to trust that documents submitted by Respondent contain accurate information and therefore present a challenge to the system that the law must eliminate.

The Commissioner, upon consideration of the evidence, legal argument and analysis presented by the parties to the Hearing Officer and presented during oral argument, as well as Respondent's remarks presented at oral argument, can find no error warranting rejection of the Hearing Officer's Proposed Findings of Facts and Proposed Conclusions of Law. In accordance with the discretion granted to the Commissioner under 8 V.S.A. § 2215 and 8 V.S.A. §2210, the Commissioner accepts the proposed monetary administrative penalties and rejects the proposal to revoke Respondent's authority to act as a mortgage broker and/ or licensed lender and to permanently enjoin and prohibit Respondent from engaging in the mortgage lending business in Vermont.

Accordingly, the Commissioner issues the following ORDER:

1. Respondent shall pay an administrative penalty in the amount of One Thousand Dollars ($1,000.00), payable within thirty (30) days of the date of this decision.

2. Respondent shall be enjoined or prohibited from acting as a mortgage broker, licensed lender or engaging in the financial services industry in any capacity in the State of Vermont for a period of six (6) months. The prohibition period shall begin on the date of this decision.

 

 

 

1 The words "taped" and "pasted" are used interchangeably throughout this Proposal for Decision, and in all instances refer to a 'signature that has been affixed by some means to a document

2 The result of these fabrications was, for example, that the lender was misled into believing that gifts were made by persons who it was later discovered never made such gifts, and in fact did not even know the borrower to whom the gift was supposedly made, or that the gift that was made was for a lesser amount than what had been documented in the loan files.

Order Regarding Effective Date Of Individual Mortgage Loan Originator Licensing For Employees Of Loan Servicing Companies

Order
Monday, April 19, 2010
Docket No. 10-033-B
File attachments: 
http://www.dfr.vermont.gov/sites/default/files/Docket-2010-033-B.pdf

Docket No. 10-033-B

In Re: 8 V.S.A. Chapter 73 Licensed Lender Statute Act No. 29 (H.l71) 2009


Order Regarding Effective Date Of Individual Mortgage Loan Originator Licensing For

Employees Of Loan Servicing Companies

 

Background

1. Act 29 of the 2009-2010 legislative session modified the Licensed Lender Statute, 8 V.S.A. Chapter 73, to bring Chapter 73 into compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act (the "SAFE Act").

2. The SAFE Act requires that all states license individual mortgage loan originators and Chapter 73 now governs the licensing of individual mortgage loan originators in Vermont.

3. Under the broad definitions in the SAFE Act and in Chapter 73 the loss mitigation employees of mortgage loan servicing companies need to obtain individual mortgage loan originator licenses to continue their loan modification and loss mitigation efforts for loans serviced by the loan servicing company.

4. The federal Department of Housing and Urban Development ("HUD") is responsible for determining whether a state has a law or regulatory system inplace that meets the requirements of the SAFE Act. See, SAFE Act §1508.

5. HUD is currently in the rulemaking process for the SAFE Act and has issued Proposed Rule "SAFE Mortgage Licensing Act; HUD Responsibilities Under the SAFE Act", Docket No. FR-5271-P-01 (the "Proposed HUD Rule").

6. The Proposed HUD Rule indicates HUD's inclination to require individuals who modify residential mortgages to be licensed as mortgage loan originators. The Proposed HUD Rule also specifically asks for comments on this issue. The final HUD rule has not been published as of the date of this Order.

7. Subject to the guidelines and limitations provided in this Order, the commissioner desires to delay the effective date for loss mitigation employees and loan modification employees of mortgage loan servicing companies to obtain a mortgage loan originator license in order to promote foreclosure prevention opportunities during this time of increased foreclosure activity.

8. Act 29, Sec. 3, provides that the commissioner may extend the date for compliance with any provision of the Act provided the extension is permitted or approved by HUD.

9. Given the current difficult circumstances in the residential mortgage market, and the number of homeowners potentially facing foreclosure or having difficulty making their mortgage payments, it is appropriate to delay the effective date for loss mitigation employees and loan modification employees of mortgage loan servicing companies to obtain a mortgage loan originator license in order to avoid any disruption in their foreclosure prevention efforts and to encourage loan servicing companies to increase staff to meet the loss mitigation and loan modification needs of borrowers.

