WA State Law Assignment 1 of 2

Case Study

Read the below Case Study and answer the following multiple-choice questions in the comments section below:

Steve has been a licensed MLO working for a company called S & L Associates for about a year now. And, over that time, Steve has been steadily locking down his own methods for closing loans. Some of his strategies are solid and sound, while some of them could be called into question.

For example, a borrower named Vickie comes to Steve for a mortgage loan. She was referred to him by her real estate agent Patricia—whom Steve has worked with quite a few times. Steve takes Vickie’s application and information, and sends Vickie on her way.

And, with that, it looks to Steve like Vickie’s application is ready to submit.

While the loan is being processed, Steve goes on a fly-fishing vacation for a week. So just to make sure things move along smoothly while he is gone, Steve calls the appraiser that Vickie has decided to use – a guy named Herman. Steve has never worked with Herman before, so he calls to introduce himself.

In their first conversation, Steve finds out that Herman has only been in the game for a few months and is hungry for clients. So, Steve says that if Herman can make sure Vickie’s appraisal gets done quickly and that the value comes out at $225,000, Steve will funnel more business Herman’s way.

While he is gone, Steve asks his buddy and co-worker Fred to look after Vickie’s file because Steve will be out of cell phone range and away from Internet access. In exchange for his help, Steve will pay Fred $200 out of the loan commission – just for keeping Vickie’s loan on track. Everybody wins!

During Steve’s vacation, Vickie mistakenly sends the check intended for Herman the appraiser to Steve. Fred does not notice the check because he is dealing with a licensing issue of his own. Specifically, after fifteen years as an MLO, for the first time, Fred’s license has not been renewed! In scrambling to deal with reinstating his license, Fred forgets to keep tabs on Vickie’s loan.

So, after sitting on Steve’s desk for five days, Steve comes back, finds the check in a stack of mail, and forwards it on to Herman, along with an explanation of the situation.

A few weeks later, Vickie’s loan is approved and they go on to close on time.

And, even though he nearly dropped the ball with the appraisal check, Steve decides to honor his promise to give Fred the $200 bonus for helping out with Vickie’s file. After all, Fred really needs the cash right now.

Besides, Steve will not miss the $200 because he has taken on a part-time gig that is paying off quite nicely. He has gone through training and is now a licensed MLO and a licensed real estate agent. And, of course, he gives his clients the required written disclosure for those that want his services as both a real estate agent and an MLO – just so everything is on the level.

Steve takes immense pride in being as helpful as possible to his “full service clients” (those who use him for real estate and origination services). In fact, to make it more convenient for these full-service clients, Steve has decided to keep their complete files together – with both original disclosures and documents from both the real estate and origination sides – at his MLO office. Just to cover all of his bases, Steve has worked up an entirely separate disclosure outlining this practice of keeping the full-service clients’ real estate and origination files together.

Now, there are a few questions that we should ask here.

   

Case Study Questions

1.     How would you assess the relationship between Steve and Herman 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 Vickie, in the short term.

B.    It seems like Steve is too trusting of Herman, an appraiser he has never worked with before.

C.    It seems like Steve is breaking the law by putting pressure (as friendly as it is) on Herman to get Vickie’s appraisal done fast and at the value needed to close the loan.

2.     Once he found the appraiser’s check sitting on his desk, did Steve handle the situation correctly and lawfully?

A.    Yes. While the fee did sit with him for a while before getting to its intended payee, Steve did what was right and lawful by sending it along to Herman with an explanation.

B.    No. The law says explicitly that a licensee must deposit any money related to a mortgage transaction into a trust account within three (3) days of receiving it. Steve (and Fred) failed to do that for nearly a week!

C.    No. The law explicitly states that any third–party fees must be paid within three (3) days after receiving the money from the borrower. Steve (and Fred) clearly did not meet that deadline by leaving the check sitting on Steve’s desk for nearly a week!

3.     Steve’s dual role as both real estate agent and MLO is:

A.    Legal because of the disclosure that Steve provides to his clients

B.    Illegal even with the disclosure that Steve provides to his clients

4.     Is Steve’s full service client filing approach legal?

A.    Yes, because he discloses to these clients that he uses this filing system to retain their records.

B.    No, because the law prohibits keeping loan origination records with records from any other business.

C.    Possibly, as long as Steve’s disclosure mirrors the one outlined in the law. If not, he filing system might not be legal.

D.    Yes, even without the disclosure, Steve’s filing system is legal. The disclosure is just a courtesy to his clients.

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