Hey, good morning. Welcome to Mortgage Mayhem: Loan Applicant Protections. If you like and enjoy money, this is the right CLE for you hopefully. My name is Brian Brunkow. I'm a Seattle area California and Washington attorney. I also have a Washington real estate brokers license. So I've been around the industry in mortgage compliance for about ten years. I've worked as an admin assistant, hauling boxes around the office as a paralegal. I've worked as an advertising specialist. I've worked as in-house counsel, outside counsel, and also as executive level chief compliance officer. So, you know, I've seen the industry from a lot of different angles and you kind of kind of being able to see some of the shenanigans that go on inside the mortgage lender. So hopefully I'll be able to provide you some kind of behind the scenes access to what's happening inside mortgage lenders so you can help protect your client. I've also seen the industry, you know, pre-crash 2008 and I've seen the industry post crash with the Cfpb new agency. Lots of talk about a new sheriff in town and all that kind of good stuff. But it's really we kind of, you know, human nature doesn't change. We still have some of the bad acts going on inside the industry, and the Cfpb shows up. They might find the company a couple of million dollars, but they don't really kick out the bad actors unless they've done something really bad. So it's just it's really important coming from my side of the table, working in mortgage compliance, trying to protect the company, protect the staff, protect consumers. It's it's really important if you're an attorney and you have some clients that are, you know, going through the mortgage process that you kind of help them out as well to protect them before they get into this, because it's very complex. So who is this for today? This is for not just real estate attorneys, not just in house counsel at mortgage lenders, but if you are a divorce attorney, estate planning, immigration, business law, you're going to have clients that at some point are going to buy a house. And it's going to be a confusing process for them. And you can hopefully provide some objective advice. I mean, if you go down to Supercuts, they tell you you need a haircut. You go down to Jiffy Lube, it's the right, right time to get that oil changed and get the tires changed. Talk to a real estate agent. And today is the best day ever to either buy or sell a property. So you, as the attorney, can provide a good, good sense of of of what they should be looking for to protect themselves. Why are we doing this today? It's such a complex process to get a mortgage. It's complex, it's unfamiliar, it's expensive, it's rare. Maybe they're getting purchased 3 to 5 times in a life. You've got very tight deadlines. And what that does is the consumer says, forget it. It's this is too complex. There's no way I can understand everything. I'm just going to go with this loan officer and let this person take care of the rest. I'll trust them. And that is a bad life plan. You. So what we're going to try to do today is is level the field between your client, the consumer and the loan officer so they can protect themselves. So our hypothetical for today, just just kind of think it this way. If you're a divorce attorney or an estate planning, your client is a Billy buyer. Billy could be he she they just Billy buyer. Billy's got three kids. They're very busy with extracurricular activities. Billy's going through a divorce. Billy's also moving to a new city to start a new job and has an elderly parent with dementia that's going to move in with Billy. So they have a lot on their plate, bandwidth maxed out. And this is what happens. They've got all these stressors going on. What does Billy want to do? This is the perfect time to buy a house. And that's why they just sort of check out their maxed out. They go through the process. They're not thinking through what they're doing, who they're working with, and they get themselves in trouble. And that's not a hypothetical. You see it all the time. They're just they try to buy houses at the wrong time and it just goes badly for them. So three keys for today that I want you to to hopefully you can take away from here if I do my job. First thing, knowledge equals leverage. You want your consumer to be an informed consumer. The informed consumer is going to get better service and better quality control. Kind of think of it this way. If you are a family law attorney and you're going through your own divorce, you hire a divorce attorney from a different firm, chances are you're going to get better communication. Documents are going to be a little bit tighter. Qc is going to be just fantastic because you know what you're doing and you can hold them accountable and wreck their day if they don't do things the right way. So we want to level the playing field between the consumer and the loan officer. Second table selection matters. This is probably one of the most important decisions that your that your client's going to make who they work with. Tim Ferriss podcast. He talks about how table selection is really going to be the most important thing you do as far as your career and finances. So we want your client to do due diligence on who they're working with before they go through this process. And third, you know, this is kind of the the cartoon example I always use, but but it stands out for consumers. You know, if you're if your client has time to pick out the toppings on a delicious Subway sandwich, then they have time to do the due diligence on a mortgage. It's the most expensive thing they're going to buy in their life. They're only going to do it 3 to 5 times. You only get so many shots of this. So let's put a little bit of effort on selecting the loan officer, knowing what the protections are and knowing how to file a good, good faith complaint. So again, think about that Subway sandwich. It's a cartoon example, but you want to use that visual with your client, say, man, get get on board here. This is a very expensive process. Put some time and effort into it. So this is what we're going to talk about today. There's our delicious subway sandwich as our visual for for your clients. We got to talk about how to research and select the loan officer and the lender. That's the table selection that, you know, Tim Ferriss always talks about. Then we're going to talk about the key consumer protections. Now, there's a ridiculous number of state and federal protections out there. There's no way that your client is going to have the bandwidth to know everything that goes on in the industry. So we're going to break it down and look at the key protections that from the compliance side, you know, working in house with these lenders. I wish the consumers knew about this stuff before they showed up and worked with a loan officer and things go sideways. So we'll talk about those. Then we'll talk about how to to submit good faith complaints. You don't want your client to get in trouble. You know, you saw this back in the pandemic, but people were drunk dialing and sending in some pretty nasty emails when they're stressed out, threats, defamation, embellished claims, and that can get your client in trouble if they're doing that kind of stuff, because you submit a complaint to the state attorney general's office or the state agency, a federal agency, that complaint is done under penalty of perjury, and that has consequences. But again, the consumer, they're drunk dialing, They're not thinking about it, so they get themselves in trouble. So then we'll wrap up with some best practices for you to take with you. But really, the three key things that I want you to take away as far as protecting your client is, is, is, you know, doing the due diligence, selecting the right loan