The Compliance Connection

Representatives of the American Association of Residential Mortgage Regulators (AARMR) met with officials of the U.S. Department of Housing and Urban Development’s RESPA Enforcement Division on September 24, 1996 to discuss a joint effort to improve RESPA enforcement and compliance. In attendance for AARMR were members of its Board of Directors or their representatives. In attendance for HUD were Rebecca Holtz, Director of Interstate Land Sales/RESPA Division and Ivy Jackson, Senior Compliance Specialist, RESPA Enforcement.

As a result of the meeting, state mortgage banking regulators and HUD agreed to begin developing a written “memorandum of understanding” regarding how RESPA complaints and violations will be referred and handled between the states and HUD. Although HUD is the primary regulator in RESPA matters, budgetary concerns and lack of staff have hindered enforcement efforts. It was noted that in many cases, given specific state laws, state regulators may be in a better position to handle and enforce RESPA matters.

State regulators, through AARMR, pledged support to HUD to improve enforcement and compliance with RESPA. Specifically, state regulators noted their intention to 1) document RESPA violations when found during required state examinations and /or investigations and 2) forward that information to HUD for verification and enforcement. Since many state mortgage laws now require compliance with federal laws and regulations, state regulatory departments intend to penalize RESPA violators to the fullest extent of state law. HUD and AARMR agreed to hold additional meetings to develop their memorandum of understanding and oversee their collaboration on RESPA enforcement.

Regulatory Alert: Unlicensed Mortgage Company

The Bureau has discovered that some persons or organizations are doing business as First Mortgage Corporation, and claims to hold Virginia Mortgage License MB - 790. This license, however, was issued to Financial Security Mortgage Corporation, 230 N. Washington Street, Suite 400, Rockville, Maryland 20850, but was revoked on May 31, 1996 for failure to file the required annual report with the Bureau.

Licensees who do business with an unlicensed entity may be considered an accessory to the commission of a felony and are subject to regulatory action as outlined in Administrative Rulings 1603 and 1605. Please report any information about the activities of this company to the Bureau. If you have any questions, please call.

Documents in possession of the Bureau show addresses for First Mortgage Corporation as follows:

• 2102 -C Gallows Road, Vienna, Virginia 22182 (703-821-6663)
• 7202 Arlington Boulevard, Suite 301, Falls Church, Virginia 22042 (703-560-7350)
• 4160 S. Four Mile Run Drive, Suite 100, Arlington, Virginia 22206 (703-820-4405)
• Old Clifton, Clifton, Virginia 20124 (703-968-0112)
• 416 Hungerford Drive, Rockville, Maryland 20850 (410-738-7905)

Property Owner Entitled to Written Statement of Payoff

Virginia Code Section 6.1-330.82 requires that a written statement of the payoff amount be delivered to the property owner within ten (10) business days of the receipt of a written request for such payoff information. A request for payoff information may be made once within a twelve month period, without charge. A charge not to exceed $15.00 may be imposed for each additional request made within the twelve month period. The law does not allow for any other charges to be imposed. For example, charges for “rush” or “faxing” deliveries of payoff information are not allowed and will be cited as overcharges. The holder of the obligation cannot charge the borrower for the mode of transportation of payoff information.

Report Due Date Changed:

The July 1, 1996 amendment to Section 6.1-418 of the Mortgage Lender and Broker Act changed the due date for filing mortgage lender and/or broker annual reports from March 25 to March 1. Annual report forms will be mailed out to all mortgage licensees by the end of December. Keep an eye out for it, and make sure reports are completed and returned to the Bureau by March 1, 1997. Based on the information reported, annual assessment bills, which cover the cost of examination, supervision and regulation, will be sent to all licensees. Fees will be assessed on or before April 25, 1997 and must be paid on or before May 25, 1997. Penalties are imposed against companies who do not file the annual report and/or do not pay the assessment fee by the due dates prescribed by law.

License Update

The following is a list of companies who have surrendered their license, had their license revoked, application denied or been fined by the Commission since September 1, 1996. We hope this will be helpful in keeping track of companies with whom you do business. Please remember that these lists are accurate as of December 1, 1996, so call the Bureau if you have a question concerning a recent denial, surrender or regulatory action taken by the Commission. NOTE: Doing business with an unlicensed mortgage company is a violation of Administrative Rulings 1603 and 1605 which can result in regulatory action.

