11 minute read
Databank
James W. Brody, Esq. Mortgage Banking Practice Group Chair jbrody@johnstonthomas.com 415-246-3995
James Brody actively manages all the complex mortgage banking litigation, mitigation, and compliance matters for Johnston Thomas. Mr. Brody’s experience centers on those legal issues that arise during loan originations, loan purchase sales, loan securitizations, foreclosures, bankruptcy, and repurchase & indemnification claims. He received his B.A. in International Relations from Drake University and received his J.D., with a certified concentration in Advocacy, from the University of the Pacific, McGeorge School of Law. He was a recipient of the American Jurisprudence BancroftWhitney Award. He is licensed to practice law in California and has been admitted to practice in front of the United States District Courts for the Central, Eastern, Northern, and Southern Districts of California. In addition, Mr. Brody has served as lead litigation counsel for numerous mortgage banking and commercial related disputes venued in both state and federal courts, in a direct capacity or on a pro hac vice basis, in AZ, CA, FL, MD, MI, MN, MO, OR, NJ, NY, PA, TN, and TX.
Marty Green
Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms. Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University. Texas Monthly has selected him as a Super Lawyer multiple years.
Memphis
May 5, 2021
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THOUGHT THOUGHT LEADER
7 Social Media Risk Management Practices for Mortgage Lenders
As the stay-at-home era extends into 2021, home buying continues to see steady growth. According to Forbes, Zillow expects 6.9 million existing home sales this year — the highest since 2005.
One of the factors driving the surge in real estate sales is social media. The combination of time at home, popular hashtags like #dreamhome and #mortgage, and social-media-savvy millennials and Gen Z entering the homebuying market in record numbers makes social media a prime venue for marketing mortgage services.
Social media platforms are a great way to connect with the next generation of homeowners, but public communications invite regulatory or legal scrutiny. In keeping with the Mortgage Acts and Practices (MAP) Advertising Rules, companies selling mortgage products or services are required to keep records of marketing communications for compliance.
If you are using social media for marketing your products or services, now is a good time to revisit your social media risk management practices to avoid legal, regulatory or reputational risk.
1) Form a governance structure.
Companies need clear social media roles and responsibilities. Leadership should decide how social media will contribute to strategic business goals, and then create controls and perform regular risk assessments. Without this structure social media can become misaligned with corporate strategies.
2) Develop social media use policies and procedures.
Mortgage lenders should establish social media processes and communication policies to protect against non-compliance with consumer protection laws and regulations. Policies should address what employees are, and are not, allowed to communicate in their official capacity. Without this, your company may be exposed to legal and compliance risks.
3) Know the platforms you’re
using. Perform due diligence prior to engaging with any social media platform to be aware of company’s reputation and risk management policies. Without this, your company might be made vulnerable to operational risks like theft of consumer information resulting from a social media provider’s compromised IT infrastructure.
4) Establish and maintain an
employee training program. Social media training needs to be provided to all employees who use social media on behalf of your company. Establish a code of conduct. Without a formal and documented training program, your organization can be exposed to various legal, compliance and reputational risks from misuse of social media.
5) Monitor social media use.
Archiving and oversight of the content posted to your company’s social media channels is required to ensure social media content reflects internal policies and industry regulations. Without this, reputational damage can result based on fraud, misrepresentation of your brand, mismanagement of consumer comments, and other compliance and legal risks.
6) Have strong social media audit
and compliance functions. To ensure ongoing compliance with laws, regulations and your corporate internal policies, involve your compliance or audit team to identify and mitigate social media risks. Make sure your social media practices continue to comply with evolving laws and regulations. Without these functions, your company can be vulnerable to compliance and legal risks.
7) Report on and oversee your social media risk management
program. Leadership must actively supervise the risk program and have access to reporting to determine if social media initiatives are meeting company objectives. Without this, you won’t be able to ensure that corporate, legal and reputational goals are met.
Smarsh provides electronic communications archiving and monitoring solutions for financial services organizations. Visit Smarsh.com to learn more.
FROM THE DESK OF THE ‘OM-BOBS-MAN’ Location, Location, Location
By BOB NIEMI, MORTGAGE BANKER MAGAZINE CONTRIBUTING WRITER
Flexibility Matters in life and more. Business and personal plans can change by choice and by impact. Certainly, after a yearlong period of working from home, we should all understand the need to adapt and pivot when circumstances mandate. While mortgage licensing flexibility has been a critical component to protect mortgage employees and our customers during the pandemic, the need for flexibility with Work From Home will continue well beyond.
