(1) What may I request of an appraiser?
You may request an area or market survey. While there are no strict definitions of these terms, generally they refer to general information regarding a region, area, or plat. The information usually includes the high, low and average sales price, numbers of properties available for sale or that have been sold within a set period, marketing times, days on market, absorption rate or the mixture of different property types in the specified area, among other possible components. An area survey does not contain sufficient information or is not so defining as to allow an appraiser or reader to determine the value of a specified property or property type.
(2) How may I discuss property values with an appraiser, prior to the appraisal, without the discussion constituting improperly influencing the appraiser?
You may inform the appraiser of your opinion of value, the borrower's opinion of value, or the list or sales price of the property. You are prohibited from telling the appraiser the value you need or that is required for your loan to be successful.
(3) What business practices are prohibited?
The following business practices are prohibited:
(a) Directly or indirectly employing any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person.
(b) Engaging in any unfair or deceptive practice toward any person.
(c) Obtaining property by fraud or misrepresentation.
(d) Soliciting or entering into a contract with a borrower that provides in substance that the mortgage broker may earn a fee or commission through the mortgage broker's "best efforts" to obtain a loan even though no loan is actually obtained for the borrower.
(e) Charging discount points on a loan which does not result in a reduction of the interest rate. Some examples of discount point misrepresentations are:
(i) A mortgage broker or lender charging discount points on the good faith estimate or settlement statement payable to the mortgage broker or any party that is not the actual lender on the resident mortgage loan.
(ii) Charging loan fees or mortgage broker fees that are represented to the borrower as discount points when such fees do not actually reduce the rate on the loan, or reflecting loan origination fees or mortgage broker fees as discount points.
(iii) Charging discount points that are not mathematically determinable as the same direct reduction of the rate available to any two borrowers with the same program and underwriting characteristics on the same date of disclosure.
(f) Failing to clearly and conspicuously disclose whether a payment advertised or offered for a residential mortgage loan includes amounts for taxes, insurance, or other products sold to the borrower. This prohibition includes the practice of misrepresenting, either orally, in writing, or in any advertising materials, a loan payment that includes only principal and interest as a loan payment that includes principal, interest, tax, and insurance.
(g) Making or funding a loan by any means other than table funding.
(h) Negligently making any false statement or willfully making any omission of material fact in connection with any application or any information filed by a licensee in connection with any application, examination or investigation conducted by the department.
(i) Willfully filing a lien on property without a legal basis to do so.
(j) Coercing, intimidating, or threatening borrowers in any way with the intent of forcing them to complete a loan transaction.
(k) Failing to make disclosures to loan applicants and noninstitutional investors as required by RCW 19.146.030
and any other applicable state or federal law.
(l) Making, in any manner, any false or deceptive statement or representation with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan. An example is advertising a discounted rate without clearly and conspicuously disclosing in the advertisement the cost of the discount to the borrower and that the rate is discounted.
(m) Engage in bait and switch advertising.
Bait and switch means a deceptive practice of soliciting or promising a loan at favorable terms, but later "switching" or providing a loan at less favorable terms. While bait and switch will be determined by the facts of a case, the following examples, alone or in combination, may exhibit a bait and switch practice:
(i) A deceptive change of loan program from fixed to variable rate.
(ii) A deceptive increase in interest rate.
(iii) The misrepresentation of discount points. This may include discount points that have a different rate buydown effect than promised, or origination fees that a borrower has been led to believe are discount points affecting the rate.
(iv) A deceptive increase in fees or other costs.
(v) A deceptive disclosure of monthly payment amount. This practice may involve soliciting a loan with payments that do not include monthly amounts for taxes and insurance or other reserved items, while leading the borrower to believe that such amounts are included.
(vi) Additional undisclosed terms such as prepayment penalties or balloon payments, or deceiving borrowers about the effect of disclosed terms.
(vii) Additional layers of financing not previously disclosed that serve to increase the overall cost to the borrower. This practice may involve the surprise combination of first and second mortgages to achieve the originally promised loan amount.
(viii) Leading borrowers to believe that subsequent events will be possible or practical when in fact it is known that the events will not be possible or practical.
