On December 31, the DFPI entered into a consent order with a residential mortgage lender to resolve allegations of unlicensed mortgage loan origination activity under the California Financing Law and the California Residential Mortgage Lending Act. The lender agreed to pay a $160,000 administrative penalty and to undertake additional compliance and review measures, while neither admitting nor denying the order’s findings.
The consent order states that, during 2021 and 2022, the mortgage lender’s California branch used non-loan officer employees to perform activities requiring licensure as mortgage loan originators, in violation of the California Financing Law and the California Residential Mortgage Lending Act.
In addition to the $160,000 penalty, the consent order requires the lender to submit an officer declaration describing the compliance enhancements implemented as of the date of the order. The consent order also requires the lender to retain an independent compliance auditing firm, approved by the DFPI, to conduct an audit of potential unlicensed mortgage loan originator activity from January 1, 2023 through the order’s effective date. The lender must deliver the auditor’s final report within six months after the effective date, and must pay an additional $500 administrative penalty for each past or present employee the audit identifies as having engaged in unlicensed mortgage loan originator activity.
Putting It Into Practice: States continue to be active in enforcement over unlicensed activity in the consumer finance space (previously discussed here and here). California mortgage lenders should use this consent order as a prompt to confirm that only properly licensed individuals perform mortgage loan originator activity, with particular attention to branch oversight, staffing models, training, and escalation procedures for sales and support teams.