More than 440 loan officers have settled allegations from 44 state agencies that they falsified compliance with continuing education requirements on which their state and federal licenses depend.
All of the LOs involved worked with Real Estate Educational Services in Carlsbad, California, a company owned by Danny Yen, a local real estate agent. He and other REES directors are facing separate administrative enforcement actions from officials in California, Maryland and Oregon who allege they issued false certificates on behalf of loan officers or attended classes at other providers.
The action will result in fines from loan officers totaling $1.2 million, and those involved will pay $1,000 in each state in which they are licensed, according to the Conference of State Bank Supervisors, which is the National Multistate Licensing System, an LO, oversees registration. A total of 42 states were involved in the agreement.
“NMLS uses verification technology to confirm that the person who was supposed to take the course actually did. The review process found that hundreds of mortgage loan originators had, in fact, failed to attend the courses,” said Ed Gil, senior deputy commissioner for the California Department of Financial Protection and Innovation.
The settlement is a reminder that officers who oversee the NMLS established under the Secure and Fair Enforcement of Mortgage Licensing Act actively monitor compliance with professional training requirements and other standards for non-banks in the industry. The current lawsuit comes almost exactly two years after it settled with defendants who allegedly misused and reproduced questions from the NMLS exam.
"The state system will not allow bad actors to circumvent laws enacted to protect consumers, and we will remain vigilant in enforcing the principles of the SAFE Act," said Melanie Hall, chair of the CSBS and Montana's banking commissioner.
Loan officers involved in the current settlement will have to relinquish their licenses for a three-month "cooling off" period. In addition, they must enroll in 20 hours of pre-licensing, eight hours of continuing education and any other training they may need to complete, state officials said, speaking at a CSBS news conference.
The comparison dates back to incidents between 2017 and 2020. So far, no action has generally been taken at company level, except against sole proprietors who may have been loan officers involved in the alleged fraud, and the mortgages in question are in place, according to the CSBS.
"There was no indication that consumers were harmed here," said Blaine Noblett, senior counsel for the California Department of Financial Protection and Innovation. California led the enforcement action.
Around 600 individual LOs across the country, working for a variety of lenders, have allegedly been involved in falsifying their compliance with professional training requirements as a result of involvement in REES, and those who disagree could face license revocation count, said Noblett.
"It is the intention of the task force to turn over all evidence to the states so that the appropriate states can take disciplinary action against individuals who have not settled," Noblett said, noting that so far those states have included California, Florida, North Carolina and include Oregon and Texas.
Yen was licensed by the California Department of Real Estate and a DRE Approved Course Provider. Both permits are currently subject to a revocation process, Noblett said.