Don’t End Up In Fair Housing Jail!

Title:  Don’t End Up in Fair Housing Jail!

Karen Deis, Publisher,  & Tammy Butler,

Here’s a story that is happening more and more as the CFPB hires more people to “police” FAIR HOUSING – Can you defend yourself in case of an audit?

Examiner:  Mr. Mortgage Company:  can you please tell me why this client did not receive the lowest rate offered to her on this day?

Mr. Mortgage:  Uh, well let me call the loan originator.  Oh, he is not here anymore, okay I’ll call the processor.  Oh, she is on maternity leave.  Can someone look in the LOS and tell me if you see any notes on that file?  None about rate, huh!  Well, we will pull that file, get the rate sheets from that day and review everything.  I’m sure there was a good reason.

Examiner:  Fantastic, and while you’re at it, can you also pull the data together for these 350 files?  We have questions on those too.

Sound like a nightmare?  For many lenders this is a reality.  Yes, I know Fair Housing audits are not the most exciting topic; however it is the most important item you can focus on when it comes to making an exam easier.

We’ve created a Fair Housing Compliance Checklist and at the end of this article, you’ll find a “partial list.  Email for the complete 3-page checklist.

Here is how it works.  The loan originator answers the questions on the checklist.  The answers can be “yes,” “no” and/or a comment.  If they do not give you the answer that you have set up as a rule, then it needs to be noted in the file.

I have several pages of example questions; you will have to determine which ones you want to use.  The goal is to get your team brainstorming regarding the questions that you want to memorialize.

Here are some ways other lenders are using the Compliance Checklist function:

  1. Requiring explanation when the loan originator gave the client a higher rate (assuming equal price) than one of the offered programs.  This might be as simple as one lender taking the loan and another will not.  The examiner is searching for the reason.
  2. Requiring written explanation when a loan is re-locked.  What changed on the file that the program or rate needed to change?  This prevents any notion of baiting and switching.
  3. Reining in your TPO’s to get written reasons for loan selections.
  4. Ensuring that internal workflow is followed.  As an example, do you require a fully completed loan application prior to a lock in?
  5. Can the loan be locked only with this investor, or any investor?  If limited, why?

These are just a few ways the Compliance Checklist functionality is being used.  I cannot urge you strongly enough to get this started.  Ask anyone who has been through an audit and they will tell you that notations about what happened and when are so very important – and save you an enormous amount of time.

Oh, one more thing, they are monitoring real estate agents too.   A real estate agent recently got a letter that he was violating Fair Housing rules when he advertised a home as “adults only—no one under age 16” on the listing.

CFPB is out there and they have the people to monitor, audit and fine you!

Fair Housing Compliance Check List – Pricing Questions

Prices being equal, did you offer the client the lowest rate option available to them?

Is this a re-lock?  If yes, what changed on the file that it needs a re-lock?

Is this file dependent on the underwriting guidelines of the
investor you selected? If yes, what specifically?

Is the length of the lock being requested compatible with the time to close?

If you are requesting a 15-day lock, is the loan clear to close?

If you are requesting less than 60 days for a refinance or short sale, is that time frame realistic?  If yes, please indicate the loan status in the notations.

Is your final price par?

If your final price is above par, are you charging any discount points? If yes, are you giving a lender credit?  If yes, then how much is the lender credit?

Is your rate lock within (x% – lender determines) of the initial disclosed rate?

What are the client credit scores?  Please list (lender decides which scores they want listed in the notation).

Is this loan a pre-qualification?  If yes, when is closing anticipated?

Is this loan under contract?  If yes, what is the closing date?

What are the lender credits? Require notation.

If the price is below 100 or outside of your LO contract, did you receive prior exception?  If yes, by whom?  Did you document the reason for the exception in the loan file? (Lender sets what they mean by “document.”)

Does the requested pricing meet the parameters of your LO contract?  If no, give reason and who authorized lock.

Has this loan been locked with us during the last 120 days?

If you are requesting a re-lock, is the rate going up?  If so, is this based on a credit verification issue?  Notation needed for explanation.

