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Last Updated: October 03, 1997 |
| INSIDE THIS ISSUE:
Mailing Address: 1300 East Main Street P. O. Box 640 Richmond, VA 23218 |
Thank you for your positive response to our efforts to better inform all licensees. We continue to strive to improve the quality of this newsletter and appreciate any suggestions you may have.
Examination Evaluation Rating System:
As you remember from our September 1996 newsletter, the Consumer Finance and Mortgage Section of the Bureau of Financial Institutions recommended to the Commissioner that the Bureau implement a “rating” system to aid in the scheduling of examinations of mortgage and consumer finance licensees. The system was tested by Bureau examiners during the last quarter of 1996 and the system was implemented on January 13, 1997. All examinations conducted after that date will contain a rating.
The primary purpose of the evaluation rating system is to better schedule examiner resources and time. More simply, this system will help determine the frequency of examinations for each licensee.
As discussed in the September 1996 Newsletter, examination evaluation ratings will be prepared by the examiner-in-charge and submitted as part of the Report of Examination. Ratings will consist of two parts: individual performance ratings on specific examination criteria ( Compliance: compliance with all applicable laws and regulations, Operations: financial responsibility and efficiency;
Management: capability to operate efficiently, fairly and in the public interest), and an overall composite rating of the licensee’s operations.
Each licensee is assigned a composite rating based on an evaluation of pertinent standards, criteria and principles. This overall rating will be expressed through a numerical scale of “1” through “5”. Once individual performance factors have been rated, the examiner-in-charge will develop a “composite” or “overall” rating of the licensee. This composite rating will enable Bureau staff to properly monitor non-depository licensees, including determining the frequency of examinations.
The examiner may or may not disclose his/her recommended rating to the licensee at the time of examination, since senior Bureau staff must concur with the recommended rating and may, in some instances, change it before the final examination report is sent to the licensee for response. If you have any questions about the system or want to know your rating, please call our office.
Timing of Disclosures and Other Mortgage Loan Documents:
Over the last several months, Bureau staff has received inquiries on a number of issues, particularly concerning when various documents must be provided to the borrower. The most frequently asked questions relate to the following documents:
In the December 1996 Newsletter, we reported that amendments to the Truth-in-Lending Act (effective 10/21/96) require the inclusion of broker fees in the calculation of the finance charge. We further stated that yield spread premiums should also be included in this calculation. YIELD SPREAD PREMIUMS ARE NOT REQUIRED TO BE INCLUDED IN THE CALCULATION OF THE FINANCE CHARGE.
We apologize for the error. Please refer to the 1995 Amendments to the Truth-in-Lending Act for further information or clarification.
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 December 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 March 1, 1997, 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 DECEMBER 1, 1996
| MB - 174 ROBERT E. HAYES -- 12/5/96
MLB - 190 CONSUMERS MORTGAGE CORPORATION -- MB - 950 LONG INVESTMENTS, INC. -- 12/18/96 MB - 747 SCOTT M. MACMILLAN -- 12/18/96 MB - 638 HAMILTON MORTGAGE SERVICES, INC. -- 12/31/96 MB - 662 VINA MORTGAGE & INVESTMENT COMPANY -- 1/2/97 MB - 643 EXCEL MORTGAGE SERVICES, LLC -- 1/13/97 MLB - 370 PRIORITY MORTGAGE COMPANY, LLC -- 1/16/97 MB - 878 PATRIOT MORTGAGE CORPORATION -- 1/27/97 MB - 889 WILLIAM THOMAS WALSH, III -- 1/27/97 MLB - 308 CHOICE MORTGAGE CORPORATION -- 1/29/97 MLB - 353 FIRST HOME MORTGAGE OF VIRGINIA, INC. -- 2/21/97 |
MB - 798 INDEPENDENCE FINANCIAL MORTGAGE CORP.-- 1/2/97 ML - 182 GINGER MAE, INC. -- 1/3/97 MB - 367 HOME MORTGAGE FINANCIAL SERVICES, INC. -- 1/3/97 MB - 929 KEVIN TODD ROOP -- 1/3/97 MB - 943 MORTGAGEWORKS INCORPORATED --1/13/97 MB - 872 HAMPTON MORTGAGE CORP. -- 2/21/97 MB - 871 CROSSTATE MORTGAGE, INC. -- 2/25/97 MB - 208 LESLIE R. CABRINHA -- 2/26/97 MB - 921 FIRST DISCOUNT MORTGAGE, INC. -- 2/27/97 MB - 822 FIRST CHOICE MORTGAGE CORPORATION -- 2/27/97 MB - 419 UNISOURCE FINANCIAL CORPORATION - 2/28/97 |
MORTGAGE APPLICATIONS DENIED SINCE DECEMBER, 1, 1996
| MB - 1044 JGS & ASSOCIATES, INC. -- 1/14/97 MB - 1051 AMERICAN FEDERAL MORTGAGE CORP. -- 2/28/97 |
MB - 1034 W. MITCHELL HINES -- 1/27/97 |
NONE
PENALTIES PAID BY MORTGAGE LICENSEES SINCE DECEMBER 1, 1996
MB - 1021 JOHN H. YATES - 12/23/96 - PAID $500 FOR ACTING AS A BROKER WITHOUT A LICENSE
MLB - 303 C. RICHARD BELL C/O CAPITOL MORTGAGE BANKERS - 2/28/97 - PAID $500 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO ACQUIRING 25% OR MORE OF CAPITOL’S STOCK
ML - 125 THE MORTGAGE AUTHORITY - 2/26/97 - PAID $500 FOR FAILURE TO OBTAIN APPROVAL PRIOR TO RELOCATION
The following is a breakdown of the number of examinations conducted in 1996 for Bureau regulated non-depository licensees and an overall breakdown of the violations found in licensed consumer finance and mortgage offices.