The investment in technology by mortgage companies in the last ten years has rapidly evolved how today’s mortgage business is SAFEGUARDS REMAIN conducted. Consumers drive the time and location well beyond the There are safeguards in both model statutes as well to ensure 9:00 to 5:00 office world. Working with consumers via the telephone, consumer information if protected with cybersecurity protocols, internet or application-based system has become common place and data security, and secure connections as included in the company’s not reserved for the licensed branch location. written policies and procedures. Customer interactions and
Mortgage companies today utilize business models that promote conversations about consumers must be conducted in compliance faster and safer processes when the right technology, secure access with all federal and state information security requirements. and training are in place. This provides homebuyers an enhanced process if not the same experience with the mortgage originator MORTGAGE COMPANIES TODAY UTILIZE working from a branch. Authorizing remote work merely allows licensed mortgage BUSINESS MODELS THAT PROMOTE companies to provide critical financial services to today’s homebuyer. FASTER AND SAFER PROCESSES.
WFH RULES THE DAY
Work From Home is NOT about unlicensed branching. While there are several states that do not license individual locations, Work From Home is not a mandate to open unlicensed offices to evade state licensing requirements.
Work From Home is an effort to allow originators, processors, servicing representatives to all work from a time and location that meets the needs of their customer. Again, this is not customers making an application or making mortgage payments in an employee’s home. The employee of the licensed mortgage company is supervised and is providing the same telephone or internet-based services as if they were physically sitting in a licensed branch location.
The Mortgage Bankers Association (MBA) and American Financial Services Associations (AFSA) both the support Work From Home initiative beyond the pandemic. Both AFSA and MBA have come out with model language to allow supervised employees to work from home or another remote location. The model language of both AFSA and MBA both have common message that branch licensing is not impacted. Only the ability to meet the needs of the customer at a time and place determined by the consumer. These actions would be prohibited in more than twenty states today.
While we hope this pandemic is drawing near a close, the need for flexibility will continue. We have all seen regional and national disasters like hurricanes, wildfires and winter storms. These all impact how a mortgage company could provide essential financial services to homebuyers and impacted homeowners. Flexibility provides answers in advance of the next emergency.
For more information including the MBA model language, visit mba.org/LicensingFlexibility
How To Make Sure Reward Follows Risk
TAKING ON NEW INITIATIVES MEANS TAKING ON NEW RISK. BE READY
By FELECIA BOWERS, MORTGAGE BANKER MAGAZINE CONTRIBUTING WRITER
Every year brings with new company- is almost back to birth! An exaggeration, but it does cover wide initiatives. You have heard me and an extensive period. And, if you are licensed in Washinga plethora of other compliance profes- ton, underwriters and processors are required to report to sionals mention that, as the compliance a licensed loan originator. That LO can be licensed in any manager for your company, you should state, but it must be a licensed LO. Plus, WA requires a ensure you have a seat at the table to un- supervisory plan for these individuals. derstand the initiatives, the design, and the flow if pro- Loan originators are the target of headhunters offering cesses are changing. While you are listening, take notes the latest, greatest, and sometimes non-compliant combecause those notes will come in handy later. FELECIA BOWERS pensation proposals. The C-Suite wants to retain these
For example, does your company have an initiative to individuals for obvious reasons, but you will become modify current staffing models? What exactly does that the “heavy” when you tell them that their proposal is not mean? If it means the company is considering outsourcing under- legal. Sign-on bonuses, percentages of profits, LOs with their own writing, this initiative has a lot of underlying vetting to consider. balance sheets, and net-branching are all being offered. If you are
With no disrespect to the C-Suite, the idea of getting more loans not proficient in compensation law, then you should encourage, if through underwriting is the vision before them and not the under- not insist on, engaging a third-party attorney proficient in the rules. lying review process. The S.A.F.E. Act requires the licensing of independent contractor underwriters or processors if they perform THE WHOLESALE MARKET certain tasks. If the company is engaging the services of a third-party Maybe your company is considering entering the wholesale marcompany to handle underwriting overflow, you now must look at ket to work with brokers. If so, we must circle right back to that vetting that company through your third-party vendor management third-party vendor management program because they fit the defiprogram. nition. Contract, privacy, data security, compensation options for
Chances are the one-off 1099 independent contractor does not lender paid compensation or borrower paid compensation, and the have a contract, but they too must be vetted under your vendor man- disclosures process are but a few of the things to consider. agement program as they are a vendor performing a service. Do Remember, the broker must perform a minimum of services to not forget privacy, data security (think automated activity timeout), receive compensation under RESPA. And remember TRID disclointernal controls, background checks for LDP, EPLS-SAM, FHFA, sures: if the broker issues them, the lender name at the top must be and OFAC. your name or blank. What if the disclosures are grossly understated,
If you are licensed in Georgia, that background check’s look back will you reject the submission? Or will your company require submission of a skinny package of the six items to issue TRID disclosures 24 to 48 hours after receipt of the application. Be prepared for grousing from your retail channel if you are approving brokers within their market. They are basically competing against the broker for the same business which will end up with your company through one channel or another. Been there and done that and it is difficult to work with.
I heard a new term a few weeks ago called “Fulfillment Intelligence.” I listened intently as if I knew what they were talking about while on my second computer screen, the internet was hard at work finding me a definition I could understand. I felt pretty darn intelli-
