May 4: State lending law changes; deep dive into First Choice – there is no Costco Mortgage

Lenders and vendors and investors, coming and going, personnel moving around, programs coming and going… who can keep track? It is important to distinguish between facts, misinformation, and rumors. The industry is realizing that that the likelihood of a large “outside” company like Amazon grabbing 100% of the mortgage market share is nonexistent, but it is very informative to know what goes on “behind the scenes.” For example…

This week the commentary noted the current environment, and the news that First Choice Loan Services Inc. was for sale by Berkshire Bank. “The national mortgage banking operations of First Choice Loan Services, Inc... have been classified as discontinued while the Company pursues the sale of these operations in 2019. FCLS continues to serve its markets while this sale is being pursued.” Many associate First Choice with Costco (in fact the recent Costco Magazine has an ad for First Choice on the inside cover).

There was also a reminder that, “Berkshire Bank, Pittsfield, MA [Docket No. 17–1894–MRT] Action: On April 26, 2018, the Board voted to accept a settlement agreement with Berkshire Bank that required Berkshire to pay a civil money penalty in the amount of $28,559. Contemporaneous with this action, the Board voted to withdraw for one year the FHA approval of First Choice Bank, for which Berkshire was a successor-in-interest. The settlements did not constitute admissions of liability or fault. Cause: The Board took this action based on the following violations of HUD/FHA requirements alleged by HUD: (a) On December 2, 2016, First Choice merged into Berkshire; however, both Berkshire and First Choice failed to notify FHA timely of the merger between the entities; and (b) in October 2017, Berkshire acquired, an entity that was not FHA approved, and Berkshire failed to notify FHA timely of the merger between the entities.”

I received this informative note from Josh Weinberg, EVP of Compliance with First Choice. “I wanted to take a moment to respond to and hopefully clarify some of what was published about First Choice Loan Services Inc. and our relationship with the Mortgage Program for Costco Members.

“First and foremost, First Choice is still in business and while we’ve been classified as discontinued operation from an accounting perspective (A.S.C. 205-20), our doors are open and we’re continuing to provide service beyond belief to our customers, business partners and all we interact with. In fact, in just the past 60 days we’ve taken over $900 million in applications and locked over $700 million in loans. Business as usual here!

“’Discontinued operations’ is an accounting term utilized to set apart from an entity’s continuing operations the assets, liabilities and income. When a company has a formal plan to sell a portion of its operations it effectively classifies a material business segment as ‘held for sale’ and is required to report that segment as discontinued operations for all periods presented both prospectively and retrospectively. The intent is to show what the business would look like without the impact of the operations it plans to sell.

“We have been actively vetting new partners and are excited by the opportunities we are finding. Turns out, there’s quite a bit of interest in a lender with a very clean book of business, a stellar regulatory and compliance history, who happens to maintain a consumer-direct platform with a unique and advantageous relationship with Costco, as well as a successful and growing retail operation.

“Please know, however, there is no such thing as ‘Costco Mortgage.’ While it sounds good and catches headlines, it doesn’t exist. First Choice built the Mortgage Program for Costco Members, which was launched in 2010 and serves as the official licensing partner for the program. Costco is not a mortgage originator and cannot advertise or provide any services associated with mortgage origination, because they’re not a lender.

“That’s where we come in. We maintain a platform that enables consumers to receive reliable quotes from multiple lenders, at no cost and without providing any non-public personal information. We think we’re what regulators have in mind when they envision an ideal consumer experience that encourages them to shop.

“First Choice is not the only lender on the platform, and all participating lenders in the Mortgage Program for Costco Members are vetted and monitored to ensure they provide they type of experience Costco Members would expect. Due to the reduced lender fees and competitive interest rates, many consumers find the program an affordable and competitive option, and far more convenient than what they’ve experienced in the past working with lenders outside the program.

“It’s important that everyone know, Costco has no ownership, investment or other affiliation with First Choice, nor do we have any ownership, investment or other affiliation with Costco. The Mortgage Program for Costco Members and First Choice Loan Services Inc. lives on and will be supported by the new parent bank we will partner with by the end of the year, if not before.”

“Regarding the Settlement and FHA approval, the reality is, there’s no connection to that CMP and the withdrawal of the First Choice Bank FHA Approval. First Choice Loan Services Inc. was a wholly owned subsidiary of First Choice Bank, and until we’re sold, remain a wholly owned subsidiary of Berkshire Bank.

“At the time of the acquisition between Berkshire Bank and First Choice Bank, all three institutions had their own unique FHA approvals. Both First Choice Loan Services and Berkshire Bank informed HUD of the merger, but because First Choice Bank ceased to exist, Berkshire did not believe it was necessary to notify HUD about its acquisition of First Choice Bank. That was an incorrect assumption that led to the CMP.

“First Choice Loan Services maintains our own Fannie Mae, Freddie Mac, Ginnie Mae, FHA/HUD, USDA and VA approvals, in our name, separate and apart from any approvals for any of our parents. Our approvals and relationships with all agencies are in good standing, based on solid relationships, and completely unaffected by the HUD/FHA issues related to Berkshire Bank, or First Choice Bank. I think it’s pretty clear a $28,559 CMP is not the type of financial liability that has a material impact to an institution like Berkshire Bank or Berkshire Hills Bancorp. And, that impact was entirely outside the control of, or related to us.” Thank you, Josh!