officer, looking for those red flags, the key consumer protections we'll talk about and the complaints. And if you don't believe me, believe Andy Fastow, the former CFO at Enron. You know, if you can't trust me, you can trust Enron. And Andrew said culture starts at the top. Employees will see through empty rhetoric and will follow the nature of top management decision making. And that's a fact. That is not an opinion. I can I can let you know, after ten years in the industry, you know, self-interest, self-preservation that have been around for a long time, they are undefeated. People are going to look out for themselves. And there are some bad acts inside these companies and it usually starts at the top and they just say, well, looks like, you know, this is our mission statement. We've got it on the coffee mug. We've got it on the placard outside the office. But this is really how things roll and things go downhill from there, unfortunately. So here's where we're at. This is a very tough time right now with interest rates. I think you've all all kind of watched what's happening with those. So we got to talk about table selection and bad acts. This is the kind of stuff that happens. So let's say we have a home purchase price of 410 K. A standard 20% down 30 year fixed rate mortgage back in August of 2021 at 2.86%. That would cost your client 1.3 K per month in principal on interest. Fast forward to August 20th, 23. Rates go up to 7.23%. That means 2.2 K for that same home at 410 K. So. So your client's got to come up with 900 bucks more a month to make this mortgage happen. This is the kind of stuff when you have this kind of market shift, it leads to a lot of bad decisions, both by the consumers and by the loan officers. Your consumer wants to get into the house. The loan officer wants a commission. Bad stuff happens. So we got to be really careful about this because we'll talk about how, you know, these these loan files are looked at again and again and again by lenders in the secondary market, by state and federal agencies, litigation and whistleblower complaints. This stuff can come back on your client five, seven years down the road. So you got to be really careful with this stuff. But that's what we're looking at here. That's the same same house, same price. And in two years that that mortgage goes up $900 simply because the rates are at at a higher, higher amount. This is one thing I always talk about in training with staff is what gets rationalized, gets normalized. And what that means is, you know, there's a slippery slope. You start out with the best intentions again with that that sweet, nice branded mission statement on the coffee mug, but kind of we lose track and we start making really bad decisions and that starts to look normal after a while. Space shuttle Challenger engineer said don't take off. It's too cold. We're down here in Florida for a reason. It's it's warm, but it was really cold. Morning engineer said don't do it It's going to bad stuff is going to happen. Nasa said what we're going to be fine. We've done it before. When it's this cold, things will go okay. Things did not go okay for space shuttle Challenger, and they knew it ahead of time. Bernie Madoff, all these consumers with their investments, with the Madoff fund, they're getting, you know, a pretty consistent 12% per month for like a decade. If you look at your statements and it's 12% per month per year for about ten years, that should probably be a red flag for anybody. But everyone kind of put their head in the sand because things were looking good. So what gets rationalized? It gets normalized. Volkswagen, you might remember, they they had a little trouble with their with their emissions and a Volkswagen built a cheat device to get their green cars through emissions and everything's looking great but they got caught with a cheat device. So what did Volkswagen do? Volkswagen, went back to the lab and built a better cheat device. So they got caught twice trying to put together a cheat device. And that is when you got to look at that and say, yeah, what gets rationalized gets normalized. You show up on day one. You probably don't do that, but you do enough bad behavior. You don't get caught on it. That becomes the new norm. And then Theranos got to love that. Basically a toaster oven held together with duct tape and big dreams and they sold that as a blood device. I think their their value at one point was $9 billion. And they had a product that was just garbage, But people bought in. They looked around and said, now this is this is great. I don't want any any more information. This is where I want to work. This is where I want to invest and bad stuff happens. So this is what we got to keep in mind. With mortgages most expensive purchase your client's going to make. And it's complex. And there are some good people in the industry and there are some bad people in the industry. We don't we don't get a list in advance of who's who. So you got to do your homework and make sure you're working with the right person. So let's kick this off with how to how to research and select your loan officer table selection. I love this quote from The Big Short. People hate to think about the bad things happening, so they always underestimate their likelihood. We put our head in the sand and hope for the best. We get that 12% rate from Bernie Madoff. And yeah, things are good, things are things are great, but we got to make sure that we are asking questions on the front end because we don't want your client getting burned with a loan officer or with a loan that they can't pay three years down the road. And these are some examples from 2023. We had the crash back in 2008 and the Cfpb said things are changed. We got a new new sheriff in town, but we're at 2023 and we're seeing the same bad behavior. Cfp shows up, finds the company a couple of million bucks. Nobody gets kicked out of the industry and off we go. And that's why we keep having the same kind of stuff come up and that's why we got to pay attention on the consumer side to protect them from these bad this kind of bad behavior. So the hype 2023, not 20 years ago this year, CFP requires lender one main to pay 20 million bucks for deceptive sales practices. So one main pressure that's employees to load up its loans with extra charges through false promises of easy cancellation and full refunds. And the director said, we are forcing one man, one one main to refund borrowers it cheated. When the director says you cheated, that's that's not great for an employee recruiting at the at the universities so they're ordering one made to pay 20 million bucks for cheating and to clean up its business practices. Again, they show up, give them a fine. The staff goes on their way and probably going to happen again down the road by another lender. Second one. See if he sues snap finance for illegally luring Americans into expensive financing and bullying borrowers with false threats. That's never a good day when the lender is bullying borrowers with false threats. So SNAP advertised a 100 day cash payoff. That sounds pretty explainable. And that led consumers to believe that they had entered into a 100 day financing agreement. The reasonable consumer test. Yeah, that makes sense. In fact, consumers were entered into 12 months of payments, which involved payments that amounted to more than double the cash price of the financed purchase, purchase or service. And again, these are allegations, no admission or finding of fact. They say it goes out, do an investigation, they settle and everybody goes on their way, which is really sad. Number three. Cfp penalizes Freedom, Mortgage and Realty Connect for illegal kickbacks. So in the industry, you can you can send referrals back and forth all day long between real estate