Advertising

Advertising by mortgage lenders is governed by both federal and state rules.
The federal Truth in Lending Act dedicates an entire section to advertising consumer credit. The best place to read about all of the federal restrictions is in a document called "How to Advertise Consumer Credit & Lease Terms," on the Federal Trade Commission's Web site: http://www.ftc.gov/bcp/conline/pubs/buspubs/creditad.htm.

The two most common violations of the Truth in Lending Act are advertising a note rate without the APR and using a trigger term, such as the amount of the down payment, without the required disclosures.

Oregon also has several rules on advertising, governing everything from what ads can and cannot promise to what direct-mail pieces should look like. To read all of Oregon's regulations, go to http://arcweb.sos.state.or.us/rules/OARS_400/OAR_441/441_870.html.

The Oregon Association of Mortgage Professionals is another resource in this area. The OAMP's Ethics Committee monitors advertising statewide. You can contact the OAMP at http://www.oamponline.com/ or (800) 650-9076.

The Oregon Association of Mortgage Professionals and the Oregon Division for Finance and Corporate Securities work together to police advertising in the mortgage lending industry.

The OAMP's Ethics Committee looks at all kinds of advertising -- radio, billboards, newspapers, magazines, direct mail, television, and the Internet. If it finds an advertisement that seems to be in violation of the rules, it sends a letter to the advertiser. Most of the time, the advertiser cooperates and takes care of the problem after that first letter. But if the ad continues to run as is, the committee sends a second, more forceful letter. If the advertiser ignores the second letter, it gets a third letter that is copied to DFCS for review.

DFCS also checks advertising on its own. For example, as part of the licensing process, the division checks the advertising on the applicants' Web sites.

Companies that violate the Oregon Mortgage Lender Law and its rules can be fined up to $5,000 per violation or up to $20,000 for a continuing violation. And, while rare, an advertisement that breaks the law could carry a criminal penalty.

The Oregon Division of Finance and Corporate Securities tries to resolve the issue with the advertiser before issuing penalties. For example, if customers complain that an advertisement implies an association with their current lender, DFCS will contact the advertiser and request that it change the ad.

But if an advertiser has been warned and fails to change the ads or if DFCS find a clear violation of the law, it will issue a cease-and-desist order and penalty.

Applications

Mortgage lenders can apply for licenses, renewals, or branch locations online.

The system requires that you enter the same data as on the paper application forms, although some pieces of the application still need to be submitted in paper format, such as financial statements.

If you would like to use this online licensing service, go to http://www.oregonimla.org.

Contact your local insurance agent. He or she has access to the companies that are issuing Oregon Mortgage Lender Surety Bonds.

Have the surety bond company use the surety bond form located in the forms section of http://dfcs.oregon.gov/mortgage_lending.html. The form is labeled "Surety bond form - 440-2775."

You must designate an Oregon agent for service of process. The Oregon agent for service of process is an individual or corporation physically located in Oregon who can receive legal documents on behalf of your company. For companies in Oregon, the agent is usually someone at the company. Out-of-state companies, though, must find an agent in Oregon. If you do not know an individual or company in Oregon to take on that role, here are some options:

CT Corporation System: (800) 227-4734

Corporation Service Co.: (800) 222-2122

Data Research Inc.: (800) 992-1983

Charles F. Mathias: (888) 375-6188

National Registered Agents Inc.: (800) 554-3113

Every licensed mortgage lender must have an experienced person. An experienced person is an individual in your company who is responsible for ensuring compliance with the Oregon mortgage lending statutes, rules, and policies. Your experienced person must be an owner, officer, director, or full-time W-2 employee who does not work for any other licensed mortgage lender. He or she must have three years experience negotiating or originating residential real estate loans within the past five years.

An individual may be able to apply experience in other fields to the three-year requirement. For more information on equivalent and related experience, go to http://dfcs.oregon.gov/mortgage_lending.html#statrules and click on the rule for licensing.

If your experienced person changes, you must notify the Oregon Division of Finance and Corporate Securities within three working days as well as comply with other requirements. For specific requirements, go to http://dfcs.oregon.gov/mortgage_lending.html#statrules and click on the rule for licensing.

You will never need to send in both.

If you accept any money from borrowers other than at closing, you must maintain a clients' trust account with an Oregon financial institution. If that is the case, you must complete and send in the Notice of Clients' Trust Account and the Authorization to Examine Clients' Trust Account.

Any time you open a new client's trust account, you must send the Oregon Division of Finance and Corporate Securities a Notice of Clients' Trust Account and Authorization to Examine a Clients' Trust Account for that account within 30 days. If you close a client's trust account, you must notify DFCS in writing with 30 days.

If you do not receive money from borrowers prior to closing, you must complete the Affidavit and Undertaking.

The initial license, which expires after one year, costs $825 for your principal location and $165 for each branch location. Renewal licenses cost the same amount and expire after two years. If you add a branch after the initial license is issued, the cost is $247.50 per branch. The branch licenses will be set up to expire at the same time as the principal location license.

In addition, the licensee must pay $60 for every loan originator it employs. The licensee must pay that assessment with its initial application and at each renewal. For a new license, the company must estimate the number of loan originators it expects to employ during the first year and base the assessment on that number.

If your application is complete, it will take about three to four weeks. Please do not call to check the status of your application for at least 15 days.

If your application is not complete, there is no way to reliably estimate how long it will take to get your license. You will be sent a Notice of Incomplete Application, which will ask you to provide the items listed within a certain time frame. The faster you provide those items, the sooner the Oregon Division of Finance and Corporate Securities will issue your license.