 

Order

10. Subject to the limitations and criteria in paragraph 11, it is hereby ordered that the effective date for loss mitigation employees and loan modification employees of mortgage loan servicing companies to obtain a mortgage loan originator license is hereby delayed until July 31, 2010.

11. An individual and the individual's employer must meet all of the following criteria to qualify for the delay in the mortgage loan originator licensing requirement set forth in paragraph l 0:

a. The individual must be an employee of a third party loan servicing company.

b. The third party loan servicing company must not be the original lender of the mortgage loan and the company must service residential mortgage loans owed or due, or asserted to be owed or due, another.

c. Neither the individual nor the third party loan servicing company receives any direct or indirect compensation from the borrower for providing the loan modification or any related foreclosure mitigation services.

d. Notwithstanding the provisions of subparagraph c the lender, the third party loan servicing company, and the borrower may receive incentive payments from a federal or state government, or an agency or department thereof, for participating in the federal Home Affordability Modification Program or in a similar state or federal foreclosure prevention program.

8 V.S.A. Chapter 73 Licensed Lender Statute, Act No. 29 (H.171) 2009 - Order Regarding: (A) Modification Of Transition Deadline; (B) Submission Of Credit Reports And Credit Scores; And (C) The Date The Department Will Begin Accepting Mortgage Loan ...

Order
Monday, September 28, 2009
Docket No. 09-128-B
File attachments: 
http://www.dfr.vermont.gov/sites/default/files/ORD-B-09-128.pdf

Docket No. 09-128-B


In Re: 8 V.S.A. Chapter 73 Licensed Lender Statute Act No. 29 (H.171) 2009

 

ORDER REGARDING:

(A) Modification Of Transition Deadline;

(B) Submission Of Credit Reports And Credit Scores; And

(C) The Date The Department Will Begin Accepting

Mortgage Loan Originator License Applications

 

Background

1. On May 21, 2009 Governor Douglas signed Act 29 (H. 171) into law.

2. Act 29 modified the Licensed Lender Statute, 8 V.S.A. Chapter 73, to bring Chapter 73 into compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act (the "SAFE Act").

3. Among other things, Act 29 requires applicants to obtain and submit fingerprints for a criminal background check.

4. The Department has learned that the fingerprint and criminal background check functionality of the Nationwide Mortgage Licensing System and Registry ("NMLS") will not be available until late January 2010.

5. Act 29 also requires applicants to submit authorization for the NMLS and the commissioner to obtain credit reports and credit scores.

6. The Department has learned that the credit report and credit score functionality of the NMLS will not be available as of January 1, 2010 and may not be available until late spring 2010.

7. Pursuant to Act 29, Sec. 3 (b) (transition provisions), the commissioner may extend the date for compliance with any provision of Act 29.

8. The commissioner has determined that, under the current transition provisions in Act 29, Sec. 3 (b), the timing of the fingerprint and criminal background check functionality on the NMLS, and the current unavailability of the credit report and credit score functionality on the NMLS, may create problems for the Department and for those individuals who begin acting as a mortgage loan originator after December 31, 2009.

9. This Order is issued to modify the transition provisions of Act 29, to provide guidance as to how to accommodate the current unavailability of the credit report functionality, to inform potential mortgage loan originators when the Department will begin accepting mortgage loan originator license applications, and to enable the orderly transition to the licensing of mortgage loan originators in a manner consistent with the SAFE Act and Act 29.

10. This Order is permitted under Act 29, is not in conflict with the SAFE Act, and is permitted under HUD's interpretation of the SAFE Act

Order

11. The transitional provisions of Act 29, Sec. 3 (b), are hereby modified as follows:

All individuals who, on or before March 31, 2010, are employed by a mortgage broker holding a valid Vermont license and who are authorized to act as a mortgage broker under such license, or are employed by a lender holding a valid Vermont lender license and are acting as a lender or loan officer under such license, shall complete the pre-licensing education and testing requirements and shall obtain a mortgage loan originator license as required by the Act 29 no later than July 1, 2010. All other individuals (i.e., those individuals who start acting as a mortgage loan originator under a Vermont mortgage broker or lender license beginning on or after April 1, 2010) must obtain a mortgage loan originator license as required by Act 29 prior to acting as a mortgage loan originator in this state.

12. Until such time as the credit report and credit score functionality is available on the NMLS, applicants shall obtain and submit to the Department, outside of the NMLS, a copy of their current credit report and credit score, which credit report and credit score must not be more than sixty (60) days old.

