Mortgage Broker Overview
Overview of the Division of Consumer Services and Mortgage Broker Licenses
The Washington Department of Financial Institutions (DFI) is an administrative agency that has long regulated mortgage brokers doing business in Washington State through the Division of Consumer Services. The financial crisis of 2007-2008 was largely caused by poor, and often wrongful practices by mortgage brokers and lenders. Many of these practices led to hundreds of lawsuits throughout the country and eventually brought about the collapse of mortgage lenders such as NovaStar Financial and large banks including Washington Mutual.
Since the financial crisis, laws governing mortgage brokers have become more exacting and DFI has increased its level of oversight and regulation of an already highly regulated industry.
- All mortgage brokers must apply for a Washington Mortgage Broker License through DFI which requires licensees to read and remain familiar with the Revised Code of Washington, RCW 19.146 and Washington Administrative Code, WAC 208-660 and the federal regulations applicable to this industry.
- Applicants must satisfy Washington State licensure requirements.
- Mortgage brokers must carry sufficient surety bonds subject to specific requirements.
Mortgage Brokers are governed by a number of state and federal laws and regulations–many of which are interrelated and carry separate potential fines and penalties. It is important that a Mortgage Broker facing a complaint from a private party or an investigation from DFI quickly retain an attorney that understands the statutes and regulations that govern mortgage brokers and the potential liabilities. Laws with provisions that govern mortgage brokers conduct or that can trigger liability for violations include:
Washington Statutes (RCW)
Mortgage Lending and Homeownership
Washington Administrative Regulations (WAC)
Mortgage Lending and Homeownership
Washington Consumer Loan Act Regulations
Mortgage brokers and loan originators licensing regulations
Federal Statutes and Regulations
Fair Debt Collection Practices Act
FRB Privacy of Consumer Financial Information – Regulation P
Home Mortgage Disclosure Act (HMDA) – Regulation C
Truth in Lending – Regulation Z
A number of statutes and regulations include strict disclosure requirements. Among other things, DFI regulates the various disclosure forms mortgage brokers may use in their practice of brokering mortgage loans. Suggested acceptable forms include:
- Fixed Rate Loan Disclosure Form
- Interest Rate Lock Agreement
- Model Disclosure Form
- Variable Rate Loan Disclosure Form
Mortgage brokers alleged to have violated any of the above statutes or regulations can face liability from two primary avenues: DFI Enforcement Action and private civil litigation.
Ari Brown has litigated a variety of issues involving lending, mortgage origination and disclosures, loan servicing, broker and lender liabilities, and debt collection for more than twenty years. Cases he has litigated have informed application of the Mortgage Broker Practices Act; the Consumer Loan Act; Escrow Agent Registration Act and Washington Consumer Protection Act. Years of litigating cases pertaining to banking and lending practices both on individual bases and as class actions have informed Mr. Brown’s approach to dealing with alleged violations and has heightened his ability to mitigate common mistakes and to help financial licensees avoid actions that DFI may perceive as misconduct.
Robert Rhodes works with Mr. Brown on an as-needed basis. He has handled hundreds of administrative and licensing investigations and enforcement actions in various forums. He draws on his extensive background in criminal and whistleblower law that occasionally becomes useful. Other team members are available as necessary.