California Mortgage Loan Brokering & Lending - PowerPoint

Report
Chapter 14
California Department of Real Estate
(DRE) License Activity for Loan
Agents
By Dr. D. Grogan
M.C. “Buzz” Chambers
©2011 Cengage Learning
Preview
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Some activities fall under the DOC, but the majority of loan activity in
California falls under the DRE, which regulates licensees who make loans
secured on real property. This chapter discusses the loan business that
requires a DRE state license, including obtaining and maintaining a DRE
license.
Both the State of California and the federal government have enacted laws
regarding mortgage loan originators (MLO). Under the Federal S.A.F.E. Act
the single license record for each MLO are outlined and discussed.
Of the 10 most common violations found in DRE audits, trust fund handling
and recordkeeping are the most troublesome. This chapter discusses the
legal requirements for licensing in various states other than California.
©2011 Cengage Learning
Student Learning Outcomes
1. Outline the activities that do not require a DRE license.
2. List activities that require a DRE broker license.
3. Describe the DRE license requirements for the salesperson and
broker license.
4. Identify topics and differentiate between the B&P Code and the DRE
Real Estate Commissioner’s Code of Regulations.
5. Discuss the most common DRE violations.
6. Differentiate between loan broker license laws prior to January 1,
2010 and those required after that date.
7. Outline the required conduct for licensed activities as a residential
mortgage loan originator (MLO) for the new 2010 and 2011 license
laws.
©2011 Cengage Learning
14.1 Department of Real Estate
(DRE) License Law
Activities that do NOT require a DRE license:
1.
2.
3.
4.
5.
Participation in market analyses, such as obtaining comparable sales prices
or loan amounts recorded against similar properties.
Review of government reports, such as zoning, coastal commission, or
environmental findings and seeking disclosure, as described in Chapter 5.
Report on items of interest in trade publications, such as FNMA underwriting
guidelines or obtaining blank, current lending forms, such as the loan
application (1003) described in Chapter 6.
Participation in office training sessions on loan processing or servicing.
Participation in sales meetings of the loan agents, describing Reg. Z
advertising regulations, as described in Chapter 2.
©2011 Cengage Learning
Activities that do NOT require a
DRE license (cont)
6.
Keeping records on loans, including principal, interest, taxes, or
insurance.
7. Observing certain phases of office management, such as personnel
and files and typing rate sheets that are approved by the broker.
8. Contact with the title company regarding vesting of a prospective
buyer, as described in Chapter 8.
9. Contact with the title company about property information that is of
public record, such as square footage of land and improvements
and tax liens.
10. Contact with real estate licensees to obtain recent sales data and
financing terms.
©2011 Cengage Learning
Activities that do NOT require a DRE
license (cont)
11. Help in the preparation of advertising copy, such as to
place or cancel advertising, as described in Chapter 2.
12. Contact with DVA, FHA, FNMA, or FHLMC to obtain
underwriting guidelines and instructions.
13. Contact with the DRE to obtain license information and
forms.
14. Telephone answering assignments (cannot quote price or
rates) to take messages for loan agents.
©2011 Cengage Learning
LOAN LICENSE EXEMPTIONS
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Loan correspondent: Conducts loans for only ONE California
chartered savings & loan
Owner: When carrying back a loan in a sale
Employees of institutional lender, insurance company or credit union
Corporate officer performing regular duties with no extra
compensation for real estate acts
Receiver in a bankruptcy
Individual who collects 10 or less loans under $40,000 in one year
Those who fall under: Food & Agricultural Code; Cemetery loans
under Health & Safety Code; and Institutions under Federal Home
Loan Bank Board
©2011 Cengage Learning
(DRE) License Law (cont)
Activities that DO require a Broker License:
1. Soliciting borrowers for loans and soliciting lenders
for loans
2. Negotiating loans
3. Collecting payments for loans secured on real
property or performing loan servicing for borrowers
or for lenders in connection with loans on real
property
4. Selling or offering to sell a promissory note secured
collaterally by a lien on real property
©2011 Cengage Learning
Activities that DO require a
Broker License:
5. Buying or offering to buy a promissory note
secured by a lien on real property.
6. Exchanging or offering to exchange a
promissory note secured directly by real
property.
7. Performing services for the promissory note
holder secured by a lien on real property.
©2011 Cengage Learning
(DRE) License Law (cont)
License Requirements
DRE is under the California Business
and Transportation Agency
A.
•
•
B.