13. The Department will begin accepting mortgage loan originator applications February 1, 2010.

14. The Department strongly encourages individuals to apply for a mortgage loan originator license well in advance of the July 1, 2010 deadline. Those who wait until the July 1, 2010 deadline may experience significant backlogs and delays in the processing and issuance of a mortgage loan originator license, including a period of time during which the individual is not permitted to engage in mortgage loan originator activities in Vermont.

8 V.S.A. Chapter 73 Licensed Lender Statute, Act No. 29 (H.171) 2009 - Order Regarding Effective Date Of Deletion Of Licensed Lender Statute Exemption For Nonprofit 501(c) Organizations That Conduct Their Lending Activities Through Revolving Loan Funds

Order
Thursday, July 23, 2009
Docket No. 09-097-B
File attachments: 
http://www.dfr.vermont.gov/sites/default/files/ORD-B-09-097.pdf

Docket No. 09-097-B

In Re: 8 V.S.A. Chapter 73 Licensed Lender Statute Act No. 29 (H.171) 2009

 

ORDER REGARDING EFFECTIVE DATE OF DELETION OF

LICENSED LENDER STATUTE EXEMPTION FOR

NONPROFIT 501(c) ORGANIZATIONS THAT CONDUCT THEIR LENDING

ACTIVITIES THROUGH REVOLVING LOAN FUNDS

 

 

Background

1. Act 29 modified the following exemption from the Licensed Lender Statute, which exemption was formerly found at 8 V.S.A. §2201(c)(8) (the "Nonprofit Revolving Loan Fund Exemption") by adding the following italicized language:

(c) No license shall be required of:

. . .

(8) lenders that conduct their lending activities, other than residential mortgage loan activities, through revolving loan funds, that are nonprofit organizations exempt from taxation under section 501(c) of the Internal Revenue Code, and that register with the commissioner of economic development under section 690a of Title 10

[As amended, this exemption is now codified at 8 V.S.A. §2201(d)(9).]

2. The effect of the modification to the Nonprofit Revolving Loan Fund Exemption is that nonprofit organizations operating revolving housing loan funds using grant money (for example, grant money from the Department of Housing & Community Affairs) would need to be licensed as a lender under Chapter 73 as of July 1, 2009 in order to continue making residential mortgage loans to low income homeowners.

3. Pursuant to Act 29, Sec. 3 (b), the commissioner may extend the date for compliance with any provision of Act 29 provided the extension is permitted or approved by the federal Department of Housing and Urban Development ("HUD").

4. Act 29 modified the Licensed Lender Statute, 8 V.S.A. Chapter 73, to bring Chapter 73 into compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act (the "SAFE Act").

5. Under the SAFE Act HUD is responsible for determining whether a state has a law or regulatory system in place that meets the requirements of the SAFE Act. See, SAFE Act §1508.

6. Both the SAFE Act and HUD commentary permit a state to delay licensing lenders such as nonprofit 501(c) organizations that conduct their lending activities through revolving loan funds.

7. Delaying the effective date for the removal of an exemption from Chapter 73 is consistent with the SAFE Act and HUD guidelines, and is fair and reasonable because of the particular circumstances involved in the transactions that would otherwise be affected by the removal of the exemption, provided the delay does not extend the effective date for licensing beyond July 31, 2010.

8. Given the current difficult circumstances in the residential mortgage market, and the number of homeowners potentially facing foreclosure or having difficulty making their mortgage payments, it is appropriate to delay the effective date of the modification to the Nonprofit Revolving Loan Fund Exemption to enable these nonprofit 501(c) organizations to continue assisting homeowners while they transition to becoming a licensed lender under Chapter 73.

Order

9. Based upon the foregoing and other factors deemed relevant to the commissioner, it is hereby ordered that:

a. The effective date of compliance with the requirement of Act 29 that nonprofit 501(c) organizations that conduct their residential mortgage lending activities through revolving loan funds be licensed as lenders is hereby delayed until December 30, 2009.

b. Prior to and including December 30, 2009, nonprofit 501(c) organizations that conduct their residential mortgage lending activities through revolving loan funds, as described in former 8 V.S.A. §2201(c)(8), do not need to obtain a lender license to make residential mortgage loans.

c. Beginning December 31, 2009 nonprofit 501(c) organizations that conduct their residential mortgage lending activities through revolving loan funds must have obtained a lender license or otherwise qualify for an exemption from Chapter 73 in order to continue the practice of making residential mortgage loans in Vermont.

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