companies and mortgage lenders, which you cannot do is pay any value for those referrals. That would be a kickback because we want these industry professionals sending referrals based on merit, experience and skill. We don't want them sending referrals back and forth based on getting paid because that just means you've got a garbage real estate agent that's the loan officer is referring their client to simply because they're getting a kickback, not because that agent has a lot of skill. So freedom. The mortgage company hosted parties for the real estate agents, including events held exclusively for Realty Connect, real estate agents. Freedom paid for the food, the booze and the entertainment, which was their freedom, would also sometimes give free tickets to sporting events and charity galas because it's a feel good service. And this is where the agents brokers would otherwise have to pay their own way. So they're paying kickbacks for those referrals, not because they're such a high quality operation. Next one, Bank of America, you might have might have heard of this company. So the CFB takes action against Bank of America for illegally charging junk fees. Not a good thing. Withholding credit card rewards. And hey, what about this opening opening fake accounts? That's not good in 2023. So from at least 2012. In order to reach now disbanded sales based incentive goals. Bank of America had employees illegally apply for. And enroll consumers and credit card accounts without the consumers knowledge or authorization. That is a fail in those cases. B of A illegally used or obtained consumers credit reports without their permission to complete the applications. That is a double double fail. So because of Bofa's actions, consumers were charged unjustified fees, suffered negative effects to their credit, and had to spend time and money correcting those errors. Again, allegations only. No admission or finding of violation because agency shows up. They paid a bunch of money and they closed it up and there's no finding of liability. So this is my favorite one that I've seen probably in the last 15 years. This is this comes out of New Day Financial. So. The loan officer similar, similar to attorneys. We have to take continuing legal education requirements. Same thing for licensed loan officers. They have continuing education requirements of eight hours per year. That does not sound very onerous, onerous, eight hours per year. You can find time for that. So the allegations were the compliance staff, the compliance staff, who's there to protect the company. And the consumers were taking the education courses for the licensed loan officers and getting paid, and it gets better. The compliance staff, part of the legal department was taking the education requirements for some of the C-suite execs. So this is why we got to talk to or talk to the consumers and say, you have to vet these loan officers, you have to vet the branch manager, you have to vet the lender because this is the kind of crap that goes on. How do you protect yourself there? You've got the licensed loan officers, you've got the compliance staff and the C-suite alleging only involved in bad acts for continuing education. They cannot find eight hours over the course of a year to knock these credits out. That is that's insane. But again, again, again, again, allegations only, no admission, no finding of violation, just a big fine and everybody goes on their way. So this is what I want consumers to know about. And again, you got time to pick out the toppings on your subway sandwich. You got time to look this stuff up. So at the Consumer Access website and I've got all these links on my resource page for you guys, you can go to the Nationwide multistate licensing system, the consumer access, and that's going to give you the rundown on the licensing history and the bad acts and ten years of past employment for all the actors inside of the lending industry. And you got to go to the consumer access site. You punch in the the MLS number similar to a bar number and it brings up your loan officer and you want to look over their employment history. You want to look over any kind of bad acts involved. And that's not just the loan officer in the company, but you want to do that for the branch manager to let's say your loan officer has a very clean record company looks pretty clean. But what do you know? You look up the branch manager's information and he or she has a portfolio of regulatory investigations for bad behavior. And they're just kind of there in the industry because they're getting getting stuff done. They they close loans and it's, you know, you can close a loan. You can close a loan if you want to close a loan in the industry. But if your loan officer is clean, the company is clean. The branch manager has 17 investigations for bad behavior. That's kind of a red flag that you want to take a look at. So make sure that you do that and it's going to take them ten, 15 minutes. You just check it out, see what it says and see if there's any red flags to have a conversation about with the loan officer before you sign that application. So you also want to check other licenses if the loan officer has, you know, a real estate license or a law license, their CPA, their personal trainer, whatever it is, look at those other licenses as well to see if there's any kind of red flags. Because, again, the reason you do this, you're buying the house 3 to 5 times in your life, spend some time on the front end to know who you're working with to help protect yourself. So you want to take a look at that. You want to take a look at online reviews and look for trends. Most of the people that post these online reviews are probably day drinking. They're a little out of sorts, but you want to look for trends. Is there a trend line of of bad communication trend line of over promising trend line of lack of product knowledge? That's kind of what you're looking for with those online reviews. Take it with a grain of salt, but you do want to take a look at those before you go. Go ahead with the loan officer. The real estate agent partnered a lot of real estate agents and loan officers kind of work together because it helps them keep the process in sync and streamline. They kind of work well as a team, but you want to be very careful if your loan officer says, Hey, I want you to work with this real estate agent if you'd like to. They can't force you to do it, but they provide you that referral, Kind of keep that case of Freedom Mortgage in mind. Am I getting this referral because this person is good at their job or am I getting this referral because the loan officer is getting a kickback for it? You got to be really careful with that stuff. So you're looking at the real estate agents licensing history as well. And so I've got a checklist here of the things that I wish consumers would would look over before they sign on with the with the loan officer. In addition to what we just talked about, their set expectations with the loan officer and the team regarding communication. How often will they communicate in what method? I mean, these loans and home sales, they can get delayed, you know, sometimes three, 4 or 6 months just because of funky stuff going on with the property or the appraisal. So you got to set those communication standards up front because you get through the honeymoon period and. And everyone kind of loses steam. So set that expectation. Loan officers vacation schedule and backup plan. They don't they don't talk about that during the during the sales pitch. So you you sign on with the loan officer because they've got a sweet website. They've got a good pitch. And what do you know three days later they are on vacation. So you've got to make sure that you know what their vacation schedule is and what