AZ State Law Assignment 1 of 2

Please review the following case study and answer the following multiple choice questions in the Comments Section below.

Dave has been a licensed MLO working for a brokerage company called S & L Associates for about a year now. And, over that time, Dave has been steadily locking down his own methods for closing loans.

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

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

Dave takes Martha’s application and information and sends her on her way.

Before he submits her materials for underwriting, though, Dave checks it over one more time, just in case anything was left blank. In doing this final once-over on the documents, Dave notices that Martha accidentally forgot to put down her annual income on the employment verification document. But he remembered her clearly stating that she makes $70,000 per year. 

Thinking back, Dave realizes that they were talking a bit while she was filling out the application, about the home she is trying to buy and how it had three bedrooms that she didn’t know if she would have enough furniture to fill. And, in all of the conversation, she must have gotten sidetracked.

Dave knows that, given the volume of loans right now, it’s going to be a little tight time-wise submitting Martha’s application and getting the appraisal done, etc., by the projected closing date. So, Dave fills in Martha’s income. After all, he knows she would authorize that, and, this way, the process stays on track and Martha’s correct income figure is sent in for underwriting.

And, with that, it looks to Dave like Martha’s application is ready to submit.

Still, Dave knows that the time crunch could catch up to him, since he has scheduled a remote hiking trip for the following week. He’s going to be away from Internet, out of cell range, and if any problems should arise, it’s not like someone is going to send the Pony Express to find him.

So just to make sure things move along smoothly while he is gone, and to be certain that they make the closing date, Dave asks his buddy and co-worker Fred to look after Martha’s file.

In exchange for his help, Dave will pay Fred $200 out of the loan commission – just for keeping Martha’s loan on track. Everybody wins!

During Dave’s vacation, Martha mistakenly sends the check intended for the appraiser to Dave. Fred 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, Fred’s license has not been renewed! In scrambling to deal with reinstating his license, Fred forgets to keep tabs on Martha’s loan.

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

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

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

Now, there are a few questions that we should ask here.

Case Study Questions

1.     What about Dave’s handling of Martha’s missing income figure?

A.    Dave broke the law because he negligently allowed Martha to sign a document that had blank spaces.

B.    Dave broke the law because he wrote that down from memory, when he is required to get complete verification before recording such information.

C.    Dave did not break the law because he and Martha had talked about this and, as her originator, the law gives him explicit permission to fill in information such as this when the applicant forgets to do so.

D.    Dave did not break the law because the document Martha signed was for employment or financial verification.

  

2.     Was the kickback Dave offered his co-worker Fred to watch over Martha’s loan while he was on vacation legal?

A.    The payment was illegal because Dave paid Fred from the loan commission after Fred’s license expired.

B.    The payment was legal because it was a little incentive among friends.

C.    The payment was illegal because Fred forgot the appraiser’s check on Dave’s desk for nearly a week. In effect, Fred was being paid a fee for a service that he did not perform.

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

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

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

C.    Yes and no. While Dave 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.

After you finish with the assignment you may return to finish the rest of the course content.