Anthony Johnson, partner and recently-appointed CEO at Mortgage Educators & Compliance, says that he is “constantly amazed” at the lengths LOs will go to in order to cheat on their education. “It’s in the law that they need eight hours of education, and people will try to send others in their place to complete that,” he said.
Lockard said that when it comes to being compliant, sharing is caring and no information is too much to provide your state NMLS. Lockard says that the concern she usually gets from clients is they feel they’re raising a red flag on themselves. But she tells them that it’s better to disclose than to be sorry. “I had one person who called [us] because they had filed for bankruptcy and kept their license as an LO and claimed that they didn’t know to file [bankruptcy] with the state. And when it came time to renew their license, the state said no. I think the biggest thing that we’re going to see coming up is bankruptcies, foreclosures, and tax liens start to affect people’s licenses in that way. You should always keep the state up to date on any financial changes.”
Reputation Precedes
Getting slapped with a formal discriminatory action will stay on an NMLS profile forever, Lockard says. “Your customers can see this information, whether you have an enforcement action or a cease and desist … it’s all on the NMLS Consumer Access page,” she said. “And even if the state pulls a license, [that person will] always have to disclose if they’ve ever had a professional license revoked if they apply for another professional license.”
Lockard says she’s also seen mortgage loan officers get their licenses pulled for issues that don’t have to do with the NMLS or RESPA. “I know an MLO who got their license taken for having two DUIs,” she said. “I don’t think an enforcement action is a scarlet letter forever. You can recover, but like any public mistake, you’re always going to have to explain it.”
Johnson says that having a regulatory action on your record is something that LOs will have to explain for the rest of their careers. “It’s going to stay with you. There’s not a time frame or process after [an action[ has been implemented where it will be removed,” Johnson said. “You have to face it … And it doesn’t look good if you have multiple marks on your license.”
Considering others’ reputations also has a role, especially when entering into partnerships or co-advertising opportunities, Lockard advised. “If you’re looking into partnerships, do your due diligence and investigate their reputation and how they follow the rules,” she said. “Advertising is another area that people get into a lot of trouble with. If an LO is co-advertising with someone who is a Realtor and there isn’t a firm delineation between their two separate roles, they can get slapped for that.”
Marketing And Money Mishaps
Even though most LOs are eager to advertise their services, marketing and creating relationships are two areas where regulatory mistakes can occur, says Ari Karen, a litigation attorney. He has seen LOs attempt to bend rules to give their referral partners kickbacks. “A lot of people try to ‘get cute’ by skating around RESPA kickback rules,” Karen, a partner and head of litigation for labor and employment law firm Mitchell Sandler, based in Washington, D.C., explained. “It might work with your employer but it isn’t going to fly with the CFPB. There’s also the idea of if other people do it, they can do it, too. Candidly, that will work for a lot of people … if everyone does it, everyone honestly won’t get caught. But what if you’re the ones who do?”
In August, the CFPB fined Freedom Mortgage $1.75 Million for illegal kickbacks. The CFPB said Freedom provided real estate agents and brokers with numerous incentives — including cash payments, paid subscription services, and catered parties — with the understanding they would refer prospective homebuyers to Freedom for mortgage loans.
Social media is another area where LOs can fudge up the boundaries of their contracts. Karen recommends separating business from pleasure, meaning that LOs should consider keeping their business content out of their personal content, and vice versa. “When you’re inviting business people intentionally into your personal sites, anything you say can affect you from a regulatory or professional standpoint and affect your relationship with your realtors or customers,” Karen explained. “You may alienate a whole group of borrowers.”