the backup plan is. Is a loan officer working full or part time or part time. Okay. But but why loan officers years of licensed activity versus actual lending experience? If your loan officer has been licensed for ten years but has only been actively working as an Loa for two years, they need to be transparent about that. If they tell you that they have ten years of experience and they've only been working as an for a couple of years, that's going to be a red flag. How many states is yellow licensed in? Is it manageable if it's a brand new loan officer? They work part time. They're licensed in 47 states. How can they possibly manage that if they are brand new to the industry and only work in part time? What are the average and typical days to close if it's a purchase versus a refinance, a conventional versus a government, FHA, VA, a lot of times they kind of give you the here's our average close time, but they don't really, really break it down into, you know, the specific mortgage mortgage types. It can take a while to get a VA loan done versus just a standard conventional loan. So you just got to be very careful about what the promising non-arm's length referrals. This one's always you want to be cautious about this. If your loan officer refers you to the real estate agent who's their spouse, that's something to kind of be aware of. The reason that's a problem is that when it's your spouse, if a real estate agent and a loan officer are kind of working together on these deals, the professionalism and the firewalls between the two just kind of break down a little bit. And that's just something to be aware of. It's not not always a problem. Maybe it can be a benefit, but just kind of be aware of that and say, how does this how is this going to work for you in your favor as a as a consumer complaint process and response time? Get get that out in the front. Try to find out if you have an issue and you're concerned about it. How soon are they going to follow up with you and in what way? And then you want to find out if they've had any prior data breaches by the loan officer at the branch or by the lender? And how is it handled? And then always, always, always, I wish consumers would do this, get the contact information for the lenders compliance officer. You want to have that so you have an additional resource with the complicated questions that come up. And also what that does, it kind of puts your loan officer in check. It says the consumer saying, I know what to ask about. I know it's important in this industry. I know the leverage points inside your company. Give me the contact information for the compliance officer. So if I have a concern, I'm going to go talk to that person about the regulatory issues and you do that kind of stuff and that's going to put the on notice that you know what you're talking about. You're an informed consumer. You're going to get better quality control that way. So let's kind of summarize how to how to research and select a loan officer. Bad acts. What we're looking for here, is it a mistake or is it malfeasance? Is it something that's ancient history or is it something that's recent? And then is it a one off or is it a pattern? Same thing is when you're when you're, you know, hiring anybody. Is there any kind of malfeasance involved? Is it pretty, pretty, you know, is it last week or 15 years ago? And do we see this happening multiple times where they're just not learning their lesson? The next thing set the communication expectations, which we just talked about. It's on the checklist that you have in the resources. The loan officer is working for the applicant, right? Not the other way around. And what what happens here is that loan officers kind of think they don't get a lot of questions from the applicants just because it's so complex and the bandwidth that we talked about. But you want to inform that loan officer that you know what you're talking about and make sure that they know that they're working for you and you want to set those communication expectations and quality control expectations early. That way, you're going to have a little better experience, hopefully, and then again, signal that you are an informed consumer knowledge equals leverage. If you just show up and you just say, Hey, you take the ball loan officer, I don't really care. That can come back to bite you. So bad acts look for that malfeasance recent pattern, set the communication expectations and let them know that you are an informed consumer. All right. So let's jump into consumer protections again. There's there's 50,000 different state, local and federal regulations to keep in mind. Consumers just don't have the time for that. So we'll break it down to the three that I really want them to know. And again, this is coming from working in compliance and just say, man, I wish the consumers knew about this stuff. So consumer protection is first prize is a Cadillac. Second prize is a set of steak knives. Third prize is you're fired. Lending is a zero sum game. You either get the home or you don't. You either get the mortgage or you don't. You either get the commission or you don't. So this is kind of what they're looking at, both as a loan officer, a real estate agent and the consumer. So everyone's kind of, you know, really kind of narrowly focused on getting this done and they make bad decisions. And that's that's not what we want to do. So the three consumer protections that you've got to keep in mind to protect themselves. I have I have a full one hour class on YouTube. You can take that, take a look at that. But we're going to talk about that briefly again today, because this is really the most important regulation that we have in the lending industry. Lenders fear it because it's all over the place and it's very subjective. It's hard to defend against. And this is why we're going to talk about a little bit today and why your client needs to know about it. So we'll talk about that. We'll talk about data security and privacy and then also mortgage fraud. Right now, don't do not get involved with that. Again, we looked at that that sample before the rates go up. Monthly mortgage goes up and that can lead to a lot of bad decisions and that can come back on your client. So unfair. What is unfair? That would be the like a late mortgage statement being sent out resulting in a late fee. And your client says that's not really fair. I got the bill two days after it was due. How can you charge me a late fee? So it's not deceptive. It's not abusive. There's just a computer malfunction. The bill gets sent out late and a late fee gets charged. And that's not really fair to your client. So is there a substantial injury? Here's the test. You go through substantial injury, not reasonably avoidable and a balanced test between protecting the consumer and keeping the costs low and the competition high. So is there an injury? Yeah, you got you got a late fee avoidable. Can't can't avoid that. The lender is supposed to send out your bill on time. They didn't and a balanced test obviously there's no no advantage of having that take place. So it's not unfair. It's not not deceptive. It's not abusive. It's just computer malfunction late. Bill got sent out, got a late fee. It really wasn't fair to you. So next one, deceptive. This would be your classic bait and switch. This is the lender that says we close our loans in ten days. Well, they have ten different programs and they can only close two of those programs in ten days. And they bring in they say, well, yeah, yeah. Those those those two programs close in ten days. But the one you're looking at, we're going to get you in a different loan program. You're probably going to take about 35 to 40 days. It could be that or it could be the they have a program that says, hey, everyone's