If you are requesting a re-lock, and the rate or price are increasing, do you have written documentation in the file as to what changed and how that resulted in a higher rate or price?  Require notation.

Bill Would Open VA Loans to More Surviving Military Spouses

A House bill passed this week would increase access to the VA home loan program for surviving spouses of permanently disabled veterans.

Dubbed the Disabled Veterans’ Surviving Spouses Home Loans Act, the proposed legislation would eliminate the requirement that only spouses of veterans whose death is attributed to a service-connected disability may qualify for a VA loan.

Instead, the bill would provide loan eligibility to spouses of permanently disabled veterans whose deaths are not necessarily attributed to their service-related disability. It passed by a 418-6 vote as part of the Veterans Opportunity to Work Act.

“As we approach Veterans Day, we should ask ourselves if this Congress doing all that can be done for our veterans,” U.S. Rep. Virginia Foxx, R-N.C., the bill’s sponsor, said before the House vote. “This bill maintains our promise not only to the men and women that have served in the Armed Forces, but to their families as well.”

The change would provide loan eligibility to thousands of military spouses.

A series of veterans organizations came out in favor of the bill, including Veterans of Foreign Wars, the American Legion and Disabled American Veterans.

More than 18 million Americans have used the VA loan program to become homeowners since 1944. The program has become increasingly important in recent years as lending requirements have tightened.

VA loan volume has increased 135 percent since 2007. Last year, the agency guaranteed 314,011 loans last year, including about 1,000 to surviving spouses.

Finally, A Govt Agency That Wants to Hear From You!

Looks like the CPFB has been working on hard on creating new loan disclosure forms and guess what?

They want to hear from you–yes YOU!

I’ve copied the email that they sent out!  They want you to choose between two loan scenarios (Jasmine and Nandina) and tell them why you would choose one loan option over the other one.  There is also a short questionnaire asking you for suggestions on what else you’d like to know about.

Would you please take a look and choose one of the other.  Please let us know which loan option you choose and why!  What suggestions did you make?  THIS IS YOUR CHANCE TO PROVIDE INPUT (which is totally rare for a government agency anyway!)  Karen Deis, Publisher, (Reading the fine print–so you don’t have to!)


                                                                       Email Notice From CFPB: 

Since May, we have been asking you to help us improve mortgage disclosure. By comparing different draft forms, you’ve helped us understand how to communicate information more effectively.

Now we need you to do something just a little different.

This time we’ve posted just one version of a disclosure, but with two different mortgage loan products. We’d like you to look at them and decide which one you would choose.

Make your choice today:

We’re shifting gears for a simple reason: Comparing two versions of a form is useful, but in the real world, consumers should be able to use disclosures to compare different loan offers, not different forms. An effective disclosure form should help people make the best decisions for themselves and their families.

We want to see how well this version of the form lets people do that. Can consumers use the form to choose the right loan for themselves and their families? Can lenders or advisers make a clear recommendation about the best loan?

Tell us which loan you prefer. Help us make mortgage disclosure forms easier to understand and use:

Thank you for your help,
The Consumer Financial Protection Bureau

Your Credit Report vs. Your Mortgage License–Heads Up!

Beginning November 1,  NMLS says that all LO”s are supposed to log into NMLS and authorize TransUnion to send a credit report (electronically, within NMLS) to their regulator(s). “MLOs will have to answer 3-4 questions about themselves in order to verify their identity with TransUnion before the credit report is generated.

So,  what’s “wrong” about the way loan officers have to be licensed?  ..first you pay all that money, spend all that time getting your license and only AFTER you’ve done that…will they pull a credit report…too see if you can continue doing loans.   I’ve heard of loan officers who are “on probation” because they had a collection 3 years ago.  Another state has suspended a LO’s license because of back child support (yeah, the child support needs to be paid–but how can he if he’s not working?)

It’s the cart before the horse scenario.

While a company may pay for the credit report through NMLS, only the MLO will be able to complete the identity verification process.” for more info on what’s involved and the fees.  Be sure to click thru to the OTHER links  on the website page metioned above.

I recommend that you check out your state’s “financial responsibility” measuring stick.  Your report will be sent to your state and they will contact you if problems. 