(ix) Advertising or offering rates, programs, or terms that are not actually available at the time. See WAC 208-660-440
(n) Engage in unfair or deceptive advertising practices. Unfair advertising may include advertising that offends public policy, or causes substantial injury to consumers or to competition in the marketplace.
(o) Negligently making any false statement or knowingly and willfully make any omission of material fact in connection with any reports filed by a mortgage broker or in connection with any investigation conducted by the department.
(p) Making any payment, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property.
(q) Advertising a rate of interest without clearly and conspicuously disclosing the annual percentage rate implied by the rate of interest.
(r) Failing to comply with the federal statutes and regulations in RCW 19.146.0201
(s) Failing to pay third-party providers within the applicable timelines.
(t) Collecting or charging, or attempting to collect or charge, or use or propose any agreement purporting to collect or charge any fees prohibited by the act.
(u) Acting as a loan originator and real estate broker or salesperson, or acting as a loan originator in a manner that violates RCW 19.146.0201
(v) Failing to comply with any provision of RCW 19.146.030
or any rule adopted under those sections.
(w) Intentionally delay closing of a residential mortgage loan for the sole purpose of increasing interest, costs, fees, or charges payable by the borrower.
(x) Steering a borrower to less favorable terms in order to increase the compensation paid to the company or mortgage loan originator.
(y) Receiving compensation or any thing of value from any party for assisting in real estate "flopping." Flopping occurs during some short sales where the value of the property is misrepresented to the lender who then authorizes the sale of the property for less than market value. The property is then resold at market value or near market value for a profit. The failure to disclose the true value of the property to the lender constitutes fraud and is a violation of this chapter.
(z) Abandoning records. If you do not maintain your records as required, you are responsible for the costs of collection, storage, conversion to electronic format, or proper destruction of the records.
(4) What additional practices are prohibited when providing residential mortgage loan modification services?
You are prohibited from:
(a) Collecting an advance fee;
(b) Charging total fees in excess of usual and customary charges, or total fees that are not reasonable in light of the service provided when providing residential mortgage loan modification services;
(c) Failing to provide a written fee agreement as prescribed by the director when providing residential mortgage modification services. See also WAC 208-660-430
(d) As a condition to providing loan modification services requiring or encouraging a borrower to:
(i) Sign a waiver of his or her legal defenses, counterclaims, and other legal rights against the servicer for future acts;
(ii) Sign a waiver of his or her right to contest a future foreclosure;
(iii) Waive his or her right to receive notice before the owner or servicer of the loan initiates foreclosure proceedings;
(iv) Agree to pay charges not enumerated in any agreement between the borrower and the lender, servicer, or owner of the loan;
(v) Cease communication with the lender, investor, or loan servicer or stop or delay making regularly scheduled payments on an existing mortgage unless a mortgage loan modification is completely negotiated and executed with the lender or investor and the modification agreement itself provides for a cessation or delay in making regularly scheduled payments; or
(e) Entering into any contract or agreement to purchase a borrower's property;
(f) Failing in a timely manner to:
(i) Communicate with or on behalf of the borrower;
(ii) Act on any reasonable request from or take any reasonable action on behalf of a borrower;
(g) Engaging in false or misleading advertising. In addition to WAC 208-620-630
, examples of false or misleading advertising include:
(i) Advertising which includes a "guarantee" unless there is a bona fide guarantee which will benefit a borrower;
(ii) Advertising which makes it appear that a licensee has a special relationship with lenders when no such relationship exists;
(h) Leading a borrower to believe that the borrower's credit record will not be negatively affected by a mortgage loan modification when the licensee has reason to believe that the borrower's credit record may be negatively affected by the mortgage loan modification.
(5) What federal guidance has the director adopted for use by the department in determining if a violation under subsection (3)(b) of this section has occurred?
The director has adopted the following documents:
(a) The Conference of State Bank Supervisors and American Association of Residential Mortgage Regulators "Guidance on Nontraditional Mortgage Product Risks" (released November 14, 2006); and
(b) The Conference of State Bank Supervisors, American Association of Residential Mortgage Regulators, and National Association of Consumer Credit Administrators "Statement on Subprime Mortgage Lending," effective July 10, 2007 (published in the Federal Register at Vol. 72, No. 131).