going to qualify for it, Don't worry about it. Easy qualification. And maybe 3% of the people that apply would actually qualify for that loan. So deceptive is the bait and switch. You have a misleading representation or omission. The consumer's understanding is reasonable and the information is material. So if it would kind of impact and change the consumer's mind, that would be material information. So we talked about unfair late bill, late fee deceptive is going to be, you know, the bait and switch where you have a misleading representation, the reasonable consumer test and then the material, the information is material to your consumer. So that would be deceptive and then abusive. This is think of this as deceptive on steroids. This is going to be where it's beyond a bait and switch, where the lender is targeting a demographic and using their their situation, their weakness against them. So kind of think of elderly with reverse mortgages. So this is going to be worse than deceptive because you're targeting somebody. And this, again, the the the factors here, the elements, it's too complex for the consumer. And that's why we want to break it down to just these examples of of the of what we have up there in red. So it's targeting demographics. It's a mouthful, but it's materially interfering with the consumer's understanding of the terms and conditions or takes advantage of the consumer's lack of understanding or the consumer's inability to protect interest or the consumer's reasonable reliance on the latter. So so an example here would be for abusive. This is beyond deceptive. It's now abusive where the lender has a reverse mortgage program and the loan officer explains it to somebody who's 85 years old. You work in estate planning, your client's 85 years old, trying to get a reverse mortgage. They're confused. The loan officer explains the reverse mortgage 17 times to your client. So the loan officer spends a ton of time explaining it to your client. Your client has no idea how the reverse mortgage works because it's a little bit complex and the loan officer says, Screw it, let's close it. So that's taking advantage of the consumer's lack of understanding and their inability to protect their interest. The loan officer knows the consumer doesn't have any clue what this reverse mortgage does, the rights and obligations, and they close it anyways that could possibly be abusive and targeting a demographic. So the industry fears UTEp. Utep applies almost all the time with any other any other violation. You know, again, we have the computer failure, Truth and Lending Act. Computers acting up spits out the wrong APR. That would be unfair to the consumer. Respa kickbacks. We saw that we want referrals based on merit, skill and ability. We do not want referrals going back and forth between lenders and real estate agents based on kickbacks. So that would be deceptive because you you sent me a referral to this person not because they're good, but because you're getting a kickback. And then you also shows up in fair lending when you're discriminated against people based on the protected class. That would obviously be unfair, overt discrimination. That's just hey, we we don't serve your kind disparate treatment is you're treating people differently based on a protected class. The white guy comes in bad credit. You give him a bunch of time and care about how to improve the credit. Black female comes in and they just say you don't qualify. See you later. Disparate impact. That would be a neutral policy that results in a discriminatory impact. So neutral policy is a lender says we're not doing any. First liens under $75,000. Neutral policy. It applies to everybody. But if you don't do liens first liens under 75 K and that becomes a trend in the industry that impacts low income people who may be minorities, and that would be a disparate impact. So disparate impact is difficult, but it's neutral policy with a discriminatory impact. So let's talk about data security. Those is the one you got to know about data security. We got to know about that, too. This is going to be so important right now, especially after Covid with everybody working remote, you know, the work from home and they got documents all over the place. How are they getting rid of those? They shredding them, taking it down the old shred bin at Staples. So for for identity theft, it can take up to six months and 200 hours of total time to get that cleared up. So that's not a block of time, but that's checking in with all your different credit cards and accounts and doing that six months, 200 hours just because the loan officer left a bunch of documents out on the table and so what we're concerned about here are non public information documents, tax documents that include your family's information, your kids bank statements, credit card statements, divorce documents, Social Security card number, driver's license, all that stuff. You want it secured, You leave that stuff out on the desk and you're at a you leave that stuff out on your desk at the office on a Friday. The cleaning crew comes in on Saturday. Everyone's got a phone, everyone's got a camera on their phone, and they can take pictures of all the documents that are sitting out on the desk. It's horrible when that happens. So non public information, again, it can be at the office, it can be at home, it can be at remote Starbucks at the airport. We're talking about paper documents, digital fax, email, text, social media. So on the laptop, it's on the tablet, it's on the cell phone. It's all over the place. And the loan officers, they change companies frequently. They're kind of mercenary. They're W-2 employees typically. But I think for the most part at this point, I don't think you can have an independent contractor. But they but they really just change employers like an independent contractor. They're really it's a commission based gig and they move around quite a bit. So the reason that's important, if you have a loan officer, he or she's been in the business for 15 years, they probably I hate to say this, they probably have an Excel spreadsheet with all their previous client's information and they just kind of carry that around with them from employer to employer, which they shouldn't, because that information belongs to the company, not to the loan officer, but they just have this Excel spreadsheet. It's not password protected, it's not encrypted, and they just take that from shop to shop to shop, and you want to put a stop to that. As a consumer, you want to be very clear. Again, this is part of our selection process of the low is you want to make sure, hey, low when you change companies, you damn well better leave all my information off your spreadsheet, Leave it at the company here, that company, that information doesn't belong to you. And I don't want it sitting out on an Excel spreadsheet when you're down at Starbucks and not secured. So the term you want to use to show you you're an informed consumer during that vetting process, the consumer wants to ask the lender, the loan officer, explain to me your clean Desk policy at the office at home, remote paper docs, digital documents, when you leave the company, explain all that to me. And that again, puts the loan officer in check and it becomes a material part of the transaction because you brought this up as as a big concern. So get that in writing. What is your Clean Desk policy? I expect you to follow that Again, it's just something as stupid as leaving a tax return out on the desk for the weekend. Cleaning crew comes in, takes a picture of it. It's got your family's information, your kid's information, your home address. It's a really bad deal. So you got to be very strict with the loan officers about this. And again, this is this is coming from compliance. This is the kind of stuff we we deal with all the time in the industry having. Are nonstop conversations about the Clean Desk policy. So be on top of it. And this stuff happens. Look at this, 2023 T-Mobile. 