Over 400 mortgage originators nationwide have been fined following a large-scale investigation into mortgage lenders’ continuing education, alleging that they dishonestly claimed annual licensure requirements compliance.
California Department of Financial Protection and Innovation (DFPI) spearheaded the investigation last December 2020, which spanned 42 states and 44 state financial agencies. According to the investigation, implicated originators failed to comply with the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act requirement for yearly continuing education credits.
Although SAFE Act requirements differ from state to state, loan officers are required to complete eight hours of education each year, as well as 20 hours of education before they can obtain a license. A multistate task force led by the California DFPI was formed after verification software found that hundreds of originators had not taken these courses.
According to the investigation, each of the 608 originators indicted paid for continuing education through Real Estate Educational Systems (REES), a Carlsbad-based company owned by Danny Yen. Investigators said that Yen falsely provided credit for courses to loan officers in exchange for payment or, in some instances, completed classes on behalf of the originators.
There have already been 441 settlements reached with regulatory agencies, and each originator will pay, on average, $2,700. In addition, these loan officers will have to surrender their licenses, which will trigger a three-month “cooling-off period.” They will have to take the pre-licensure education classes and the continuing education classes again before they can petition for an endorsement or license as a mortgage loan officer. State financial regulators are expected to take further disciplinary action against loan officers implicated in the investigation but not signing settlements.
CSBS says that any loans originated by loan officers involved in the scandal are valid. There is a more complicated story around the loan applications that are being processed while originators are prohibited from working.
At this time, the agencies do not intend to take action against the licenses of any of the mortgage companies that employ these originators. Yen, his family members, and REES, however, face discipline from state agencies in California, Maryland, and Oregon.