The Minnesota Department of Commerce recently took a unique step and provided the mortgage origination industry with information on some of the more common statutory violations being uncovered. For those in the industry who did not see the publication, here are the five topics published by the Department:
1. Agency versus Non-Agency: Failure to properly disclose Agency relationships, the Non-Agency relationships of lenders, and Advance Fee Agreements.
2. Interest Rate Lock and Discount Point Agreements: Failure to properly disclose the five requirements of the agreement, complete the agreement in its entirety, and include a disclaimer that the statement of terms is not an offer.
3. Record Retention: Failure to maintain for 60 months the business records, including advertisements, regarding residential mortgage loans applied for, originated, or serviced in the course of its business. This includes loan estimates, closing disclosures and all other loan origination documentation.
4. Net Tangible Benefit: Failure to demonstrate the tangible net benefit to a consumer for refinance loans and engaging in churning.
5. Trust Funds and Advance Fees: Failure to disclose proper advance fee contracts, deposit advance fees or escrows into a trust account.
These points are all quite easily dealt with and specifically are proven (or dis-proven) by documentation.
My experience of formerly working at the Department can help you avoid the horrors of a regulatory sanction. Avoid the problem as best you can in advance and let's schedule a time to review your operations and compliance.
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