California is leading a multi-state regulatory task force that’s investigating an alleged “education fraud scheme” by a company suspected of allowing mortgage loan originators to skirt their pre-licensing and continuing education coursework requirements.

The SAFE Mortgage Licensing Act requires state-licensed mortgage loan originators to complete at least 20 hours of pre-licensing education, and a minimum of eight hours of continuing education annually, using providers approved by the Nationwide Multistate Licensing System (NMLS).

Mortgage loan originators who fulfilled that requirement through a Carlsbad, California-based provider, Real Estate Educational Services (REES), were recently ordered to provide details to regulators about the courses they took from 2017 through 2020.

Regulators want to know whether loan officers certified by REES as having completed their eight-hour continuing education classroom requirement actually attended those classes in person. Licensees were also instructed to list any online prelicensing or continuing education courses “for which you received course credit, but you did not personally take and complete.”

Regulators sought that information through an online survey that also demanded copies of invoices, certificates of completion, and communications with REES or its owners, Danny and Wendy Yen.

“This [is] a mandatory survey that provides you with an opportunity to disclose information regarding your participation in the aforementioned scheme,” regulators told recipients. “Failure to provide information or complete the regulatory survey, as well as providing false or incomplete information in your response to the regulatory survey, may result in more severe enforcement action taken by your state regulator(s) against you and your mortgage loan originator license.”

The survey states that it is part of a Multi-State Regulatory Taskforce investigation authorized by the Conference of State Banks Supervisors, which owns and operates the Nationwide Multistate Licensing System (NMLS).

The survey — which loan originators were given until July 31 to complete — also asked licensees to indicate whether they were willing to resolve any potential violations through a consent order or settlement agreement.

The investigation was first reported by Mortgage News Daily’s Rob Chrisman, who said it could involve “hundreds if not thousands” of loan originators who relied on REES to fulfill their educational requirements since 2017.

Those involved “are facing, at best, having to retake their 2020 and 2021 NMLS classes, and a recommendation that their license be suspended until they re-complete the 2020 class,” Chrisman reported. “All of the LOs in question face the possibility of the NMLS recommending that the state revoke the LO’s licenses. Some involved may be facing prison time.”

A spokesman for the California Department of Financial Protection and Innovation confirmed to Inman via email that the DFPI is the lead agency in the investigation, but said he could not comment on any particulars.

REES and its owners, Danny and Wendy Yen, did not immediately respond to requests for comment to a phone number and email associated with the business. REES is no longer listed as an NMLS-approved course provider, and the company’s former website is inactive.

In addition to completing the required coursework, mortgage loan originators seeking state licensing must pass a 115-question SAFE Mortgage Loan Originator Test developed by NMLS with a score of 75 percent or better.

Email Matt Carter

mortgages
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