All licensees are required to comply with Oregon?s Mortgage Lender Law, located at ORS 59.840 through 59.996, and Oregon Administrative Rules (OAR) 441-850-0005 through 441-885-0010.

You may access these and other laws at the Division of Finance and Corporate Securities? Web site: http://dfcs.oregon.gov/mortgage_lending.html#statrules.

Complaints

If the complaint is on behalf of a consumer, the consumer should make the complaint. For example, if the lender hasn't provided a good faith estimate or won't refund a client's trust account funds, the consumer should make the complaint.

To file a complaint, the consumer should send a letter to the Oregon Division of Finance and Corporate Securities outlining what happened. There also is a complaint form on the DFCS Web site, http://dfcs.oregon.gov/complaint.html, that a consumer can print, complete, and send in. If the issue is time sensitive or if there is a barrier to filing a written complaint (such as a literacy issue), the consumer should call DFCS at (503) 378-4140.

There are some instances, though, when it is more appropriate for the real estate agent to make the complaint. For example, if the real estate agent has noticed a pattern of a broker not providing good faith estimates promptly or not refunding clients' trust fund accounts, it might be appropriate for the agent to make the complaint. It also might make sense for an agent to let DFCS know about an unlicensed office or other things that wouldn't necessarily involve a consumer but would violate DFCS' statutes, rules, or policies.

Education

Licensees

Mortgage bankers and brokers must be licensed. But not everyone who engages in mortgage banking and brokering has to be licensed. There are two main exceptions:

• Those who are already regulated by a governmental or quasi-governmental agency. Typically these are banks or other depository institutions that are regulated by an agency such as the Office of Thrift Supervision or the Federal Deposit Insurance Corporation. It also could include a mortgage wholesaler that is a subsidiary of a bank or bank holding company.
  
• Those who are performing mortgage banking or brokering incidental to something else. This means mortgage lending is not their primary professional activity. This could include a lawyer who occasionally engages in mortgage lending or an individual who sells his or her home and assists in the financing by taking a second mortgage.

For a complete list of the exceptions to the mortgage lending licensing requirements, go to http://dfcs.oregon.gov/mortgage_lending.html#statrules and click on the rule for Mortgage lending, mortgage bankers or brokers.

No. Your Oregon license only allows you to engage in residential mortgage transactions in Oregon. To handle a loan involving Washington property, you would have to check with Washington about its licensing provisions.

Yes. Oregon doesn't have any statutes or rules that prohibit co-brokering, but there are some limitations and requirements:

• The agreement must be made from company to company and not from an individual loan officer to another company. Otherwise, it would appear that the loan officer is working for two companies at the same time, which is unlicensed brokering activity.
  
• The two companies would both need to have valid Oregon licenses or be exempt from licensing.
  
• The compensation for loan origination activities must be reasonable, and it must travel from company to company. The companies then would pay their respective individual loan officers, processors, or whomever is owed for the deal.
  
• The brokers should inform both the lender and the borrower about the arrangement.
  
• No referral fee can be paid.

If you want to use a co-brokering arrangement for a FHA, VA, or other type of special loan, check with HUD first. Such arrangements may be prohibited for those kinds of loans.

Examinations by DFCS

The Oregon Division of Finance and Corporate Securities examines all licensees regularly -- more frequently when there is a problem.

For the routine exams, the division provides about a week's to 10 days' notice.

The examiner reviews the company's personnel, financial, and advertising records, clients' trust accounts, and loan files. For specifics on what the examiner looks for, see the current exam report (3368.pdf), which is posted in the mortgage lending section on the DFCS Web site: http://dfcs.oregon.gov/mortgage_lending.html. The current loan worksheet (3369.pdf) also is posted on the site and shows what the examiner looks for when reviewing a borrower's loan file. DFCS keeps these forms up-to-date.

It typically takes an examiners between three to five hours to review the records and check loan files. The exam costs $60 per hour.

After the on-site visit, the examiner mails the report to the licensee. The report includes a letter detailing any problems or potential problems the examiner found at the business; an invoice; and a survey about the examiner's performance.

If the examiner finds problems that are not serious and caused no harm to consumers, the licensee simply needs to respond to the letter explaining its plan for correcting the problems. If DFCS feels the response brings the licensee back into compliance, it will close the exam and not take any other action.

But if the examiner finds serious violations that have resulted or could result in damage to consumers, DFCS may take action. That action can vary, depending on the violation, but typically the licensee will have to pay a fine and agree to stop violating the rules.

Loan Originators

Yes. But to comply with the Oregon Mortgage Lender Law, you would have to license the office where the Realtor is originating loans as a branch location of your company. The license must be prominently displayed at the branch.

In addition to licensing the branch, there are a few other things to consider.

• If you have a relationship with the Realtor other than as an employer, make sure the arrangement is compliant with the U.S. Department of Housing and Urban Development's RESPA (Real Estate Settlement Procedures Act) in regard to fee splitting.
   
• If the Realtor is not an employee of your company, he or she must have a mortgage lender license or be exempt from the licensing requirements.
  
• Because there are potential confidentiality and conflict of interest issues, it is best to address how you will handle those situations before they come up.

In addition, the Oregon Division of Finance and Corporate Securities advises you disclose the relationship to all those involved in the real estate transaction. Oregon does not require this, but some states do. The Texas Savings and Loan Department has a disclosure form available on its Web site: http://www.sml.state.tx.us/.

Although these types of arrangements are allowed under Oregon law, the Oregon Association of Mortgage Professionals' Ethics Committee warns against them. It says it sees no way to ethically perform the duties for one client as both loan officer and real estate agent.

Where can I get more Information?