37 million consumers impacted. They probably have good security measures in place. But what do you do? Yum! Conglomerate, KFC, Taco Bell, Pizza Hut, 300 locations they had to close up temporarily. So that impacts a massive amount of consumers, impacts a massive amount of employees who lost probably income from that. And then others. We have ChatGPT. We're all using that now. Chick fil A, That won't stop me. I'm still going to go down there, get myself a delicious chicken sandwich, but I'll probably be burning cash. Mailchimp and then also Nortonlifelock, which is in the business of what protecting consumer information? Just the hackers will always be ahead of the game. They hack in the industry, makes changes and the hackers look for different ways in and if the hackers can't find a new way in, all they do is they can go to LinkedIn, find some of these 20 year olds with, you know, $200,000 worth of student loan debt. And they contact the I.t. People from these companies and they say, hey, if you show us a way in, we're going to give you 75,000 bucks and you'll be on your way. So there's always a way in for the hackers. It's a nonstop battle for everybody in the industry to protect the documents. Keep this in mind, too. It's not just the big shops. You're not immune. If you go to go to do business with a small shop, the Fortune 500 companies, they have a ton of data and that makes them a target. The mom and pop shop, they have a lot of gaps. They don't have a lot of data, but it's pretty easy to get into these mom and pop shops versus the Fortune 500. So nobody is immune. This is why for your if you're a divorce attorney, immigration attorney and your clients going to go out there and get a get a purchase, this is the stuff you got to talk to them about. Make sure that they're talking to their loan officer about the Clean Desk policy. You know, if a loan officer is working at the home, they got a ton of paper documents. Okay. How are they dealing with that? They put it in the garbage can. What are they doing it with when their kids have a party at their house? Got to make sure that stuff is secured and having this conversation showing up as the informed consumer, you know, what questions to ask, you know what terms to use clean desk policy that puts the loan officer on notice that you expect your documents to be taken seriously. Mortgage fraud. Don't do it. That's that's my legal advice for the day. So 18 USC 1001. This is called the false statement statute. This is one of the statutes they got Bernie Madoff and Martha Stewart on. You cannot provide false information on these financing and investment documents. So for the home loan application, you're going to have your consumer is going to put in declarations regarding the property itself, source of funding, financial history, All that information is going to be true. It's got to be accurate. It's got to be complete. And your consumer is required to update any changes or new information before closing. So, Billy, Billy Buyer, your client, Billy, has their hours reduced from 40 hours to 20 before closing. You got to notify the low. Billy is going to not get the bonus, the $80,000 bonus for the year. You got to notify the loan officer because that is going to impact the loan terms and conditions. So don't don't get cute about it. Don't think, oh, I forgot to tell you that I'm not going to get my bonus. I just forgot about it. That's not going to be an excuse because penalties under 18 USC ten 001 are for intentional or negligent misrepresentation. So if you're not going to get the $80,000 bonus, don't show up with a weak sauce excuse of, Oh, I forgot, civil liability applies and criminal penalties, you can go to prison. Probably not going to happen unless there's a pattern of bad behavior that would necessitate that you probably just get a fine. So mortgage hotspots, this is not a get out of jail free card if you're not one of these cities. But this is really where the regulators are kind of looking at for fraud. When red flags come up, kind of kind of the usual suspects, you know, Miami, New York, LA, Houston, San Francisco, Chicago, why? These are very expensive cities. They're destination cities. People want to go there. So you have a lot of international money and a lot of people moving there for business. And when it's expensive and you got a lot of people moving in, transitory bad stuff is going to happen because it just creates kind of a frenzy. And what can happen with some of these with some of these cities. You might have this. It's not just mortgage fraud for for for for profit. What can happen in some of these cities is it's it's mortgage fraud for occupancy. And what I mean by that is you might want to set up a bunch of Airbnb locations in Miami. You're not trying to get a profit. You're just trying to get a better interest rate. So you go to the lender and you say, Yeah, this is going to be my my primary residence down in Miami, but you're actually going to have it as a investment property. The reason that's important is you get a better interest rate for a primary residence compared to investment property, because if times get tough, you lose your job, lose your money, you're going to protect your residence before you protect the investment property. So there's always going to be that that check mark on the application that says, is this going to be your primary residence or is this going to be an investment property? And if you're fraudulently filling it out saying, yeah, this is going to be my, my, my home down in Miami, but you're going to rent it out as an Airbnb that is going to be mortgage fraud. So red flags that you got to look for. And I've got the family Social Security card number up there for a reason. Consumers. You know, it's sad, but they don't really know how important these documents are as far as the certifications and the declarations. And it's it's staggering some of the decisions that get made by consumers because they just don't know this stuff. And they just think, well, this is how the industry works. So the red flags that we're looking for on the lender side and the government side and the secondary market, we're looking at income and expenses, assets and debt identification of the buyer. Again, family social Security, card number, employment and title education and licensing judgments, loan purpose, occupancy. Again, that's that that Airbnb example less cost or your APR your interest rate going to be lower for a primary residence higher for the investment property. Got to be honest about how you're going to use that property. But this is the kind of stuff that's going to be looked at again and again and again to see if there's any kind of red flags when you're dealing with hundreds of thousands of dollars or millions of dollars or ten millions of dollars in mortgage loans, so many, many bites at the apple. This is what you got to keep in mind. There's going to be a loan file and it's going to be looked at again and again and again. Loan application supporting documents. The purchase agreement for the real estate appraisal title credit underwriting, pre close post close QC sales into the marketplace, the loan servicing rights get sold again and again. Just vanilla lender and government exams, more intensive lender and government audits. It could be an investigation, it could be litigation. You could get sideswiped by a whistleblower complaint. And any time there's a red flag, these lenders have what's called a Bank secrecy Act officer, BSA officer. If they see any kind of red flag for mortgage fraud, the BSA officer is required to