ID State Law Assignment 1 of 2

2 hr SAFE: ID Assignment 1 of 2

CASE STUDY

Please read the following case study and then answer the following multiple-choice questions in the comments section below:

Craig has been a licensed MLO working for a brokerage company called Great Plains Mortgage for about a year now. And, over that time, Craig has been steadily locking down his own methods for closing loans. Some of his strategies are solid and sound and some of them… well….

Let’s look at one of his latest transactions as an example.

A borrower named Penelope comes to Craig for a mortgage loan. She was referred to him by her real estate agent Diane—whom Craig has worked with quite a few times.

Craig takes Penelope’s application and information and a fee (payable to the lender High Mountain Bank) to ensure she gets the lowest possible interest rate. While Penelope doesn’t love the idea of paying for an interest rate she feels she should be able to get based on her excellent credit history, alone, she pays the fee, anyway.

With all of her information and the fee in-hand, Craig sends Penelope on her way. He checks everything over one more time. Satisfied that everything is in order, Craig submits Penelope’s application. 

Craig knows that, given the current loan volume, it’s going to be a little tight time-wise submitting Penelope’s application and getting the appraisal done, etc., by the projected closing date. And he has scheduled a remote camping trip this next week.

While he is gone, Craig asks his buddy and co-worker Allen to look after Penelope’s file because Craig will be out of cell phone range and away from Internet access. In exchange for his help, Craig will float Allen $200 out of the loan commission – just for keeping Penelope’s loan on track. Everybody wins!

During Craig’s vacation, Penelope mistakenly sends the check intended for Luke the appraiser to Craig. Creative types! Allen does not notice the check because he is dealing with a licensing issue of his own. Specifically, after fifteen years as an MLO, for the first time, Allen’s license has not been renewed! In scrambling to deal with reinstating his license, Allen almost completely forgets to keep tabs on Penelope’s loan. The only thing he does during that whole week is to fax the appraisal to the lender – High Mountain Bank. 

So, after sitting on Craig’s desk for five days, Craig comes back, finds the check in a stack of mail, and forwards it on to Luke, along with an explanation of the situation.

A few weeks later, Penelope’s loan is approved and they go on to close on time.

And, even though he nearly dropped the ball with the appraisal check, Craig decides to honor his promise to give Allen the $200 bonus for helping out with Penelope’s file. After all, Allen really needs the cash right now.

Meanwhile, Craig has come upon a good problem, for once has amassed quite a roster of clients. He has gotten so many, in fact, that he no longer has room for their files (either electronic or hard copy) at his origination office. So, Craig decides to do some spring cleaning – deleting or throwing out any files that are over three years old (the cutoff for file retention in Idaho), deleting or discarding any files for loans that did not close for whatever reason, putting electronic files onto a flash drive until he can get another external hard drive, and boxing up hard copies and moving them to a storage unit he has rented. He takes the flash drive home.

Craig’s policy of keeping only open or very recent files in the office becomes somewhat inconvenient when the Director comes to inspect Great Plains Mortgage’s records.

As it turns out, Craig’s co-worker Allen licensing renewal problem has turned into a company problem. Allen’s renewal was denied because he was accused of railroading clients into using a particular insurance agent named Susan for all of their mortgage insurance needs – often funneling a loan to Susan without the applicant’s knowledge.  

As a result of this complaint, the Director has decided to look closer at the entirety of Great Plains Mortgage business dealings. So, the Director demands that all of Great Plains’ loan records be available for investigation immediately.

Craig feels as though the entire company is being harassed for one indiscretion. After all, he has worked with Susan for years and thinks she is dependable, efficient, and honest. While he doesn’t do the hard sell, Craig often strongly suggests Susan as an option for his clients.

Nevertheless, he retrieves the hard copy files from the storage facility and the flash drive from his home and brings them back to the office to prepare for the Director’s examination.

Under the cloud of this investigation, Linda, one of the owners of Great Plains Mortgage, challenges all of the loan originators in the office to come up with some ads to promote new loan products and to sell themselves. She feels like the company could use some good advertising to boost business.

Craig teams up with his co-worker Mike to brainstorm some concepts for ads. Since they are starting this project in late September, their ad revolves around Halloween. It has a banner across the top that says, “Don’t be afraid of our sweet deals!” Okay, so it’s not the greatest advertisement ever created, but Craig and Mike are proud of it.

With the big creative hurdle out of the way, Craig delegates the job of filling in the standard information to Mike. The rest of the flyer is pretty standard stuff: interest rate quote, repayment term of the loan in years, APR, unique identifier, and the company address. Mike even adds “Established in Idaho in 1977” right under the Great Plains Mortgage logo as a final touch – just to give potential clients confidence that the company has longevity in the community.

Spurred on by his burst of ad-making creativity, Craig decides to design some new business cards for himself. He uses the Great Plains logo as a faded watermark across the front of the card, with his name and the office address, phone number, and website address front and center. 

Let's ask some questions about this scenario...

1. Was the fee Penelope paid to get a low interest rate legal?

A. Yes, Craig handled everything perfectly.

B. No, it was entirely illegal. Borrowers should not be required to pay advance fees to secure a mortgage loan.

C. Not entirely legal, because Craig forgot to give Penelope a disclosure about the fee.



2. What do you think of Craig asking his co-worker Allen to look after Penelope’s file was on vacation?

A. It was illegal because Allen’s license had been denied renewal.

B. It was legal because Allen was still within the license revocation grace period to finish up any business he had in the pipeline.

C. It would have been legal if Allen had not left the appraiser’s check sitting on Craig’s desk for nearly a week.



3. Once he found Luke the appraiser’s check sitting on his desk, did Craig handle the situation correctly and lawfully?

A. No. The law says explicitly that a licensee must account for all moneys that he receives in connection with a mortgage loan, and Craig (and Allen) failed to do that for nearly a week!

B. Yes. While the fee did sit with him for a while before getting to its intended payee, Craig did what was right and lawful by sending it along to Luke with an explanation.

C. Yes and no. While Craig did what he could to remedy the situation, the very fact that the check sat on his desk for five days means that the situation falls in a gray area legally.


4. Craig’s decision to throw out some older and un-closed files and put records on a flash drive (which he takes home) and move hard copies to a storage unit is:

A. Completely legal and a smart idea. It makes more storage for future clients and keeps records safe.

B. Entirely illegal and pretty dumb. The records should be on-hand at all times in case a client has a problem or the Director wants to examine them.

C. Is in a legal grey area. Throwing out un-closed files that are less than three years old and taking files home on a flash drive could be legally problematic.

D. Illegal as it stands, but could have been legal if Craig had submitted a written request to the Director prior to moving the records and kept the flash drive either at his office or in the storage unit with the hard copy records.

5. What crucial piece of required information is missing from both the advertisement flyer and Craig’s business card?

A. Craig’s cell phone number

B. A statement that Great Plains is a Idaho-approved licensee

C. Craig’s unique identifier

D. Idaho state seal

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After you complete this assignment, you may continue in your course.