Regulators investigate ‘education fraud scheme’ by mortgage originators

California is leading a multi-state regulatory task force investigating an alleged “education fraud scheme” by a company suspected of allowing mortgage originators to bypass their pre-court course requirements. license and continuing education.

The SAFE Mortgage Licensing Act requires state-approved mortgage originators to complete at least 20 hours of pre-licensing training and a minimum of eight hours of continuing education per year, using approved providers. the Nationwide Multistate Licensing System (NMLS).

Mortgage originators who met this requirement through a Carlsbad, Calif.-Based provider, Real Estate Educational Services (REES), were recently ordered to provide details to regulators about the courses they followed from 2017 to 2020.

Regulators want to know whether loan officers certified by REES as having completed their eight-hour continuing education requirement in the classroom actually attended these classes in person. License holders were also asked to list any pre-service or continuing education courses online “for which you have received course credit, but have not personally taken and completed”.

Regulators sought this information through an online survey that also required copies of invoices, certificates of completion and communications with REES or its owners, Danny and Wendy Yen.

“This [is] a mandatory survey that gives you the opportunity to disclose information regarding your participation in the aforementioned program, ”regulators told recipients. “Failure to provide information or respond to the regulatory investigation, as well as providing false or incomplete information in your response to the regulatory investigation, may result in more severe enforcement actions taken by your or your state regulators against you and your mortgage lender license. “

The investigation indicates that it is part of a multi-state regulatory task force investigation authorized by the Conference of State Bank Supervisors, which owns and operates the National Multi-State Licensing System (NMLS).

The investigation – which loan originators had until July 31 to complete – also asked licensees to indicate whether they were prepared to address any potential breaches through a consent order or a settlement agreement.

The investigation was first reported by Rob Chrisman of Mortgage News Daily, who said it could involve “hundreds, if not thousands” of loan issuers who relied on REES to fulfill their loan requirements. education since 2017.

Those involved “are faced, at best, with the need to resume their 2020 and 2021 NMLS courses, and a recommendation to suspend their license until they complete the 2020 class again,” Chrisman reported. “All the LOs in question face the possibility of the NMLS recommending that the state revoke the LO licenses. Some of the people involved could be sentenced to prison. “

A spokesperson for the California Department of Financial Protection and Innovation confirmed to Inman by email that the DFPI was the lead agency for the investigation, but said he could not comment on any details.

REES and its owners, Danny and Wendy Yen, did not immediately respond to requests for comment for a phone number and email address associated with the business. REES is no longer listed as an NMLS approved course provider and the old company website is inactive.

In addition to taking the required courses, mortgage originators seeking a state license must pass a 115-question SAFE Mortgage Originator Test developed by NMLS with a score of 75 percent or better.

Email Matt Carter

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