Randy has been a licensed mortgage broker working for a
brokerage company called Big Valley Mortgage for about a year now. And, over
that time, Randy has been steadily locking down his own methods for closing
loans. Some of his strategies are solid and sound and some of them… well….
Let’s look at one of his latest transactions as an example.
A borrower named Mary comes to Randy for a mortgage loan.
She was referred to him by her real estate agent Lauren—whom Randy has worked
with quite a few times.
Randy takes her application and documentation and sends Mary
on her way. Before he submits her materials for underwriting, Randy checks it
over one more time – just to be sure he hasn’t forgotten anything. Satisfied
that everything seems to be in order, Randy submits Mary’s application.
Now, Randy knows that, given the current loan volume, it’s
going to be a little tight time-wise submitting Mary’s application and getting
the appraisal done, etc., by the projected closing date. And he has scheduled a
remote camping trip this next week.
So just to make sure things move along smoothly while he is
gone, Randy calls the appraiser that Mary has decided to use – a guy named Paul
– just to introduce himself and see if he can work out some sort of agreement
with the appraiser.
In their first conversation, Randy finds out that Paul has
only been in the game for a few months and hungry for clients. So, Randy says
that if Paul can make sure Mary’s appraisal gets done quickly, Randy will
funnel more business Paul’s way. Nothing formal, just a little nudge to ensure
that the property Mary is buying appraises the way it should and that her loan
stays on track, in exchange for a promise of building a new business
relationship.
While he is gone, Randy asks his buddy and co-worker Johnny
to look after Mary’s file because Randy will be out of cell phone range and
away from Internet access. In exchange for his help, Randy will float Johnny
$200 out of the loan commission – just for keeping Mary’s loan on track.
Everybody wins!
During Randy’s vacation, Mary mistakenly sends the check
intended for Paul the appraiser to Randy. Johnny does not notice the check
because he is dealing with a licensing issue of his own. Specifically, after
fifteen years as a mortgage broker, for the first time, Johnny’s license has
not been renewed! In scrambling to deal with reinstating his license, Johnny almost
completely forgets to keep tabs on Mary’s loan. The only thing he does during
that whole week is to fax the completed appraisal to the lender – Royal
Bank.
So, after sitting on Randy’s desk for five days, Randy comes
back, finds the check in a stack of mail, and forwards it on to Paul, along
with an explanation of the situation.
A few weeks later, Mary’s loan is approved and they go on to
close on time.
And, even though he nearly dropped the ball with the
appraisal check, Randy decides to honor his promise to give Johnny the $200
bonus for helping out with Mary’s file. After all, Johnny really needs the cash
right now.
Meanwhile, Randy has come upon a good problem, for once he
has amassed quite a roster of clients. He has gotten so many, in fact, that he
no longer has room for their files (either electronic or hard copy) at his
origination office. So, Randy decides to do some spring cleaning – deleting or
throwing out any files that are over three years old (the cutoff for file
retention in West Virginia), deleting or discarding any files for loans that
did not close for whatever reason, putting electronic files onto a flash drive
until he can get another external hard drive, and boxing up hard copies and
moving them to a storage unit he has rented. He takes the flash drive home.
Randy’s policy of keeping only open or very recent files in
the office becomes somewhat inconvenient when the Commissioner comes to inspect
Big Valley Mortgage’s records.
As it turns out, Randy’s co-worker Johnny’s licensing renewal
problem has turned into a company problem. Johnny’s renewal was denied because
he was accused of railroading clients into using a particular insurance agent
named Veronica for all of their mortgage insurance needs – often funneling a
loan to Veronica without the applicant’s knowledge.
As a result of this complaint, the Commissioner has decided
to look closer at the entirety of Big Valley Mortgage business dealings. So,
the Commissioner demands that all of Park West’s loan records be available for investigation
immediately.
Randy feels as though the entire company is being harassed
for one indiscretion. After all, he has worked with Veronica for years and
thinks she is dependable, efficient, and honest. While he doesn’t do the hard
sell, Randy often strongly suggests Veronica as an option for his clients.
Nevertheless, he retrieves the hard copy files from the
storage facility and the flash drive from his home and brings them back to the
office to prepare for the Commissioner’s examination.
Under the cloud of this investigation, Cameron, one of the
owners of Big Valley Mortgage, challenges all of the brokers in the office to
come up with some ads to promote new loan products and to sell themselves. She
feels like the company could use some good advertising to boost business.
