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On November 5, the Washington Department of Financial Institutions issued a consent order against a mortgage company and its designated broker following an examination of activities under the Mortgage Broker Practices Act and the Consumer Loan Act. The order resolves allegations that the company failed to comply with various state and federal requirements governing mortgage origination and advertising.
The consent order follows a 2023 examination that reviewed two years of mortgage activity and resulted in an amended statement of charges earlier this year. According to the regulator's allegations, the examination identified multiple recordkeeping, reporting, advertising, disclosure, and compensation issues.
Specifically, the DFI alleges that the company:
- Filed inaccurate reports. The regulator alleges that the company failed to submit accurate mortgage call reports across multiple quarters.
- Used noncompliant advertising. The allegations include webpage content that omitted required licensing information, used superlative terms such as "best" or "lowest," and displayed unregistered trade names.
- Issued improper preapproval letters. The regulator alleges that the company issued preapproval letters without lender approval or automated underwriting results.
- Provided untimely disclosures and exceeded tolerance limits. The DFI alleges that required disclosures were not timely provided to several borrowers and that closing costs exceeded disclosed estimates for two transactions.
- Maintained impermissible compensation agreements. According to the regulator, compensation agreements improperly tied loan originator pay to loan terms.
As part of the settlement, the company must pay a $60,000 civil penalty, a $1,700 investigation fee, and $950 in restitution to two borrowers. The order also requires ongoing recordkeeping consistent with state requirements and affirms obligations to comply with all provisions of the Mortgage Broker Practices Act and the Consumer Loan Act.
Putting It Into Practice: State regulators continue to assert a meaningful role in consumer-finance oversight, and actions like this show that examinations can still lead to consequences even when overall enforcement levels fluctuate (previously discussed here, here, and here). Companies operating in Washington and other jurisdictions should take note of this shift, revisit the strength of their compliance programs, and ensure they remain prepared for state-level examinations and inquiries.
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