Keep up to date on all the rules and regulations with  Try for $1 (just one buck)…

Only 3 days left to impact your future!!!!

Ok, so I know the title sounds like a hard sell for the next great product. The reality is that this could not be further from the truth.

This post is about what YOU can, and NEED, to do this week to have an impact on your own future and the future of the industry.

Last week we had a call with Senator Merkley with Sue Woodard, Mortgage Success Source, Marc Savitt, NAIHP and Bill Kidwell, IMMAAG and myself that you can listen to right here Senator Merkley Conference Call. I strongly urge you to do so. It’s great to yell, scream and shake your fist at the sky but the sad reality is that you can’t blame anyone for what we are going through if you don’t take personal responsibility to get involved. Harsh – yes. But 100% real – absolutely.

This week is a rare opportunity where your legislators are home from Washington D.C. and in your backyard!! If you’ve ever thought about writing, faxing or visiting your Congressman or Senator – NOW IS THE TIME!!!

The easy excuse is that you can’t get to Washington. The tough excuse right now is that you don’t have to get to Washington. The accessibility of your legislator will never be greater than over the next 3 days!

If you’ve been nervous about what to say, how to say it or how your Legislator might act/react to your message – just listen to Senator Merkley’s call. You will find that the oft villified legislators actually have some sound reasons for what they are proposing and they are also open minded to hearing what their constituents have to say to help them avoid unintended consequences.

I’ve been to D.C. twice in the past few months and have found the exact same openness of communication with every legislator I’ve had the pleasure to meet.

Don’t be scared, don’t feel like you need to be an expert. Plan to contact your legislator THIS WEEK!

Not only are they in-district (at their home office in YOUR state) but the timing is perfect to make our industry voice heard before the conference committee finalizes the Financial Reform Bill (expected over the next few weeks).

Bill Kidwell, IMMAAG founder, has prepared some amazing letters for you to present to your legislators and they break everything down into very simple and easy to understand terms. he even has a link where you can go to find out who your legislators are and where they are located.

If you’ve ever wanted to get involved but have just felt like you might not know what to say or that you don’t know enough about the issues – take 10 minutes to visit and see just how easy Mr. Kidwell has made the process for you.

I would challenge each of you to rally 4 or 5 other originators in your area, make an appointment to go visit your legislator this week and present these points for the good of our industry and your own futures. You will undoubtedly feel more comfortable going with a group and the appointment is strongly suggested so you can actually meet with your legislator or one of their key aides.

If you absolutely, positively can not get to your legislator’s office this week – please, please go to the IMMAAG site and use the letters that Bill carefully crafted and fax or send them ASAP. Tweak them to make them personalized, send them as is – just send them!!!

Please post back if you make an appointment, have the appointment or if you were able to send one of the letters. I would love to hear about your experiences.

Remember, the legislators put their pants on one leg at a time, just like you and I do. They typically will not know as much about these issues as you do and they certainly won’t want to support anything that would have unintended consequences for their constiuents. They just need some education and to see that people in their district DO care about the issues and want to impact the outcomes so they achieve the goals of consumer protection without hurting the industry.

Below is Bill Kidwell’s email from IMMAAG from a few days ago. I urge you to visit, write, send or call by Friday. This may be our last great chance to impact the proposals for the Financial Reform Bill so let’s take advantage of that timing.

I personally thank each and every one of you that gets involved and tries to get your message to your legislator. There is no one else that will do this. It is on each and every one of us, as individuals to get involved.


Jason Klaskin

This is the week to ACT!

Your congressional delegates will be back in district this week: May 31 – June 4.

When they return to D.C. the week of June 7th about two dozen of them will be getting together in a conference committee setting to decide the outcome of HR4173, known either as the Restoring American Financial Stability Act [Senate version ] or the Wall Street Reform and Anti-Predatory Lending Act [House version].

A list of the Conference Committee’s Senate members and the likely House members is available on IMMAAG’s home page at

Whether your delegate is on the committee or not, this next week is a great opportunity for you to communicate your feelings about the portions of this landmark legislation that directly affect your business and your customers.