Randy teams up with his co-worker Mark to brainstorm some
concepts for ads. Since they are starting this project in late September, their
ad revolves around Halloween. It has a banner across the top that says, “Don’t
be afraid of our sweet deals!” Okay, so it’s not the greatest advertisement
ever created, but Randy and Mark are proud of it.
With the big creative hurdle out of the way, Randy delegates
the job of filling in the standard information to Mark. The rest of the flyer is
pretty standard stuff: interest rate quote, repayment term of the loan in
years, APR, and the company address. Mark even adds “Established in West
Virginia in 1977” right under the Big Valley Mortgage logo as a final touch –
just to give potential clients confidence that the company has longevity in the
community.
Spurred on by his burst of ad-making creativity, Randy
decides to design some new business cards for himself. He uses the River Valley
logo as a faded watermark across the front of the card, with his name and the
office address, phone number, and website address front and center.
A year later, seeing that interest rates have dropped
significantly, Randy contacts Mary about possibly refinancing her mortgage.
After two weeks of phone tag, in which Randy lets Mary know that the rates
could swing back up, she finally decides to come in and talk about a refinance.
Sure enough, by the time Mary gets in to Randy’s office, the
rates aren’t quite as good as they were when he originally contacted her. Even
so, after running the numbers, Randy finds that Mary will still save $85 per
month on her mortgage payment with the refi! Mary applies to refinance her
mortgage and is easily approved – especially since she’s received a small raise
since she originally applied. She saves money and Randy gets another
commission. No extra paperwork. No fuss.
Now, let’s ask some questions about Randy’s methods and his
decisions.
Case study questions
1.
Assess the relationship between Randy and Paul
after their initial conversation.
A.
It seems like they are setting up a good
affiliated business arrangement that will benefit both of them in the long run
– and Mary, in the short term.
B.
It seems like Randy is too trusting of Paul, an
appraiser he has never worked with before.
C.
It seems like Randy is putting pressure (as
friendly as it is) on Paul to get Mary’s appraisal done fast and at the value
needed to close the loan.
2.
Was the kickback Randy offered his co-worker
Johnny to watch over Mary’s loan while he was on vacation legal?
A. The
payment was illegal because Randy paid Johnny from the loan commission after
Johnny’s license expired.
B.
The payment was legal because it was a little
incentive among friends.
C.
The payment was illegal because Johnny forgot
the appraiser’s check on Randy’s desk for nearly a week. In effect, Johnny was
being paid a fee for a service that he did not perform.
3. Once
he found Paul the appraiser’s check sitting on his desk, did Randy handle the
situation correctly and lawfully?
A. Yes.
While the fee did sit with him for a while before getting to its intended
payee, Randy did what was right and lawful by sending it along to Paul with an
explanation.
B.
No. The law says explicitly that a licensee must
account for all moneys that he receives in connection with a mortgage loan, and
Randy (and Johnny) failed to do that for nearly a week!
C.
Yes and no. While Randy did what he could to
remedy the situation, the very fact that the check sat on his desk for five
days means that the situation falls in a gray area legally.
4.
Randy’s decision to throw out some older and
un-closed files and put records on a flash drive (which he takes home) and move
hard copies to a storage unit is:
A. Completely
legal and a smart idea. It makes more storage for future clients and keeps
records safe.
B.
Entirely illegal and pretty dumb. The records
should be on-hand at all times in case a client has a problem or the
Commissioner wants to examine them.
C.
Illegal as it stands, but could have been legal
if Randy had submitted a written request to the Commissioner prior to moving
the records and kept the flash drive either at his office or in the storage
unit with the hard copy records.
D.
Legal as it stands, as long as Randy maintains
the new storage location for a minimum of three years.
5.
What crucial piece of required information is
missing from both the advertisement flyer and Randy’s business card?
A. Randy’s
cell phone number
B.
A statement that River Valley is a West Virginia
licensee
C.
Randy’s unique identifier
D.
State seal
6.
How many laws did Randy break in refinancing
Mary’s mortgage loan?
A.
Three – The rates were not the same as what
Randy promised Mary when she came into the office, he contacted her too soon
after her original loan, and he failed to collect a lock-in fee.
B.
Two – Randy should not have collected an
origination fee for the refinance, and he was calling Mary too soon for a
refinance.
C.
One – Randy should have documented the tangible
net benefit that the loan would provide Mary in writing and included it in her
file.
D.
None – For once, Randy did everything right.
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