CSBS FINES LENDER FOR SAFE ACT VIOLATIONS

CSBS FINES LENDER FOR SAFE ACT VIOLATIONS

On April 13, 2015, The Multi-State Mortgage Committee (“MMC”) of the Conference of State Bank Supervisors (“CSBS”) entered into a settlement with New Day Financial, LLC for violating the testing and education requirements of the SAFE Act. Pursuant to the Order, New Day was penalized $5,160,000 ($5.16 million), which is to be divided equally among the 43 participating state regulators. The Order was based on the following practices:
-Employees of New Day violated the NMLS Rules of Conduct for Test Takers by having employees take information from the testing program and storing that information so as to teach other employees what was on the test.
– Members of the New Day compliance staff took continuing education course and quiz requirements for at least 20 other employees.
– Robert Posner, the Chief Executive Officer, and Paul Alger, the Chief Operating Officer of New Day acknowledged that continuing education requirements were taken for them at least 18 times. Mr. Alger claimed that he was unaware of his requirements and only became aware of this activity after the initial complaint was disclosed to New Day. However, the Maryland Investigation uncovered evidence demonstrating that Mr. Alger did indeed have direct knowledge of and condoned these practices while they were occurring.
As part of the settlement, Mr. Alger is removed from his role as COO, but is permitted to maintain his ownership interest in New Day and may remain employed with New Day, but not as an NMLS “control person.” In addition, New Day must hire an independent auditor to evaluate New Day’s policies and procedures and review New Day’s training and education program to determine if additional remedial action is required.
This Order is a strong message that state regulators take SAFE Act requirements seriously. Licensed Companies and Loan Originators that continue practices such as this do so at substantial risk.

Leave a Reply

Your email address will not be published. Required fields are marked *