DFPI Bulletin Digest: October 2022
The October 2022 DFPI Bulletin focuses on consumer protection, enforcement measures and escrow reportsamong other topics.
Editor’s Note – California Financial Protection and Innovation Department (DFPIformerly the Department of Business Oversight) oversees, licenses and regulates a variety of financial institutions, including certain home mortgage originators (MLOs) holding a National Multistate (or Mortgage) License System and Registry (NMLS) Licence. Next to the California Department of Real Estate (DRE)the DFPI shares responsibility for monitoring MLOs based on their use of licenses.
Scroll forward for a summary of October’s most important developments affecting your license usage.
DFPI and FTC MARS Enforcement Actions
For the first time under powers granted by the California Consumer Financial Protection Act (CCFPL), the DFPI and the Federal Trade Commission (FTC) have filed a joint action to enforce the Mortgage Assistance Services Rule (MARS).
The MARS rule, enacted by Regulation O, protects consumers by potentially prohibiting deceptive practices by mortgage service providers. It came into effect in 2010 in response to widespread abuse by consumers in mortgage distress.
Mortgage concepts: what is the MARS rule?
The DFPI and the FTC have unsealed a joint complaint against Roger Scott Dyer and Dominique Ahigaalleging the two had falsely promised to lower homeowners’ mortgage payments and avoid foreclosure by using multiple Los Angeles-area businesses since 2018.
The complaint claims that the defendants guaranteed these results in exchange for illegal and exorbitant fees. initial monthly feebut instead pocketed payments from borrowers — totaling about $6.3 million according to the filing.
In response to the DFPI’s complaint, the court issued a temporary restraining order intended to stop the scheme and freeze the assets while the court decides the case. In the meantime, an appointed receiver will help take over the defendants’ businesses and administer potential reparations.
See the full DFPI press release on the complaint.
Do the practices above first tuesday Does the NMLS course video sound familiar? The DFPI encourages consumers who have experienced misleading practices by a financial services provider to file a complaint online.
DFPI Consumer Advisory on Crypto Assets
Despite regular warnings from the DFPI about investing in cryptocurrencies, California investors are still falling in love crypto scams.
In September 2022, the DFPI announced cease and desist orders against 11 different entities for violating California securities laws. These entities offered high yield investment programs (HYIP) which promised crypto asset investors consistently high returns with low risk. To deceive and entice investors, these programs often used vague language to describe the program, offered referral bonuses, facilitated crypto exchanges, and leveraged social media hype.
Financial social media influencers — or finfluencers – are attracting the attention of young millennial and Gen Z investors. These demographics often consume more financial literature on social media than traditional sources such as brokerages or investment advisory firms. In reality, a third of all new investors use social media to investments in researchaccording to a TIAA study.
Thanks to this growing trend, real estate professionals often find themselves correcting outrageous investment information circulating online. To bolster your industry knowledge, direct your clients to DFPI’s finfluencer board, which encourages consumers to seek financial certifications. Your real estate licensewhile not as exciting as a flashy YouTube channel, is your hard-earned brand of expertise.
The DFPI has issued a consumer advisory on HYIPs to help consumers identify the red flags of this new form of Ponzi scheme. As crypto assets creep into the real estate space, real estate professionals are quickly becoming the first line of defense for consumers looking to turn their crypto assets into real estate assets.
The Future of Cryptocurrency in Real Estate Transactions
CLA Outstanding Achievement in Public Law
The California Lawyers Association (CLA) recognized the DFPI Real Estate Educational Services (REES) task force this month for outstanding achievement in public law. This is in response to a historic task force of 45 state agencies that uncovered more than 600 MLO qualification frauds across the country.
In December 2021, the California DRE withdrew the qualification of Danny Yen, owner and sponsor of REES, a continuing education (CE) supplier operating out of Carlsbad, CA.
When subpoenaed by the DRE, Yen did not provide enrollment agreements, take final exams, or earn final exam scores. In addition, the course materials themselves had been “inadvertently lost or misplaced”.
Thanks to the sharing of resources between the agencies, the DFPI’s investigative working group determined that Yen was leading a education fraud scheme in which he distributed course completion certificates to licensees for courses they did not actually take or complete.
The investigation resulted in a nationwide settlement process of more than 500 settlements with involved MLOs that included monetary penalties and license rebates. Read the full details of the REES case below.
DRE Hot Seat: Danny Yen, Owner of Real Estate Educational Services (REES), Reprimanded by DRE and DFPI for Running Massive Education Fraud Scheme
Escrow reports due
The DFPI recalls escrow agents submit their annual report to the Commissioner within 105 days of the end of their fiscal year. For example, if your fiscal year ended June 30, 2022, your annual report should be emailed to [email protected] on October 13, 2022.
The report should be prepared by an independent public accountant and sent using a secure, encrypted delivery system or secure drop box. Reports can also be mailed to:
Senior Financial Institutions Examiner, Escrow Law, Department of Financial Protection and Innovation
320 West Fourth Street, Suite 750, Los Angeles, CA 90013
Note that the penalty for failing to file a complete report by the deadline is $100 per day for the first 5 days and $500 per day after that date. Violations may also result in the suspension or revocation of your escrow license or trigger an immediate review.
This is the end of the DFPI October 2022 MLO news. Subscribe to Quilix, the first tuesday newsletter, to get next month’s MLO news digest delivered to your inbox.