(6) What must I do to comply with the federal guidelines on nontraditional mortgage loan product risks and statement on subprime lending?
You must adopt written policies and procedures implementing the federal guidelines that are applicable to your mortgage broker business. The policies and procedures must be maintained as a part of your books and records and must be made available to the department upon request.
(7) When I develop policies and procedures to implement the federal guidelines, what topics must be included?
The policies and procedures must include, at a minimum, the following:
(a) Consumer protection. Communication with borrowers.
Providers must focus on information important to consumer decision making; highlight key information so that it will be noticed; employ a user-friendly and readily navigable format for presenting the information; and use plain language, with concrete and realistic examples. Comparative tables and information describing key features of available loan products, including reduced documentation programs, also may be useful for consumers. Promotional materials and other product descriptions must provide information about the costs, terms, features, and risks of nontraditional mortgages that can assist consumers in their product selection decisions. Specifically:
• Borrowers must be advised of potential increases in payment obligations. The information should describe when structural payment changes will occur and what the new payment would be or how it was calculated. For example, loan products with low initial payments based on a fixed introductory rate that expires after a short time and then adjusts to a variable index rate plus a margin must be adequately described to the borrower. Because initial and subsequent monthly payments are based on these low introductory rates, a wide initial spread means that borrowers are more likely to experience negative amortization, severe payment shock, and an earlier than scheduled recasting of monthly payments.
• Borrowers must be advised as to the maximum amount their monthly payment may be if the interest rate increases to its maximum rate under the terms of the loan.
• Borrowers must be advised as to the maximum interest rate that can occur under the terms of the loan.
• Borrowers must be alerted to the fact that the loan has a prepayment penalty and the amount of the penalty.
• Borrowers must be made aware of any pricing premium based on reduced documentation.
(b) Control standards.
Actual practices must be consistent with the written policies and procedures. Employees must be trained in the policies and procedures and performance monitored for compliance. Incentive programs should not produce high concentrations of nontraditional products. Performance measures and reporting systems should be designed to provide early warning of increased risk.
(8) May I charge a loan origination fee or discount points when I originate but do not make a loan?
No. You may not charge a loan origination fee or discount points as described in Regulation X, Part 3500, Appendix A.
(9) What mortgage broker fees may I charge?
You may charge a mortgage broker fee that was agreed upon between you and the borrower as stated on a good faith estimate disclosure form or similar document provided that such fee is disclosed in compliance with the act and these rules.
(10) How do I disclose my mortgage broker fees on the good faith estimate and settlement statement?
You must disclose or direct the disclosure of your fees on the good faith estimate and HUD-1/1A Settlement Statement or similar document.
(11) May I charge the borrower a fee that exceeds the fee I initially disclosed to the borrower?
Pursuant to RCW 19.146.030
(4), you may not charge any fee that benefits you if it exceeds the fee you initially disclosed unless:
(a) The need to charge the fee was not reasonably foreseeable at the time the initial disclosure was provided; and
(b) You have provided to the borrower, no less than three business days prior to the signing of the loan closing documents, a clear written explanation of the fee and the reason for charging a fee exceeding that which was previously disclosed. See WAC 208-660-430
for specific details, disclosures, and exceptions implementing RCW 19.146.030
[Statutory Authority: Chapter 43.320 RCW and RCW 19.146.223. 12-18-048, § 208-660-500, filed 8/29/12, effective 11/1/12. Statutory Authority: RCW 43.320.040, 19.146.223, and 2010 c 35. 10-20-125, § 208-660-500, filed 10/5/10, effective 11/5/10. Statutory Authority: RCW 43.320.040, 19.146.223, and 2009 c 528. 09-24-091, § 208-660-500, filed 12/1/09, effective 1/1/10. Statutory Authority: RCW 43.320.040, 19.144.070, 2008 c 109. 09-01-156, § 208-660-500, filed 12/23/08, effective 1/23/09. Statutory Authority: RCW 43.320.040, 19.146.223. 08-05-126, § 208-660-500, filed 2/20/08, effective 3/22/08. Statutory Authority: RCW 43.320.040, 19.146.223, 2006 c 19. 06-23-137, § 208-660-500, filed 11/21/06, effective 1/1/07.]