The Mortgage-State Mortgage Committee (MMC), representing 43 State Regulators, takes action against a lender for NMLS Test Conduct and CE Prohibited Practices.
New Day Financial LLC was accused of having company staff in the compliance department take NMLS CE for 20 licensees (including C-Level Executives) and communicating/storing NMLS test information for the purpose of improving test prep tools (and pass rates).
The COO was removed, a $5.2M penalty assessed, an independent auditor required to look at training/education and review corporate governance for other possible changes.
This may be the first action we've seen but its no small action combining the efforts of the MMC representing 43 states and resulting in over $5M in penalties.
If you are in the industry, you get weary of articles that are all about hype and judgment. Why don’t we agree not to go there and instead talk openly about learning from what happened.
Should we have known about these rules?
Yes we should have. It’s important to know that all of the rules that apply to mortgage lending are important. They must be followed. If you see a culture that accepts these types of things or condones it, be a part of the change that’s needed. I am sure the company had people that understood that these types of things weren’t acceptable. They either didn’t feel empowered to act or didn’t want to speak up. Be the solution. Speak up and help others understand the importance. If a C-level officer’s job was affected then everyone in the organization from top to bottom should care and speak up.
What specific lessons are here?
Every rule matters. There isn’t a rule that someone doesn’t care about. Also, remember that when you do business by the rules, you are protected. Others can’t break them and gain any advantage. There may be industries that are “all about sales and not about the details” but this isn’t one of them. If you do NMLS training in-house, you are going to be held to a high standard. Make sure you have your “game plan” fully in place and regularly tested or outsource it. It’s really that simple. Some companies take the approach of keeping it in-house and others say they “focus on what they are best at” and they outsource the rest (including the NMLS training and education). There’s no “right answer” but doing it in-house means being fully prepared for all the responsibilities.
Beyond that, the company responded by implementing some very good practices. There’s no recipe for the rest of us, but here’s what you can “take away”:
Did these steps close out the issues in the regulators minds?
They didn’t. In this case, the MMC required the lender to agree to retain a state approved independent auditor.
What can we learn from this?
We should know that:
The full ROC form is here:
I am sure there will be more for all of us to learn, but let’s agree to look and learn and stay away from the judging and finger pointing. We are all in a great industry and we all have a lot to gain by sharing information related to compliance.
CSBS Press Release:
Scott Weghorst is President of Diehl and Associates, a National NMLS, Compliance and FHA/VA/USDA Mortgage Skills Training Firm serving over 50,000. 11478 Lantern Road, Fishers, Indiana 46038 317-272-7600 X105 firstname.lastname@example.org
Brief Bio for Scott Weghorst:
Training in all delivery modalities for mortgage industry topics like TRID, LO Comp, CFPB preparedness, and all aspects of the loan origination process.
Consultant to lenders on training solutions, ranging from standardized options to completely customized and private label applications, along with tracking for licensed and non-licensed content.
Past President and Board Member, Indiana Mortgage Bankers Association
Mortgage banking experience includes growing an Indiana-based lender to Top 25