State lending law changes

For any lenders, servicers, or vendors doing residential business in California, the California MBA is offering three great incentives to “Start a Conversation” and join in May: 50% off first year dues, double the value of their 3Under35 program, and $1,000 off on sponsoring either 2019/2020’s Mortgage Innovators ConferenceClick here to find out more.

Idaho has passed Senate Bill 1111, modifying its Revised Uniform Law on Notarial Acts by adding new provisions in the act and allowing for a notarial act to be performed by a remotely located individual effective January 1, 2020.

Requirements include personal knowledge of the identity of the individual pursuant to section 51-107(1) of the Idaho Code; satisfactory evidence of the identity of the remotely located individual by oath or affirmation from a credible witness pursuant to section 51-107(2) or have obtained satisfactory evidence of identity by using at least two different types of identification.

Additionally, the notary public must be able to confirm that the record is the same record the remotely located individual made a statement on or affixed their signature to. The notary public must create an audio-video recording of the performance of the act and must use the certificate provided in section 51-116 of the Idaho Code containing the statement that “this notarial act was performed using communication technology.”

Prior to performing remote notarial acts, the notary public must notify the Secretary of State that the notary public will perform notarial acts using communication technology and identify the technology used. The Secretary of State is empowered to establish requirements, standards, policies, and procedures relating to the technology used, retention of audio-visual recordings, and performance of the notarial act.

Montana amended provisions relating to its Revised Uniform Law on Notarial Acts that include electronic records, remote notarization and the use of electronic notarization systems and communicating technology, effective on October 1, 2019.

Section 2 revises laws related to notarial officers and notarial acts including verifying the identity of the individual, that the individual holds the title or capacity claimed and has knowingly and willingly signed the record in that capacity for the purposes intended.

The amendment revises the provisions related to electronic records by allowing certification that a tangible copy of electronic record is an accurate copy and a county clerk is allowed to accept for recording a tangible copy of an electronic record containing an original notarial certificate as satisfying any requirement that a record be an original.

Section 3 amends the certificate of notarial acts provision. It provides that any changes or corrections made on any information on the certificate must be “dated and initialed by the notary public and a corresponding notation of the changes must be made in the journal record.” Section 5 provides that a provider of an electronic notarization system must take reasonable steps to ensure that a notary public opting to use the provider’s system has the knowledge to use it to perform electronic notarial acts in compliance with the Law. The notary public must also complete a course of instruction approved by the Secretary of State and pass an examination based on the course.

Section 6 revises provisions relating to signatures and stamps and that the notary public is the sole owner of the notary public’s stamping device. Section 8 amends the audio-video recordings provisions by requiring the notarial officer to make an audio-visual recording of the entire communication where a notarial act is performed using communication technology and to keep sole possession of an audio-visual recording.

Section 9 and 10 revise provisions related to qualifications, training and examination of the notary public and authorize the Secretary of State to charge fees for training. Section 12 revises the notarial officer authority to refuse to perform a notarial act.

The amendment also revises the prohibited acts provisions, fees notaries may charge, information included in the database of notaries public, and rulemaking authority of the Secretary of State. It also clarifies notarial jurisdiction and venue, authorizes notaries public to solemnize marriages, provides for a certificate of authority to authenticate acts related to documents for use outside the United States, and establishes unlawful acts and penalties thereto.

Utah amended provisions under its Residential Mortgage Practices and Licensing Act effective on May 14, 2019.

Section 1 amends provisions regarding the Division of Real Estate’s (Division) issuance of a citation and states that the provisions of Title 63G, Chapter 4, Administrative Procedures Act, do not apply to the issuance of a citation under certain circumstances listed under Section 1 (4) of the amendment unless a licensee or another person authorized by law to contest the validity or correctness of a citation commences an adjudicative proceeding contesting the citation.

Section 2 2 prohibits a person from transacting the business of residential mortgage loans without first obtaining a license unless he or she qualifies for temporary authority to act as a mortgage loan originator.

Section 3 establishes the criteria and parameters for temporary authorization to act as a mortgage loan originator. A person employing an individual with temporary authorization to act as a mortgage loan originator (including any individual with temporary authorization to act as a mortgage loan originator) is subject to the requirements of the Act to the same extent as if the individual was a licensed mortgage loan originator under the Act.

Section 4 provides for licensing fees and procedures and requires applicants for sales agent, principal broker and associate broker licenses. The amendment requires a background check for certain licenses by the Bureau of Criminal Identification, The Securities Commission is permitted under the amendment to make rules, with the concurrence of the Division, in relation to background checks.

Section 5 amends the grounds for disciplinary action and makes it unlawful for a person licensed or required to be licensed to take or remove from the premises of a main office or a branch office, or otherwise limit a real estate brokerage’s access to or control over, a record that the real estate brokerage’s licensed staff, unlicensed staff, or affiliated independent contractor prepared and is related to the business of the real estate brokerage or an associate broker, a branch broker, or a sales agent of the real estate brokerage; or is related to the business administration of the real estate brokerage.

Most people don’t know that in 1912, Hellmann’s mayonnaise was manufactured in England. In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico, which was to have been the next port of call for the great ship after its stop in New York. This would have been the largest single shipment of mayonnaise ever delivered to Mexico. But as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was lost forever.

The people of Mexico, who were crazy about mayonnaise, and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great that they declared a National Day of Mourning, which they still observe to this day.

The National Day of Mourning occurs each year on May 5th and is known, of course, as Sinko de Mayo.

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Rob Chrisman