Governor appoints DRE Commissioner
Attorney General is legal council for DRE
DRE law falls under Business and
Professions Code
©2011 Cengage Learning
DRE Licenses:
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DRE Broker receives compensation for:
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Soliciting borrowers or lenders of trust notes
Negotiates loans on real property
Collects payments for loans on real property
Buys, sells, exchanges notes secured by a lien
DRE Salesperson
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Acts as an employee of a DRE broker
May be Independent contractor for IRS taxes
May receive compensation only from their
employing broker
©2011 Cengage Learning
DRE licensee must:
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Qualify to be licensed
 Pass state examination
 Have reached 18th birthday
 Submit licensee fee
 Submit live-scan fingerprints & pay fee
 Not have felony criminal record to warrant
denial
©2011 Cengage Learning
DRE licensee must (cont):
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Obtain state license
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Salesperson:
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Complete RE Principles, RE Practice & 1 additional course
Pass state exam of 150 questions with 70%
Broker:
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Complete 8 courses (may be the 3 listed above)
Pass state exam of 200 questions with 75%
Experience: 2 yrs as salesperson; or 1 yr as salesperson
with Associate degree; or 4 year degree or law degree
©2011 Cengage Learning
DRE licensee must (cont):
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Complete statutory course(s) prior to applying
for state exam.
Pass DRE examination
Have electronic fingerprints taken
Pay fees
Complete 45 hours of continuing education
for each four-year license renewal period.
©2011 Cengage Learning
DRE license
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Employment Agreement
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Name the parties as shown on the DRE license
Date the signed contract
Definition and description of activities of the
licensee requiring broker supervision
Duties of each party
Compensation detail
©2011 Cengage Learning
DRE license law
http://www.dre.ca.gov
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Notify DRE commissioner within 5 days of:
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Employment between broker and salesperson
Change in mailing address of licensee
License renewal
Discontinuation of salesperson employment
Certificate of salesperson employment
©2011 Cengage Learning
DRE license no longer valid when:
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Licensee fails to complete 45 hours of continuing
education and submit proof to the DRE
Commissioner every 4 years.
Employing broker fails to complete 45 hours
continuing education for license renewal.
Restricted license or special requirements set by
the DRE Commissioner.
Suspended or revoked license.
©2011 Cengage Learning
Business office: Fictitious name
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DRE Commission will NOT approve DBA if:
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Misleading
Constitutes false advertising
Implies a partnership when such does not exist
Implies a corporation that is not in legal existence
Includes any licensed salesperson’s name
Is a name previously used by any revoked licensee
©2011 Cengage Learning
14.2 DRE Broker Supervision
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Broker supervision:
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Broker may delegate to another licensed broker if
written agreement specifies the delegation of
document review.
May delegate authority to licensed salesperson if
salesperson has 2 of last 5 years full-time
experience with the same designed broker; and, a
written agreement specifying duties.
©2011 Cengage Learning
14.3 California Code & Regulations
for Licensees
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Real Estate Law References
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Business & Professions Code
Real Estate law: Part 1
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licensing
Sections 10000 thru 10580
Real Estate law: Part 2
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Regulation of transactions
Sections 11000 thru 11200
©2011 Cengage Learning
14.4 Review of Instruments
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Timeline Compliance
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As Agent or Principal
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Broker review must be performed regularly
Status must be disclosed to all principals & agents
As Lender
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Licensee may not represent to be a lender unless
true
Requires written authorization from lender
©2011 Cengage Learning
Document Requiring Review
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Mtg loan disclosure statement
(borrower)
Mtg loan disclosure statement
(good faith estimate)
RESPA
TIL
FNMA form 1003 Loan
Application
Credit authorization
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Lead-based paint, termite
report, etc.
ECOA
Signed appraisal report
ARM, FHA, DVA disclosures
TDS
Prelim & title report
Gift letter
©2011 Cengage Learning
Common DRE Violations
1. Retention of records (B&P, Section 10148)
2. Use of false or fictitious name (Regulation 2731) - DBA
3. Trust fund records to be maintained (Regulation 2831)
4. Separate record for each beneficiary or transaction (Regulation 2831.1)
5. Trust account reconciliation (Regulation 2831.2)
6. Trust fund handling for multiple beneficiary—Trust fund shortage (2832.1)
7. Trust fund handling (Regulation 2832)
8. Trust account withdrawals (Regulation 2834)
9. Commingling (B&P, Section 10145/Regulation 2835)
10. Written disclosure statement (B&P, Section 10240)
©2011 Cengage Learning
14.5 California Finance Code
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Under the California Finance Code
Department of Corporations (DOC) Law
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Governor appoints Corporation Commissioner
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Commissioner oversees activities of Corporations
©2011 Cengage Learning
California Finance Lender (CFL)
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Licensed by DOC for real or personal property
loans.
