Case Study
Read the
Below Case Study and Answer the 4 Following Multiple Choice Questions
Steve is a licensed MLO who
helped a borrower named Vickie obtain a residential mortgage loan nine months
ago. But now, seeing that interest rates have dropped significantly, Steve
contacts Vickie about possibly refinancing her mortgage.
After two weeks of phone tag,
in which Steve lets Vickie know that the rates could swing back up, she finally
decides to come in and talk about a refinance.
Sure enough, by the time
Vickie gets in to Steve’s office, the rates aren’t quite as good as they were
when he originally contacted her. Even so, after running the numbers, Steve
finds that Vickie will still save $85 per month on her mortgage payment with
the refinance! So, Vickie applies to refinance her mortgage and is approved,
while Steve makes a little money in the fees and charges on the loan.
As you can see, Steve is very
hands-on with and helpful to his clients. In fact, he wants to be a one-stop
shop for them. With this in mind, Steve got has gone through training and is
now a licensed MLO and a licensed real estate agent.
Steve takes immense pride in
being as helpful as possible to his “full service clients” (those who use him
for real estate and origination services). In fact, to make it more convenient
for these full service clients, Steve has decided to keep their complete files
together – with both original disclosures and documents from both the real
estate and origination sides – at his MLO office. Just to cover all of his
bases, Steve has worked up a disclosure outlining this practice of keeping the
full service clients’ real estate and origination files together.
Bev, one of the owners of S
& L Associates, tasks Steve with coming up with some ads to promote new
loan products.
Steve recruits his co-worker
Fred to brainstorm some concepts for ads. Since they are starting this project
in late September, their main 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 Steve and Fred are proud of
it.
With the big creative hurdle
out of the way, Steve delegates the job of filling in the standard information
to Fred. The rest of the flyer is pretty standard stuff: Fred and Steve’s names
and contact information, interest rate quote, repayment term of the loan in
years, APR, company address, and S & L’s unique identifier. Fred even adds
“Established in Nebraska in 1987” right under the S & L Associates logo as
a final touch – just to give potential clients confidence that the company has
longevity in the community.
Meanwhile, spurred on by his
burst of ad-making creativity, Steve decides to design some new business cards
for himself. He uses the S & L 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.
Fred brings his finished ad
flyer to Steve for approval. Steve looks it over and decides it looks great.
They e-mail an electronic copy to the rest of the office so that other MLOs can
fill in their names and info and use the flyers to increase revenue.
Meanwhile, the director comes
for his second examination of Steve’s activities in the last year and a half.
The director’s office notifies Steve that there has been a complaint against
him and that his records should be available for investigation immediately.
Steve questions whether this investigation is fair, but he complies.
While he does have a flash
drive at home with electronic versions of records, he decides not to bring it
in because most of the records have corresponding copies in the office.
The complaint against Steve
actually comes from Vickie. After looking over her refinance paperwork, Vickie
believes that Steve actually did a bait and switch on her final refinance rate.
Even though she did save $85 per month on the payment, she feels that Steve
could have gotten her a better deal.
Now, there are a few
questions we should ask here:
1. Which of the following violations did Steve commit in doing
Vickie’s refinance?
A.
Steve
contacted Vickie too soon to refinance her loan.
B.
Steve
collected fees on the refinance loan.
C.
Steve’s
solicitation efforts we illegal.
2. Look back over the information that Fred included in the flyer. Did
he forget anything?
A.
Yes.
Fred forgot to include information about whether the loan had a fixed or
adjustable interest rate.
B.
No. For
once, Fred actually did a thorough job in filling in the advertisement
information.
C.
Yes.
Fred forgot to include his and Steve’s unique identifiers.
D.
Not
really, but Fred should have included the repayment term for the loan in both
years and months per the Nebraska State Law.
3. What about Steve’s business card? Did it comply with Nebraska State
Law?
A.
Yes. He
put all of the pertinent contact information on it that a potential client
would need. Otherwise, S & L would not have adopted it as a company-wide
design.
B.
No.
Steve should have included S & L’s unique identifier on the card.
C.
No.
Steve should have included his own unique identifier.
D.
Both B
and C.
4. Is Steve’s full service approach for his clients legal?
A.
Yes,
because he discloses to these clients that he uses a combination real estate
and mortgage loan filing system to retain their records.
B.
No,
because he did not provide written disclosure to his clients that he was
engaging in both real estate and MLO services.
C.
Possibly,
as long as Steve’s disclosure mirrors the one outlined in the law. If not, the
filing system might not be legal.
D.
Yes,
Steve’s approach is legal. The filing disclosure is just a courtesy to his
clients.
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