A borrower named Vickie comes
to see an MLO named Steve to apply for a $170,000 mortgage loan. Steve and
Vickie have a pleasant conversation while they fill out her application.
Having done some research,
Vickie asks about the prepaid finance charges on the loan, because she doesn’t
want any surprises. Steve figures up the charges, and quotes $5,100 in prepaid
finance fees.
After Vickie leaves, Steve
realizes that he forgot to have her sign one or two disclosure forms. He
decides that he will e-mail them to her before he takes off for vacation
tomorrow. But, just to make doubly sure, he prints the forms out and puts them
on his desk to drop in the mail for Vickie.
And, with that, it looks to
Steve like Vickie’s application is ready to submit.
The next morning, Steve stops
into the office on his way out of town to ask his buddy and co-worker Fred to
look after Vickie’s file because Steve will be out of cell phone range and away
from Internet access. In exchange for his help, Steve will pay Fred $200 out of
the loan commission – just for keeping Vickie’s loan on track.
Then, even though he still
feels like he is forgetting something, Steve takes off.
Fred does not notice the
forms because he is dealing with a licensing issue of his own.
Specifically,
after fifteen years as an MLO, for the first time, Fred’s license has not been
renewed! In scrambling to deal with reinstating his license, Fred forgets to
keep tabs on Vickie’s loan, so the disclosure forms intended for Vickie on
Steve’s desk.
So, after sitting on Steve’s
desk for five days, Steve comes back, sends the verification forms and gets the
loan back on track.
A few weeks later, Vickie’s
loan is approved and they go on to close on time.
And, even though he nearly
dropped the ball with the verification forms, Steve decides to honor his
promise to give Fred the $200 bonus for helping out with Vickie’s file. After
all, Fred really needs the cash right now.
Now, there are a few
questions that we should ask here.
Case Study Questions
- Was the $5,100 amount that Steve quoted for prepaid finance charges legal?
A. Yes,
because it was less than 5% of the loan amount.
B. No,
because it was greater than the $2,000 legal limit.
C. Yes,
because there is no legal limit on prepaid finance charges.
- Was the kickback Steve offered his co-worker Fred to watch over Vickie’s loan while he was on vacation legal?
A. The
payment could have been illegal because Steve asked Fred to do mortgage work
after Fred’s license expired, and paying Fred from the loan commission does not
help Steve’s case.
B. The
payment was legal because it was a little incentive among friends.
C. The
payment was illegal because Fred forgot the verification forms on Steve’s desk
for nearly a week. In effect, Fred was being paid a fee for a service that he
did not perform.
- Once he found the verification forms sitting on his desk, did Steve handle the situation correctly and lawfully?
A.
Yes.
While the forms did sit with him for a while before getting to its intended
payee, Steve did what was right and lawful by sending the forms.
B.
No. The
law says explicitly that a licensee must account for all moneys that he
receives in connection with a mortgage loan, and Steve (and Fred) failed to do
that for nearly a week!
C.
Yes and
no. While Steve did what he could to remedy the situation, the very fact that
the forms sat on his desk for five days means that the situation falls in a
gray area legally.
Assignment:
Based on your review of the case study, choose the best letter choice for each question listed and put your responses in the Comments section below. Students should post directly to the Blog! If you have any problems posting your assignment to the Blog (due to firewall issues etc.), you may send your answer directly to the instructor via email at oil@mymortgagetrainer.com
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