<< Regulators, continued from page 20
to do is monitor exam issues and to
keep examiners fully informed.
Common violations mortgage brokers can commit include:
For instance, brokers sometimes use
lines Nos. 801 and 802 of the GFE to
display fees payable to the mortgage
broker, although regulations require
that such fees be stated in lines Nos.
808 through 811. As long as the fees
were stated accurately, this type of
violation results in no actual harm to
Nonetheless, regulators may demand restitution to consumers, as well
as fines and the costs of investigation
if these violations occurred.
On the other hand, if these are the
only violations and if the examinee
gets a report of examination before
enforcement action is taken, good
communication with the enforcement
agency can go a long way toward preventing a statement of charges. Often, such violations are considered
technical in nature and often result
from oversight or inadvertence. Recognizing the errors and providing
assurances that the company will
be brought into immediate compliance can help resolve the concerns
These types of violations aren’t
considered technical in nature and
often will result in enforcement action
or, at the least, considerable oversight
and regulator involvement moving
forward. If an enforcement action is
liability despite a lack of knowledge
or involvement in individual originators’ misconduct. Moreover, such
violations will more likely lead to
enforcement actions and bans from
future industry participation.
Often, examiners will raise these issues during the examination process,
at which point there will be immediate investigation into the individual
and whether fraud occurred.
“Knowing what to expect and
how to respond when state regulators approach
your business is the key to survival
in today’s regulatory environment.”
without formal proceedings and steep
More-serious violations include:
filed, it almost certainly will include
a demand for restitution to individual
consumers as well as fines.
There also is a category of violations that state regulators consider the
most serious. These violations involve
fraud or other misconduct on the part
of loan originators and include:
Occupancy;falsification; • and
These types of violations are particularly problematic for principals
and designated brokers in larger
companies. They may face individual
Punishment and settlement
If examiners find violations, whether
substantive or technical, they have
a wide range of discretion on how
to proceed. Unfortunately, because
examiners and state agencies differ,
there’s no way to predict the next
Post-audit responses typically
range from providing an opportunity to cure deficiencies to initiating
In the event that a regulator doesn’t
follow up after an examination, don’t
assume everything is fine. The onus
is on brokers to ensure everything
is resolved to the satisfaction of the
Examination findings may lead to
enforcement actions. If an enforcement action is based on a field examination, an examination report
more than likely has been produced.
Due process should, but doesn’t always, require the production of the
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