The call to action is simple. IMMAAG has prepared a cover letter, a Request for Action and Support Document and its YSP Position Statement for you to use to reach out this next week.

What to do?

Go to

Choose the appropriate cover letter based on whether your delegate is on the conference committee. Use both versions as appropriate. The difference between the two is subtle. One asks for action during the conference, the other asks for consideration in the event the bill makes it to the floor for vote.

Personalize the interior address information and communicate with both of your Senators and with the Congress person who represents your district.

Call your delegate’s local office and if possible, arrange an appointment to meet your delegate face to face in district next week. During the meeting, share the personalized cover letter, the Request for Action and Support, and the IMMAAG YSP Position Statement.

If you can’t arrange an in-person appointment, stop by the office. Try to see the delegate at that time without an appointment. Of course, that may not work, but you can still leave the materials with the staff when you are there.

If you are unable to make an appointment or to get to their office, fax a copy of the cover letter and the attachments to both their district office and the D.C. office.

We put a link to help you identify your delegate and to get the contact information on our home page. ( Remember that, in general, the email addresses aren’t available and even if you know it, attachments are often not accepted. That is the reason we are suggesting the facsimile.

It is critical for as many of us as possible to reach out in the next week, demonstrate not only how important the issue is but also that we have a solution and that we expect our delegate to seriously consider our input.

This is a chance for us to begin to show solidarity and resolve.

And finally two last items:

1) Send this Call to Action on to as many acquaintances as you can and ask them to join in. Also, ask them to register when they get to the IMMAAG website. That increases our numbers for future efforts.

2) IMMAAG would appreciate a brief email letting us know when you have completed your call to action. Simply send a note to and we’ll track the momentum.

Confused by all of the Reg, Leg and Industry Noise!

My friend Jason Klaskin just emailed this regulatory rant for me to post on Lenderama

I’ll do my best to update this post with links to related articles, videos or online resources.

Please feel free to let us know what you think, as well suggest other topics of interest in the comment section below.




I have been so barraged with so many mortgage / financial legislative updates and calls to action lately that I’m not sure which issue I need to get involved with to make the most impact.

There just isn’t enough time to research everything, share my voice and work as a full-time mortgage originator.

Below is a list of some of the more important items you may have heard about or should be hearing about shortly.

This list is NOT exhaustive, and I am NOT an expert in any of these areas….  just a Loan Officer trying to have an impact on the industry’s future in my own small way.

Merkley Amendment to Financial Reform Bill (SA 3962)

Limits compensation based on terms of the loan (other than principal amount) and mandates ability to repay analysis. This is a Senate Amendment to the Dodd’s Financial Reform Bill (3217).

This amendment was snuck in after hours on Tuesday May 11, 2010 and was voted on, and accepted on May 12.

Now the main Bill (3217) will have this attached when it goes to conference to determine what stays and what goes for passage of a House version and then it’s final version.

(Barbara Boxer proposed a similar amendment the week prior but signed on to this amendment so it is likely that her amendment will not be pursued at this time).

Dodd’s Financial Stability Act of 2010 (Senate Bill 3217)

Sweeping reform for many areas of our financial system. You can read the full text here: .

Too much to mention in a short paragraph, but there are a LOT of amendments being proposed and ‘snuck’ in as legislators are trying to get their names attached and, likely, known for the upcoming elections in November. Merkley’s amendment is a great example.


Casey (PA) will reportedly be offering an amendment to SB 3217 that will eliminate HVCC. This one we want to support for passage! Go to and learn about the call to action and any updated news about this.


Proposal to eliminate multiple state auditing requirements by having one consistent audit mechanism across the NMLS system.

Proposal is to have a quarterly audit. Most in the industry see that as onerous and would like to see an annual audit system so the burden is lessened. proposal is number 2010-2.


Looks like there is widespread support on ‘The Hill’ for a Bill allowing conditional commitments for USDA funds once the funds are exhausted for this year (expected to be right around May 12). There appears to be widespread support for this bill.

Department of Labor Memo – The Administrator of the Dept. of Labor has stated that it is his interpretation that the duties of a Loan Officer does not qualify them to be exempt from overtime.