submit a suspicious activity report to FinCEN so they don't have to. The lender doesn't have to find mortgage fraud. They can't say, Yeah, aha. We looked into it, we caught it. This is mortgage fraud. They just have to find a red flag. It's a pattern break. They can't figure it out. And so they submit it up to FinCEN to take a look at that. So again, it's within it's, it's in the best interest of the BSA officer in the company. Any time they see something that doesn't make sense pattern break kick it up to FinCEN and then the lender is protected. If they don't, then the BSA officer can actually look at prison time for not for not kicking that up. So this is why you do not want to be, you know, getting too creative on the documents because it's going to be looked at again and again by the lenders, by investors and by the government agencies. So you don't believe me? Believe Theresa from Real Housewives of New Jersey. Love that show. So they were involved in about 7 or 8 years of pretty steady fraud involving mortgages and other kind of business loans. And they were falsifying employment information. They were falsifying income information. And Teresa got 15 months federal prison. Husband Joe got 41 months federal prison. They got a felony on the record and had to turn over 400 K in money. Now, here's why this can be so tricky for standard consumers. When Theresa goes to federal prison and gets a felony, when Martha Stewart goes to federal prison and gets a felony, they get a book deal that's that's good for business. But if your client if Billy Beyer is not a celebrity. Billy gets a felony. Billy goes to prison for for for dishonest behavior. Billy is not just unemployed. Billy is unemployable for the rest of life. Who's going to hire somebody involved in dishonest behavior to this level where they go to federal prison? So just be really smart about it and know it's not like a you know, don't get it confused with filling out those tax returns to the IRS. The IRS is going to look at the tax returns. But with mortgage documents, it's going to be looked at by several different agencies and parties for years and years and years. Anytime something is is being transferred hand like loan servicing rights, there's going to be some QC and it's just it's not worth it. Talk to your client. Make sure they're not getting involved with this stuff. Don't have them showing up for a loan application with the family Social Security card number. So for consumer protections, this is what we got to keep in mind. And again, we're trying to distill this down to the key ways for your consumer to protect themselves. There's just too many regulations out there, even for the industry to keep track of. So as a as a compliance person, this is what I wish consumers knew when they showed up so they can protect themselves. So unfair, deceptive, abusive practices. It applies for marketing through loan servicing. Unfair. Think of like the late fee example, late bill. Late fee. Nobody tried to do anything intentional, deceptive. That's going to be a standard bait and switch. And abusive is going to be targeting a demographic like closing a reverse mortgage for the 85 year old who has no idea what room they're in or what what documents are signing. Data security loan officer is not a desk job. They are sometimes at the office, sometimes they're at home, sometimes they're at Starbucks or the airport. So they've got a lot of data floating around. And this is the term you want. You want to make sure Billy Buyer uses When they go in to talk to the loan officer, please explain your Clean Desk policy. Clean desk policy is an industry term. We talk about it all the time at meetings. And if your consumer shows up and they know this term, that's going to put the loan officer in check to make sure that they're not, you know, having your documents all over the place and mortgage fraud, just just don't do it. Don't, don't don't play around with the documents. Just play it as as fair as you possibly can because this stuff is going to be looked at again and again and again. And they're certified to this and you get a felony on your record. You're done. So let's talk about complaints. We've talked about how to how to research and select the loan officer talked about those key consumer protections and now we'll talk about complaints. So this is from our margin call. Great movie. There are three ways to make a living in this business. Be first, be smart or cheat. And that's it's pretty much true across any industry. If you're not first to market, you got a couple choices you can niche down and find a little find a little pocket you can be in and be smart or they're going to cheat. And that's it's human nature. Self-interest has been around for, oh, a couple hundred thousand years and it's not going to go anywhere. So we got to be really careful about this kind of stuff. So for complaints, these are going to be the most common issues for loan officers and probably the same for real estate agents and attorneys. It's really not rocket science. This is the stuff that comes up again and again. It's going to be communication issues. It's going to be product knowledge and it's going to be over promising on on what the loan officer can deliver. Again, it's that we'll close this loan in ten days. Not a problem. We're going to get you into this loan program and the borrower applicant has no chance in hell of being approved for that loan application. So it's communication, it's product knowledge, and it's over promising. So stuff goes wrong. Your client did all Billy did all the right stuff. Billy had, you know, vetted the loan officer, the branch manager and the lender. Everything looks good. Billy knows all the consumer protections. The. Yeah, data security and not getting involved in mortgage fraud. So stuff goes sideways, which does. Here's what Billy doesn't want to do. If they're day drinking, they're emailing it. 3:03 a.m.. Don't be doing this kind of stuff. Embellishing claims, false claims. Don't be doing that. Because when you submit a complaint through a state agency, the federal agency, state attorney general, you're you're doing that under penalty of perjury. So just don't start making stuff up that's going to damage you and come back and bite, you know, personal insults. That's just going to slow things down. Not not going to help things. No defamation that can come back on you and don't make threats. Not a hypothetical. I was I was working in a lender. A consumer was not happy with the loan officer dropped out of communication. Things just went very sideways and very badly, very quickly. At the lender's office, we had two sets of security. You needed a password to get into the building. Then you needed a second password to get back to the legal department where all the documents were stored. I was back there about 5:30 p.m. and a consumer who was upset with a loan officer who had dropped out of communication and consumers not happy consumer gets past the first tripwire, consumer gets past the second tripwire into the legal department and makes their way back to my desk and assures me at the outset when they're upset that they did not have a gun with them that day. And this is the kind of stuff that happens and you don't want to be doing this. It's it's a very intense process, getting the loan. You're dealing with a lot of money. Very stressful. But you just got to be very careful for the consumer that they're not doing the stuff that's going to get them in trouble. So don't embellish. No false claims, no insults, no defamation and no threats. Don't be sneaking your way past the tripwires. So do this. Let's do this. Let's try this. Explain the issues and expected resolution. Have Billy supply supporting documents and records be professional in the communication, allow