Case Study
Read the
following case study and then answer the following multiple-choice questions in
the Comments Section below.
Burt has been a licensed MLO working for a brokerage
company called Park West Mortgage for about a year now. And, over that time,
Burt has been steadily locking down his own methods for closing loans. Some of
his strategies are solid and sound and some of them… well….
Let’s look at one of his latest transactions as an example.
A borrower named Nora comes to Burt for a mortgage loan.
She was referred to him by her real estate agent Angel—whom Burt has worked
with quite a few times.
Burt takes Nora’s application and information and a fee
(payable to the lender Freedom Bank) to ensure she gets the lowest possible interest
rate. While Nora doesn’t love the idea of paying for an interest rate she feels
she should be able to get based on her excellent credit history, alone, she
pays the fee, anyway.
With all of her information and the fee in-hand, Burt sends
Nora on her way. Before he submits her materials for underwriting, Burt checks
it over one more time.
Burt notices that Nora forgot to enter the amount of time
she had been employed as a copy editor. Burt is sure they talked about that,
but he remembers them joking about furniture around that part of the
application. Nevertheless, she did tell him that she had been with the
publishing company for seven years. So, Burt writes that down for Nora’s length
of employment.
And, with that, it looks to Burt like Nora’s application is
ready to submit.
Burt knows that, given the current loan volume, it’s going
to be a little tight time-wise submitting Nora’s application and getting the
appraisal done, etc., by the projected closing date. And he has scheduled a
remote camping trip this next week.
Since Burt will be on vacation at a remote location he will
be out of cell range and away from an internet connection. So just to make sure things move along
smoothly while he is gone, Burt asks his buddy and co-worker Dale to look after
Nora’s file. In exchange for his help, Burt will float Dale $200 out of the
loan commission – just for keeping Nora’s loan on track. Everybody wins!
During Burt’s vacation, Nora mistakenly sends the check
intended for the appraiser to Burt. But Dale does not notice the check because
he is dealing with a licensing issue of his own. Specifically, after fifteen
years as an MLO, for the first time, Dale’s license has not been renewed! In
scrambling to deal with reinstating his license, Dale almost completely forgets
to keep tabs on Nora’s loan. The only thing he does during that whole week is
to fax the appraisal to the lender – Freedom Bank.
So, after sitting on Burt’s desk for five days, Burt comes
back, finds the check in a stack of mail, and forwards it on to the appraiser,
along with an explanation of the situation.
A few weeks later, Nora’s loan is approved and they go on
to close on time.
And, even though he nearly dropped the ball with the
appraisal check, Burt decides to honor his promise to give Dale the $200 bonus
for helping out with Nora’s file. After all, Dale really needs the cash right
now.
Meanwhile, Burt has come upon a good problem, for once has
amassed quite a roster of clients. He has gotten so many, in fact, that he no
longer has room for their files (either electronic or hard copy) at his
origination office. So, Burt decides to do some spring cleaning – deleting or
throwing out any files that are over three years old (the cutoff for file
retention in New Jersey), deleting or discarding any files for loans that did
not close for whatever reason, putting electronic files onto a flash drive
until he can get another external hard drive, and boxing up hard copies and
moving them to a storage unit he has rented. He takes the flash drive home.
Burt’s policy of keeping only open or very recent files in
the office becomes somewhat inconvenient when the Commissioner comes to inspect
Park West Mortgage’s records.
As it turns out, Burt’s co-worker Dale licensing renewal
problem has turned into a company problem. Dale’s renewal was denied because he
was accused of railroading clients into using a particular insurance agent
named Camille for all of their mortgage insurance needs – often funneling a
loan to Camille without the applicant’s knowledge.
As a result of this complaint, the Commissioner has decided
to look closer at the entirety of Park West Mortgage business dealings. So, the
Commissioner demands that all of Park West’s loan records be available for
investigation immediately.
Burt feels as though the entire company is being harassed
for one indiscretion. After all, he has worked with Camille for years and
thinks she is dependable, efficient, and honest. While he doesn’t do the hard
sell, Burt often strongly suggests Camille as an option for his clients.