EXAMINATION CONDUCTED
| LICENSE TYPE | |
| CONSUMER FINANCE | |
| MORTGAGE BROKERS | |
| MORTGAGE LENDERS | |
| MORTGAGE LENDERS/BROKERS | |
| INDUSTRIAL LOAN ASSOCIATIONS | |
| NON-PROFIT DEBT COUNSELORS | |
| TOTAL # OF EXAMINATIONS CONDUCTED |
CONSUMER FINANCE VIOLATIONS
| TYPE OF VIOLATIONS | ||
| OVERCHARGE (NOT INSURANCE PREMIUMS) | ||
| OVERCHARGE (INSURANCE PREMIUMS) | ||
| FAILURE TO REDUCE RATE (MATURITY) | ||
| JUDGMENT RELATED OVERCHARGES | ||
| BANKRUPTCY RELATED OVERCHARGES | ||
| FAILURE TO REDUCE RATE (DEATH) | ||
| SIGNATURES ON BLANK DOCUMENTS | ||
| PAID JUDGMENTS NOT SATISFIED | ||
| FAILURE TO MARK DOCUMENTS PAID & RETURN | ||
| REGULATION Z | ||
| RULES & REGULATIONS - "OTHER BUSINESS" | ||
| OTHER (REG B, VIRGINIA REGS/RULINGS, ETC.) |
MORTGAGE VIOLATIONS
| TYPE OF VIOLATION | ||
| LICENSES, PLACE OF BUSINESS, CHANGES (§ 6.1-416) | ||
| BOOKS, ACCOUNTS & RECORDS (§6.1-417) | ||
| PROHIBITED PRACTICES (§6.1-422) | ||
| ESCROW ACCOUNTS (§6.1-423) | ||
| ADVERTISING (§6.2-424) | ||
| RELATED VIRGINIA STATUTES (§6.1-2.9:5, §55-66.3, §6.1-330.70 - 72, ETC) | ||
| REGULATION 225-01-1601 | ||
| REGULATION Z, TRUTH-IN-LENDING | ||
| RESPA | ||
| OVERCHARGES | ||
| OTHER ( REGULATION B, VIRGINIA REGS/RULINGS, ETC.) |
VIOLATIONS BY LICENSE TYPE
| TYPE OF VIOLATION | |||
| LICENSES, PLACE OF BUSINESS, CHANGES (§ 6.1-416) | |||
| BOOKS, ACCOUNTS & RECORDS (§6.1-417) | |||
| PROHIBITED PRACTICES (§6.1-422) | |||
| ESCROW ACCOUNTS (§6.1-423) | |||
| ADVERTISING (§6.2-424) | |||
| RELATED VIRGINIA STATUTES (§6.1-2.9:5, §55-66.3, §6.1-330.70-72, ETC.) | |||
| REGULATION 225-01-1601 | |||
| REGULATION Z TRUTH - IN- LENDING | |||
| RESPA | |||
| OVERCHARGES | |||
| OTHER ( REGULATION B, VIRGINIA REGS/RULINGS, ETC.) |
Helpful Hints for Preparing Examination Responses:
In many cases, licensee responses to the Examination Reports are incomplete. With the hope of helping licensees respond to the Report of Examination more thoroughly and eliminate additional phone calls, we offer the following:
1) Include documentation of any corrective action taken and any compliance procedures implemented (i.e. copy of revised agreements, disclosures, invoices/bills for appraisal, credit reports, courier fees, refund checks for overcharges, revisions/additions to compliance manual).
2) When overcharge violations are cited for failure to obtain the borrower’s authorization to collect broker fees, obtaining the borrower’s signature of a broker agreement after the loan closes is NOT acceptable as a corrective action. Please refer to the March ‘96 issue of this newsletter for the reprint of the 2/5/93 memo regarding compensation retained by brokers.
3) Read the Bureau’s cover letter sent with the Report and provide explanations and/or documentation, as required. The documentation needed is listed in the letter. In addition to the violations cited, common issues addressed in the cover letter are: A) business conducted with unlicensed brokers and/or lenders B) for lenders, proof of $200,000 for the operation of the business (executed line of credit agreement with a depository institution and/or bank statements) C) recent balance sheet and/or income statement D) completed personal financial statements for officers, directors and/or stockholders.
LICENSEES ARE REQUIRED TO RESPOND TO THE BUREAU’S REPORT IN A TIMELY MANNER. FAILURE TO DO SO IS A VIOLATION OF §6.1-419 AND COULD LEAD TO REGULATORY ACTION!
Important Commission telephone numbers:
| Consumer Finance and Mortgage Section (examinations) Corporate Structure and Research Section (licensing) Consumer Complaints Bureau of Financial Institutions FAX NUMBER SCC Office of the Clerk.(corporate information) Bureau of Insurance Bank and Thrift Supervision Section |
(804) 371-9701 (804) 371-9690 (804) 371-9705 (804) 371-9416 (804) 371-9733 (804) 371-9741 (804) 371-9704 |
The next issue of the Compliance Connection arrives in June!
Bureau of Financial Institutions
State Corporation Commission
P.O. Box 640
Richmond, Virginia 23218-0640
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Last Updated: October 03, 1997 |