for a fair timeline and be reasonable and open. And this is again, why we want to have the consumers always getting the chief compliance officer contact information at the outset so they can have somebody to work with outside of the loan officer. If your consumer sends the complaint to the loan officer and they do nothing with it, it's just silence. And that's going to lead to a boiling point with the consumer. So if you have the compliance officer's contact information, you just bypass the yellow, send it to the compliance officer, and then you can be pretty much guaranteed that action is going to take place. So explain the issues. Supporting documents, good communication, allow timeline to be reasonable. State and federal agency options. You can use the Consumer Financial Protection Bureau, Federal. You can use the state agency. I'm in Washington State, so that's the Washington DFI. You can use the state attorney general, FTC. They're pretty good for fraud and deceptive claims. B-b-b Better Business Bureau. It's kind of unofficial, but it's something that's very public. And then if you go online, go to the lenders Facebook page, Zillow, Yelp, Google, that can be a pretty good strategy as well to get their attention when the loan officer is ignoring the consumer. But again, don't be drunk dialing, Don't don't be sending nasty emails at 3:00 in the morning. That is going to backfire. And again, no threats or anything that could involve a police report. And we've had that happen at I've had that happen at a at a at a at a walking into too many details. What we had to had to have extra security and contact the police about some threats that came in. So it just it happens people are having a bad day, lots of money involved and they can make a really bad decision. So just be smart about it. So summary for complaints. We want to set those expectations early, get the chief compliance, contact information and bring those receipts, Bring those receipts if you want. The bag didn't get your money, didn't get your house and you want something to take place, you got to show up with a record of what happened. It can't just be a summary of what you believe happened. She's got to you got to have something to back it up, especially because you're the compliance officer is busy at the lender. State agencies are busy, federal agencies are busy. And they're seeing this information for the first time. Have something to back up what you're claiming. All right. So let's get into the wrap up here. Normalization of deviance. I love this quote from Diane Vaughn. She did a little study on the space shuttle Challenger and how that possibly happened when the engineer said this is a really bad idea. It's it was freezing in the morning. The gears and the knobs and the buttons and O-rings and the heat shields, you're not going to work correctly. Let's let's scrub the mission. And she called it a cultural drift in which circumstances classified as not good are slowly classified as good. And that's a slow drift. It's not sudden. It's just you say, hey, these three things, we will never do that. Six years later, you're kind of gradually starting to do those three things and it starts to become a little bit normal. You've got staff kind of shifting in and out. Culture changes a little bit and the standards just start to dissipate like that. And what can happen at lenders when this happens is the staff that's really good that the A-plus players, when they see this kind of stuff happening, those A-plus players leave. And what you end up with is retention of kind of the people you'd like to kick the hell out of the industry. They remain at the company and that company is going to attract that same type of employee and it just goes downhill from there. But it's not sudden. It's not overnight. It just happens gradually. So some key ratios to kind of keep in mind here. Debt to income, loan to value and Fico. There's a ton of different. Ratios to keep in mind that these are the three big ones. Debt to income. That's the ability to manage monthly payments. Loan to value is the lenders risk, and Fico is the credit risk debt to income. You want that low loan to value. You want that low and Fico, you want that high. So debt to income, we're kind of running out of a little bit of time here. But you can go through these these ratios with your client. For debt to income, you're basically dividing your housing debt by your gross monthly income. And there's a front end DTI and a back end back end DTI is a really important one. That's your housing cost plus the car lease, student loans, credit cards, child support, the big ticket items. You're not including your grocery bill, you're not including your cell bill. But it's the big ticket items divided by the gross monthly income. And that's going to tell the lender how much money is coming in, how much money is going out. And that's going to impact your your loan program loan to value. Again, you want this low. This evaluates the lenders risk and you're dividing the loan amount by the sales amount. So if the sales price is 100 K, loan amount is 90 K, that gives you a 90% LTV higher. The LTV, the worse your terms and conditions because that's going to be a higher LTV means higher risk to the lender. Fico score. Typically, lender typically consumers fall between the good to very good range so that 670 to 799. There's five factors down there below that they're going to want to keep track of payment history and amount owes are going to be the most important ones for them to know about. Some additional key ratios that are good to know about. But the three that you really want to just make sure your consumer has has a grasp on it. Dti. Ltv and the Fico score. You want that low LTV. You want that low Fico score. You want that high. So, again, we're going to wrap up here. You know, I try to I try to always talk about the subway sandwiches because they're delicious. Toasted untoasted. I don't care. But I always talk about how you got time to pick the toppings off of the subway sandwich. Your $10 Subway sandwich. Then you have time to, you know, really research the loan officer, the branch manager and the lender. You've got time to look over the consumer protections and understand that show up as an informed consumer and know how to submit an effective good faith complaint that doesn't get yourself in trouble or onto a police report because you just lost your cool. So subway sandwiches, evaluating cell phone plans, cable plans. If you have time for that, you have time to look over the mortgage process here. And again, it's it's the consumer's responsibility, right? I mean, this is their money that they're going to do it 3 to 5 times in their life. Don't be a victim. Do the work. So let's wrap up, get your client. They're maxed out. Their bandwidth is maxed out. They've got an 874 page loan file. They're just saying let the loan officer take care of it. No. Bad idea. You're going to do this 3 to 5 times in your life. Take the effort to know the stuff, research the lender. We're looking for malfeasance, recent issues, a pattern. We are looking for consumer protections, unfair, deceptive, abusive data security. What is your clean desk policy? Mortgage fraud. Don't get involved with it. We don't care about what your situation is. It could be just just don't be doing that stuff. And with coming up with some kind of excuse for why they submitted bad information, complaints, make sure it's in good faith, get the compliance officers information and know the federal and state agencies. So that's it. That's what I got for you. Hope. Hope that helps out. Any questions? Feel free to reach out and I really appreciate your time. Have a good holiday season. And 2024 is going to be raucous. So let's let's see what happens. Thanks again for your time.