Washington Amends Mortgage Originator and Escrow Agent Rules
by: Margaret Wright
The Washington Department of Financial Institutions has issued amendments effective January 1, 2014 to the Mortgage Broker Practices Act, Consumer Loan Act and Escrow Agent Registration Act.
The Mortgage Broker Practices Act and Consumer Loan Act sections concerning loan originator pre-licensing education and testing requirements have been updated and amended to reflect uniformity between the two regulations.
The pre-licensing education requirements sections of each Act have been amended to reflect a required twenty-two hours of pre-licensing education from an NMLS approved provider. The amendments further require that at least four hours of the required twenty-two hours be specifically related to Washington Law. Other topics that must be included in pre-licensing education are at least three hours of federal law and regulation, three hours of ethics, two hours related to nontraditional mortgage lending standards.
The amendments include an explanation of when credit will be received for completion of the SAFE required pre-licensing training. Credit will be received once the SAFE required pre-licensing education requirements approved by the NMLS for any state are completed.
Additionally, the amendments clarify that continuing education need not be completed in the same year as completion of the pre-licensing education.
Concerning loan originator testing the amendments state that a NMLS sponsored test which includes one section on federal law and regulation and one on uniform state law and regulation must be taken and passed with a score of seventy-five percent or higher.
The recent Escrow Agent Registration Act amendments include many technical changes and additional clarifications for the existing regulation.
Initial changes include clarifying amendments to definitions as provided in the Act and technical corrections to the attorney exemption from the Act’s requirements.
Licensing and The Escrow Officer Test
The Licensing and The Escrow Officer Test section has been extensively revised including many technical and clarifying amendments to the existing regulation.
In part, the amendments include changes to the Escrow Officer Test section which includes new sections concerning whether or not the test will be required for companies providing only payment collection and processing services for seller financed loans secured by real or personal property and whether or not the test will be required if escrow services are provided only for personal property transactions. In each case these services will be exempted from testing if the escrow agent is able to satisfactorily demonstrate that this is the extent of their services and may not additionally hold themselves as being licensed to provide escrow services on residential mortgage transactions.
Designated Escrow Officer
Sections WAC 208-680-177, “What must I do to replace my designated escrow officer?” and WAC 208-680-510 “What are the designated escrow officer’s responsibilities?” have been repealed. However, the amendment does include additional changes concerning the designated escrow officers. For example, the Act clarifies that the designated escrow officer or branch designated escrow officer may supervise more than one location as long as the Director of the Department of Financial Institutions has provided prior written consent.
New requirements have also been added concerning the appropriate steps to take if the designated escrow officer leaves the escrow agent. The escrow agent must notify the Department of Financial Institutions of the loss or change of the designated escrow officer within one business day and new clients or files may not be accepted until the proposed designed escrow officer has been approved. The proposed designated escrow officer must be identified to the Department within five days.
The amendment provides that the designated escrow officer may work for two or more licensed escrow agents under certain circumstances and with the approval of the Director of the Department of Financial Institutions. Additionally, the designated escrow officer may not be prohibited from accessing the escrow agent’s trust account and records which replaces previous restrictions.
Additional Amendments
A section concerning notification where a branch has been closed has been added requiring notification within twenty four hours to the Department of Financial Institutions and reconciliation of client accounts from that branch. Additionally where the escrow agent’s trust account has been overdrawn notification must be provided to the Director of the Department of Financial Institutions in writing and within twenty four hours of receipt of the information.
Additional amendments include clarifications of fidelity bond coverage and errors and omissions insurance or securities alternatives, changes to the administration of funds held in trust requirements, record keeping requirements, clarifications to obligations regarding escrow transactions and examination and enforcement actions by the Department.
About the Author
Margaret Wright, J.D., is VP and Manager of Regulatory Compliance at Bankers Advisory, Inc. She is a graduate of Stonehill College and earned her Juris Doctor at Suffolk University Law School. She serves on the Compliance Committee of the Massachusetts Mortgage Bankers Association and is admitted to the Massachusetts Bar. She can be reached at Margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
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