Nevertheless, he retrieves the hard copy files from the
storage facility and the flash drive from his home and brings them back to the
office to prepare for the Commissioner’s examination.
Under the cloud of this investigation, Darleen, one of the
owners of Park West Mortgage, challenges all of the loan originators in the
office to come up with some ads to promote new loan products and to sell
themselves. She feels like the company could use some good advertising to boost
business.
Burt teams up with his co-worker Jim to brainstorm some
concepts for ads. Since they are starting this project in late September, their
ad revolves around Halloween. It has a banner across the top that says, “Don’t
be afraid of our sweet deals!” Okay, so it’s not the greatest advertisement
ever created, but Burt and Jim are proud of it.
With the big creative hurdle out of the way, Burt delegates
the job of filling in the standard information to Jim. The rest of the flyer is
pretty standard stuff: interest rate quote, repayment term of the loan in
years, APR, unique identifier, and the company address. Jim even adds
“Established in New Jersey in 1977” right under the Park West Mortgage logo as
a final touch – just to give potential clients confidence that the company has
longevity in the community.
Spurred on by his burst of ad-making creativity, Burt
decides to design some new business cards for himself. He uses the Park West
logo as a faded watermark across the front of the card, with his name and the
office address, phone number, and website address front and center.
Now, let’s ask some questions about Burt’s methods and his
decisions.
CASE STUDY QUESTIONS
1. Was
the fee Nora paid to get a low interest rate legal?
A. Possibly,
it depends on how Burt records the fee in the application materials.
B. No, it
was entirely illegal. Borrowers should not be required to pay advance fees to
secure a mortgage loan.
C. Yes,
it was legal, even though Nora felt a little weird about paying it based on her
excellent credit history.
2. What
do you think of the way Burt handled Nora’s employment length?
A. Burt
broke the law because he negligently allowed Nora to sign a document that had
blank spaces.
B. Burt
broke the law because he wrote that down from memory, when he is required to
get complete verification before recording such information.
C. Burt
did not break the law because he and Nora had talked about this and, as her
originator, the law gives him explicit permission to fill in such information
when the applicant forgets to do so.
D. Burt
did not break the law because the document Nora signed was not a financial
disclosure document.
3. Was
the kickback Burt offered his co-worker Dale to watch over Nora’s loan while he was on vacation legal?
A. The
payment was illegal because Burt paid Dale from the loan commission after
Dale’s license expired.
B. The
payment was legal because it was a little incentive among friends.
C. The
payment was illegal because Dale forgot the appraiser’s check on Burt’s desk
for nearly a week. In effect, Dale was being paid a fee for a service that he
did not perform.
4. Once
he found Arnold the appraiser’s check sitting on his desk, did Burt handle the situation correctly and lawfully?
A. Yes.
While the fee did sit with him for a while before getting to its intended
payee, Burt did what was right and lawful by sending it along to Arnold with an
explanation.
B. No.
The law says explicitly that a licensee must account for all moneys that he
receives in connection with a mortgage loan, and Burt (and Dale) failed to do
that for nearly a week!
C. Yes
and no. While Burt did what he could to remedy the situation, the very fact
that the check sat on his desk for five days means that the situation falls in
a gray area legally.
5. Burt’s
decision to throw out some older and un-closed files and put records on a flas drive (which he takes home) and move hard copies to a storage unit is:
A. Completely
legal and a smart idea. It makes more storage for future clients and keeps
records safe.
B. Entirely
illegal and pretty dumb. The records should be on-hand at all times in case a
client has a problem or the Commissioner wants to examine them.
C. Illegal
as it stands, but could have been legal if Burt had submitted a written request
to the Commissioner prior to moving the records and kept the flash drive either
at his office or in the storage unit with the hard copy records.
D. Legal
as it stands, as long as Burt maintains the new storage location for a minimum
of three years.
6. What
crucial piece of required information is missing from both the advertisement
flyer and Burt’s business card?
A. Burt’s
cell phone number
B. A
statement that Park West is a New Jersey licensee
C. Burt’s
unique identifier
D. Both B
and C
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1A 2B 3A 4A 5D 6D
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