MORTGAGE LICENSES SURRENDERED SINCE SEPTEMBER 1, 1996

MB - 691 BUDGET MORTGAGE, INCORPORATED -- 9/4/96

MB - 185 DANIEL C. KREPINEVICH -- 9/18/96

MLB - 224 THE CRESCENT MORTGAGE CORPORATION - 9/20/96

MB - 838 MORCAP, INC. -- 9/23/96

MB - 724 COUNTYWIDE MORTGAGE COMPANY, INC. -- 10/4/96

MLB - 259 COLONIAL MORTGAGE CORPORATION -- SURRENDERED LENDER AUTHORITY 10/15/96 -- STILL LICENSED AS A BROKER (MB - 1033)

MLB - 236 PRIVATE LABEL MORTGAGE SERVICES CORP. -- 10/23/96

ML - 123 NATIONAL CREDIT REPORTS AND APPRAISAL SERVICES, INC. D/B/A MORTGAGE FINANCIAL SERVICES --10/31/96

MB - 663 SUN MORTGAGE CORPORATION -- 11/4/96

MLB - 280 MORTGAGE LENDING SERVICES, INC. -- SURRENDERED LENDER AUTHORITY 11/22/96 -- STILL LICENSED AS A BROKER (MB - 1046)

ML - 221 SHELTER MORTGAGE COMPANY PARTNERSHIP NO. 16 -- 11/25/96

ML - 220 SHELTER MORTGAGE COMPANY PARTNERSHIP NO. 21 -- 11/25/96

MORTGAGE APPLICATIONS DENIED SINCE SEPTEMBER 1, 1996

MB - 920 H C FINANCIAL INC. D/B/A PREMIUM HOME FINANCING -- 9/6/96

MB - 1016 DEBORAH KAY FRYE D/B/A OLD TOWN MORTGAGE GROUP -- 11/1/96

MLB - 424 BELGRAVIA FINANCIAL SERVICES, LLC-- 11/4/96

MORTGAGE LICENSE REVOCATIONS SINCE SEPTEMBER 1, 1996

NONE

PENALTIES PAID BY MORTGAGE LICENSEES SINCE SEPTEMBER 1, 1996

MLB - 300 K. HOVNANIAN MORTGAGE, INC. - 9/18/96 - PAID $250 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO RELOCATION

MLB - 237 OAKWOOD ACCEPTANCE CORPORATION D/B/A NATIONWIDE MORTGAGE COMPANY - 10/24/96 - PAID $250 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO RELOCATION

ML - 105 MORTGAGE ACCESS CORPORATION - 10/25/96 - PAID $500 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO OPENING ADDITIONAL OFFICES

ML - 209 BLOCK MORTGAGE COMPANY, L.L.C. - 11/22/96 - PAID $300 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO RELOCATION

ML - 183 MEGO MORTGAGE CORPORATION - 11/22/96 - PAID $250 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO RELOCATION

CORRECTION: The penalty reported levied against Coastal Mortgage Corporation in the September 1996 newsletter should have read MB - 493 COASTAL MORTGAGE CORPORATION OF MARYLAND - 6/11/96 - PAID $400 PENALTY FOR FAILURE TO FILE ANNUAL REPORT IN A TIMELY MANNER. Coastal Mortgage Corporation (MB - 675) was not penalized for late filing of their annual report. We apologize for the error.

PLEASE DISTRIBUTE!