In other words – support for some form of hourly compensation mode.

(Conspiracy theory?  Just putting this in context with the proposed compensation issues for Originators proposed by the FRB and Merkley’s amendment – something to consider).

Federal Reserve Board Proposal to Amend Reg. Z

Otherwise known as the Originator compensation limitations. This proposal includes many items but the most pressing is Loan Originator compensation and the inability to earn based on the terms of a loan.

Comment period ended Dec. 24, 2009 but less than 5,000 comments were submitted (less than 5% of the Originators in our country!).

IMMAAG and NAIHP held a call to action conference call with the industry and we were able to get a meeting with the FRB to discuss alternatives and present our position that the proposed rule is based on flawed information.

It appears that the FRB is moving forward with some form of this proposal and they do NOT require any legislative oversight to implement the change. Our only hope to impact this may be legal action.

IMMAAG and NAIHP are trying to determine what the cost of such action would be and if they can generate enough industry support to make it happen.

The Merkley Amendment closely mirrors this proposal so it is uncertain if both would be instituted or one or the other but it is clear that there is a lack of information available to legislators and the FRB alike and both seem bent on limiting Originator compensation one way or the other.


Now is the time to get involved and increase your Political Competency.

Again, I am not an expert on any of these matters, but I hope this little summary is helpful.

It only took me about an hour to do a little research, find some links and read a few different points of view.

If we can all just spend at least an hour a week keeping each other in the loop by having open discussions about important regulatory updates and legislation, then our clients and industry may have a more positive outlook on a true economic recovery.

We need all industry hands on deck.

Open Industry Resources / Blogs:

Related Articles:

Photo Credit: Gapper Blog

Some States Still Scrambling to Pass New Mortgage-Broker Laws

Coming up on two years after the federal SAFE Mortgage Licensing Act was passed, many states are still in the process of implementing new laws that more tightly regulate mortgage brokers. To comply with SAFE, states must craft new laws that require licensing, testing, and ongoing broker education.

Each state also sets their own rules on whether mortgage brokers must meet minimum net-worth requirements, secure a surety bond, or pay into a statewide recovery fund to guard consumers against broker fraud.

In some states, to add to the general confusion, brokers needed to comply with some components of the law shortly after passage, with other requirements phasing in later.

Some of the states where new mortgage-broker laws are still slowly rolling out:

• In Montana, even though the state enacted its new SAFE law in July 2009, some loan originators have until May 2010 to comply, depending on when their license expires.

• Massachusetts grandfathered in established mortgage brokerages and gave them until this coming December to meet the requirements of the state’s new SAFE law. Newer companies have rolling deadlines from July to October 2010 for compliance.

• Colorado’s surety-bond requirement took effect back in April 2009, but state-licensed loan originators had until January 2010 to comply with the education and testing rules.

There’s a compilation of more states and their SAFE Act implementation timelines here.

Lenders Stop Taking USDA Loans as Funding Bottoms Out

USDA rural housing funding has all but dried up, leaving prospective home buyers to consider lending alternatives until the program gets another injection of much-needed capital.

Problem is, there’s no telling when that might actually happen.

Lenders, including behemoth Wells Fargo, have already stopped taking USDA loan commitments, according to Mortgage News Daily. It’s not unusual for the program to run out of money — it does almost every year. The difference this year is how early it’s happening and the looming reality that it’s going to directly impact consumers.

Most years, funding is restored or recovered without home buyers feeling a pinch.

It’s going to take at least another $150 million to keep the USDA loan program afloat through the fiscal year. There’s no clear path at this point to getting funding restored.

The shortfall comes after renewed interest in USDA’s rural home program, which helps mostly low- and middle-income consumers purchase homes in qualified rural areas. The program has more stringent standards than other government-backed loans but features no down payment.

Homeowners flocked to these flexible loans in the wake of tighter credit and a declining housing market. Now, those hoping to purchase with a USDA loan may need to find another lending vehicle. Both FHA and a VA home loan are likely targets for homeowners who qualify.

Industry officials have urged consumers to contact their elected officials and urge them to quickly find a solution and help homeowners in need.