Makes real property loans for over $5,000
Must have $25,000 minimum net worth
People who work under DOC broker are
employees.
©2011 Cengage Learning
California Health & Safety Code
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Residential Mortgage Loan Report (RML)
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Exempt: If assets are $10 million or less
Exempt: If broker is exempt under Home
Mortgage Disclosure Act (HMDA) of 1975
Files report annually
If broker performed 12 or more transactions
Must report transactions of $500,000 or more
©2011 Cengage Learning
DOC Lenders
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Commercial Finance Lender: loans of $5,000
or more for commercial property.
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California Residential Mortgage Lending Act
(CRMLA): 1-4 unit residential requires annual
Mortgage Loan Report.
©2011 Cengage Learning
DOC licensee as a CRMLA broker:
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Buys or sells loans to or from institutional
lenders.
Handles loan servicing
Receives compensation for processing and
underwriting.
©2011 Cengage Learning
Difference between DRE & DOC
Licensing
A.
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DRE allows licensed salespersons to handle loans
DRE requires licensee to pass a state exam
DOC allows only the broker to solicit loans
DOC requires no state examination
Financial Reports
B.
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DRE has no special expenses for the loan broker
DOC requires all CFL licensees to pay annual
administrative costs to run the agency.
©2011 Cengage Learning
Difference between DRE & DOC
Loans:
C.
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DRE licensee only makes loans secured by a lien
on real property.
DOC makes loans on both real and personal
property.
DOC has secured and unsecured consumer loans.
©2011 Cengage Learning
Difference between DRE & DOC
D.
E.
Referral Fees
A.
DRE broker may pay a fee to another DRE broker
B.
DOC may compensate anyone
C.
DOC may pay a DRE broker referral fee
D.
DRE may not pay a DOC broker referral fee
Client Funds
DRE broker not required to have trust account
DOC broker must have a client trust account
©2011 Cengage Learning
Difference between REAL and
PERSONAL Property Lender
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Real property includes improvements
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Real property may become personal
property
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Loan collateral may include trade fixtures
©2011 Cengage Learning
14.6 S. A. F. E. Act
Secure And Fair Enforcement
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Part of the Housing & Economic Recovery Act of
2009 (Public Law 110-289).
License law for each Mortgage Loan Originator
(MLO).
Requires within 30 days of loan activity from Jan
31, 2010, DRE licensed broker report all activity
in making, arranging or servicing any loan
secured by real property for residential &
commercial.
©2011 Cengage Learning
S. A. F. E. Act
License qualifications
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Processing fees are non-refundable.
Individual must pass National and California Unique State component
written exam as of 2010.
Individual must complete 20 hours of pre-license education. DRE
licensee may have already met this requirement-DRE web site
maintains the info.
Individual must:
(1) file an online MLO license endorsement application.
(2) pay license fee.
(3) submit live-scan fingerprints.
(4) allow authorized credit report from consumer reporting agency.
©2011 Cengage Learning
14.7 License Laws
State
License Type
State
License Type
Alabama
Broker
Hawaii
Broker
Arizona
Broker
Idaho
Broker
Arkansas
Broker
Illinois
Residential Loan
California
Finance Broker/Lender
Indiana
Loan Broker
Colorado
Mortgage Broker
Iowa
Broker
Connecticut
2nd Broker
Kansas
1st Broker
Kansas
2nd Broker
Delaware
Broker
Kentucky
Broker
FHA - HUD
Loan Correspondent (Mini
Eagle)
Louisiana
Broker
FHA - HUD
Non-Supervised Lender
(Full Eagle)
Maine
Credit Services
Florida
Broker and Broker Business
Maryland
Broker
Georgia
Broker
Massachusetts
Broker
©2011 Cengage Learning
14.7 License Laws (cont)
State
Michigan
Michigan
Minnesota
Mississippi
Missouri
Montana
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
License Type
1st Broker
2nd Broker
Originator
Broker
Broker
1st Broker
2nd Broker
Broker
Broker
Broker
1st Broker
2nd Broker
Loan Company
Broker
Broker/Lender
Money Broker
1st
State
Oklahoma
Oklahoma
Oregon
Pennsylvania
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Utah
Vermont
Virginia
Washington
©2011 Cengage Learning
License Type
Broker
Supervised Lender
Broker
1st Broker
2nd Broker
Broker
Broker
Broker
Broker
Broker
1st broker
2nd Notification
Broker
Broker
Broker

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