We receive numerous phone calls from branch personnel with questions regarding changes in the laws, regulations and/or items clarified in issues of this newsletter. We often refer callers to sections of the law, regulations or the newsletter but are told that they do not have a copy. Mortgage licensees should be aware that mailings from the Bureau are only sent to the main office. Branches are not included in the Bureau’s mailing list and do not receive mailings from the Bureau. It is the responsibility of main office personnel to distribute this information to all affected branches and employees. Additional copies of the law books may be obtained by contacting the Michie Publishing Company at 1-800-542-0957. The 1996 Edition of the Laws of Virginia Related to Non-Depository Financial Institutions is also available on disk from the publisher. Copies of Virginia Regulations, Administrative Rulings and The Compliance Connection may be copied or reprinted for distribution to others. We do ask that information be copied or reprinted in their entirety, to alleviate the potential for items to be taken out of context. PLEASE MAKE SURE ALL PERSONNEL ARE PROVIDED THE OPPORTUNITY TO STAY CURRENT WITH ALL REGULATORY ISSUES SINCE FAILURE TO DO SO COULD RESULT IN VIOLATIONS AND THE POSSIBILITY OF REGULATORY ACTION.

OFTEN ASKED QUESTIONS:

? How are points calculated on open end lines of credit???

When an open-end line of credit secured by a subordinate mortgage lien is originated by mortgage lenders other than those enumerated in Section 6.1-330.73, points may only be charged on the amount of the initial advance, NOT on the full credit line amount. As additional advances are made, points may be charged on the amount of “new money” advanced. (Reference VA Code Section 6.1-330.71). The basis for this position is that the credit line may never be fully utilized and points are only allowed on the principal amount of the loan.

Virginia law does not address this issue, therefore, it is up to management to set the procedures for transferring loans to other brokers/lenders. Virginia law and Federal Regulation do require that a copy of the appraisal (if paid for by the applicant) be given to the applicant, if requested. (Reference Federal Regulation B 202.5a and VA Code Section 6.1-2.9).

PLEASE NOTE: Brokers are not allowed to collect any fees (other than credit report and appraisal fees) unless a written commitment to make a mortgage loan is given to the applicant by the lender. Reference VA Code Section 6.1-422B(1)).

No implementation date has been set. Preliminary drafts of the rating system format are being developed and reviewed by Bureau staff.

5 POINTS!!! These points may be divided between the broker and lender without restriction as of July 1, 1996 (Reference VA Code Section 6.1-330.71D(2)). The limitation on points and fees stated in Section 6.1-330.71 & 72 does not apply in instances where the lender is a bank, savings institution, industrial loan association, credit union, or to a seller in a real estate sales transaction who takes back a second mortgage. Private investors are not exempt from compliance with Sections 6.1-330.71 & 72 including the 5% maximum and the limitation on certain additional charges.

In addition to the interest rate and points charged, only the fees listed in VA Code Section 6.1-330.72 may be charged in connection with a subordinate mortgage loan: actual cost of credit report, title examination and insurance, mortgage guaranty insurance, recording fees, survey fees, attorney fees and appraisal fees. The law states, “No other charges of any kind shall be imposed on or be payable by the borrower either to the lender or any other party in connection with such loan...” Flood certification fees cannot be charged to the borrower on subordinate loans.

The final rule implementing the Truth-in-Lending Act Amendments of 1995 became effective 10/21/96. Under the new rule, mortgage broker fees are finance charges even if the creditor does not require the use of a mortgage broker and does not retain any part of the charge. This includes fees paid by the consumer to the broker or to the lender for delivery to the broker (i.e. yield spread premiums). Furthermore, since broker fees are finance charges, they must be included in the calculation of the APR. Please review the amendments for this and other pertinent changes.

Scheduled Commission Holidays:

December 24 - 25 Christmas

January 1 New Year’s Day

January 20 Lee Jackson King Day

February 17 President’s Day

Important Commission Telephone Numbers:

Consumer Finance and Mortgage Section (examinations) (804) 371-9701

Corporate Structure and Research Section (licensing) (804) 371-9690

Consumer Complaints (804) 371-9705

Bureau of Financial Institutions FAX NUMBER (804) 371-9416

Bank and Thrift Supervision Section (804) 371-9704

SCC Office of the Clerk (corporate information) (804) 371-9733

Bureau of Insurance (804) 371-9741

Bureau of Financial Institutions
State Corporation Commission
P.O. Box 640
Richmond, Virginia 23218-0640

---

Home | The Commission | Commissioners | Contact Us | Divisions | Recent News

---

For Additional information, contact kschrad@scc.virginia.gov Last Updated: October 03, 1997 State Corporation Commission webmaster.scc@state.va.us