Examination Identified Cheating on Testing and Continuing Education Requirements
WASHINGTON, D.C. – April 13, 2015 – (RealEstateRama) — Today the Multi-State Mortgage Committee (MMC) announced a Settlement Agreement and Consent Order between 43 state mortgage regulators and New Day Financial, LLC d/b/a NewDay USA (New Day). The case arose as a result of an examination by the state of New Hampshire and a subsequent investigation conducted by the Maryland Commissioner of Financial Regulation. The case involved the impermissible sharing of test information for mortgage professionals as well as the practice of several New Day employees completing continuing education requirements for numerous other New Day employees.
“The MMC coordinated the investigation of this matter, identifying a pattern of inappropriate conduct, and negotiated, on behalf of the participating state regulators, a resolution that will permit the company to continue to operate while ensuring compliance with all state and federal laws,” said Karyn Tierney, Chair of the MMC and Deputy Commissioner of the Arkansas Securities Department. “This case demonstrates the manner by which state mortgage regulators cooperate to more efficiently and effectively supervise mortgage companies, including resolving compliance issues through a coordinated enforcement action.”
The order includes the following main points:
- The removal and replacement of New Day’s Chief Operating Officer;
- The hiring of an independent auditor to evaluate New Day’s policies and procedures and review New Day’s training and education program to determine if additional remedial action is necessary to supplement the changes already implemented. The auditor is to report back to the MMC within 270 days after being retained, with a follow-up report 270 days thereafter;
- A report from New Day within 270 days identifying the manner in which the company proposes improving its corporate management and governance structures, with an eye to best business practices for a mortgage company of its size and scope of business; and
- The imposition of a $5,280,000 administrative penalty.
Mortgage regulators from the following states participated in the agreement: Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming, and the District of Columbia.
A copy of the Settlement Agreement and Consent Order is available here.
The MMC was created in 2008 by state financial regulators through the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR). The MMC is charged with coordinating the examination, investigation, and supervision of those mortgage lenders and brokers operating in more than one state. The MMC is comprised of 10 members who are elected by the boards of CSBS and AARMR.
Title V of Public Law 110-289, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act), requires that state-licensed mortgage loan originators (MLOs) complete annual continuing education (CE) requirements. In order to meet CE requirements contemplated under the SAFE Act, state-licensed MLOs must complete continuing education and pre-licensure education requirements. MLOs are required to meet the Nationwide Multi-State Licensing System and Registry (NMLS) Rules of Conduct for Test Takers or Education Students, as established by state mortgage regulators.
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The Conference of State Bank Supervisors (CSBS) is the nationwide organization of banking regulators from all 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands. State banking regulators supervise over 5,600 state?chartered financial institutions. Further, the majority of state banking departments also regulate a variety of non-bank financial services providers, including mortgage lenders. For more than a century, CSBS has given state supervisors a national forum to coordinate supervision of their regulated entities and to develop regulatory policy. CSBS also provides training to state banking and financial regulators and represents its members before Congress and the federal financial regulatory agencies.
The American Association of Residential Mortgage Regulators (AARMR) is the national organization representing state residential mortgage regulators. AARMR’s mission is to (a)promote the exchange of information between and among the executives and employees of the various states who are charged with the responsibility, pursuant to the laws of the individual states, for the administration and regulation of residential mortgage lending, servicing and brokering; (b) assist in resolving conflicts of jurisdiction in relation to mortgage lending, servicing, and brokering; (c) promote a better understanding of mortgage regulation; (d) develop model legislation applicable to the administration and regulation of mortgage lending, servicing and brokering; (e) increase the knowledge and ability of those engaged in the administration and enforcement of mortgage regulation and those engaged in mortgage lending, servicing or brokering by organizing and sponsoring lectures, seminars, and training programs and by providing a forum for the exchange of information; and (f) do everything necessary, proper, advisable or convenient for the accomplishment of the Corporation’s purposes and goals.