Ask the QC XpertsQC-MACquality control, regulatory compliance, RESPA violations, reverse mortgages
Dear QC-MAC:
I am a small mortgage banker based in Georgia and I am new to the
industry. I plan to open a small real estate company to assist me
with point-of-sale contact. Can I function as both the loan officer
and real estate agent in the state of Georgia?
--Murray W., Atlanta
Dear Murray:
There are really two answers to your question. If you are speaking
of being the real estate sales agent and the loan officer on a
conventional loan, the Georgia Department of Banking and Finance
state examiners would not have a problem with you working both
sides of the transaction as long as you have fully disclosed to the
consumer that you are in fact handling both sides of the
transaction and are being compensated on both sides as well. You
must also give the consumer an option to agree or not to agree.
However, if your transaction happens to be a HUD/FHA transaction,
it doesn't matter where in the United States you are located
because a loan officer is prohibited from working both sides of the
transaction, even if the consumer is informed. HUD/FHA regulations
Handbook 4060.1 REV-1, CHG-1, Chapter 2, 2-14 states, "All
employees of the mortgagee, except receptionists, whether full time
or part time, must be employed exclusively by the mortgagee at all
times and conduct only the business affairs of the mortgagee during
normal business hours. Branch managers must be located at the
branch office they manage and cannot operate or be the manager of
more than one branch office at the same time."
Dear QC-MAC:
I am very confused about a practice I see taking place. A large,
nationwide wholesale lender is sending flyers to brokers, urging
them to do business with them. Their flyers appear to be a blatant
violation of RESPA concerning kickbacks. These guys are offering
large amounts of money, trips around the world and other gifts
enticing brokers to bring their loans to them. How in the world are
these guys getting away with this, and why aren't their competitors
concerned about their practices? Isn't this a blatant violation of
RESPA?
--Paul H., Boise, Idaho
Dear Paul:
You are not the first person who has sent us this flyer. As a
matter of fact, this is about the 10th one we have received
concerning this same wholesale lender. We never thought about
running this question in our article until we received so many,
which leads us to believe there must be many of you out there who
are misinformed about the rules of RESPA.
The reason this wholesaler can offer gifts, trips and referral
fees to brokers for bringing them loans is because this wholesaler
is selling multifamily (five units and above), commercial and
industrial loans. RESPA governs residential loans only--that is,
loans secured with mortgages placed on one- to four-family
residential property. These loans include most home purchase loans,
assumptions, refinances, property improvement loans and equity
lines of credit. The HUD office of RESPA and Interstate Land Sales
is responsible for enforcing RESPA and, as you can see,
multifamily, commercial and industrial loans are exempt. This is
why the lender's competitors do not have a problem with their
advertising.
Dear QC-MAC:
Due to the stiff competition of getting business from the real
estate community, I have decided to transition into the reverse
mortgage business. I was told by a friend of mine who has already
made the transition that life is wonderful over there and the grass
is much greener. In addition, because there is virtually no
qualifying and underwriting involved in the origination of these
loans, there is also no need for quality control and compliance.
What is your opinion about the reverse mortgage business?
--Allen B., Phoenix
Dear Allen:
I am not sure how long your friend has been in the reverse mortgage
business, but I am afraid that he may have misled you on a few
things. Regarding the "grass is much greener" statement, we have
always been told that if the grass is greener on the other side,
most likely it is harder to cut. With that being said, let's talk
about qualifying, underwriting and quality control of reverse
mortgages. By all means, when you are originating reverse
mortgages, there are truly underwriting, qualifying and quality
control requirements. Approximately 90 percent of all reverse
mortgages made today are HUD/FHA home equity conversion mortgages
(HECM). These are HUD/FHA loans and, in our opinion, the qualifying
and underwriting requirements of a reverse mortgage are much more
difficult than those of a forward mortgage. Here are just a few of
the requirements: age qualifications, loan limits and calculation
of the principal limit, maximum claim amount, calculation of the
payment plans, tenure, term, line of credit and modified tenure. It
is also mandatory that the borrower(s) receive counseling by an
approved HUD counseling agency. For qualification and underwriting
guidelines for HECM loans, we would suggest that you get a copy of
HUD Handbook 4235.1 REV-1; and for the quality control requirements
of an HECM loan as you mentioned in your question, most brokers do
not think that there is a need or requirement to conduct quality
control on an HECM loan. Review HUD Handbook 4060.1 REV-1, Change-1
Chapter 6, 6-6, C-1, C, which reads, "The sample must include all
FHA programs in which the mortgagee participates including, but not
limited to, 203(b), 203(k), 234 and home equity conversion
mortgages." You will also find that the quality control
requirements for reverse mortgages are the same as they are for
forward mortgages.
Nothing in this article constitutes legal advice or
represents how HUD, RESPA, Fannie Mae, Freddie Mac or any state or
federal regulatory body may actually answer your questions. The
answers to these questions are based on QC-MAC's professional
experience as one of the country's leading quality control
companies. If you have a quality control and/or compliance
question, contact QC-MAC toll free at (888) HUD-AUDIT or visit www.qcmac.com.
