Idaho Department of Finance Policy Statement 2018-01

The Idaho Department of Finance (“Department”) recently issued a policy statement on July 1, 2018 concerning the requirement of financial responsibility/fitness of mortgage loan originators, qualified persons in charge, and designated control persons of mortgage brokers and lenders under the Idaho Residential Mortgage Practices Act.  The policy statement replaces former policy statement 2017-01.

The policy statement refers to “Individuals” which includes mortgage loan originators as well as officers, directors, members, managers, partners, and qualified persons in charge.

The statement includes factors that the Department will consider when determining whether an Individual meets the requirement of financial responsibility/fitness:

• The existence of outstanding judgment(s) (excluding judgments resulting solely from medical expenses);
• The existence of outstanding tax liens or other government liens or filings;
• The existence of any liens or judgments resulting from findings of fraud, embezzlement, misrepresentation, dishonest dealing, deceit and/or mishandling of trust funds;
• The existence of any liens, judgments, or financial or professional disciplinary actions that indicate a pattern of dishonesty;
• A pattern of delinquency in child support or student loan payments;
• The existence of outstanding collection actions against the Individual with a reported balance in excess of $5,000 as of the date of the credit report or other source information (unless solely as a result of medical expenses);
• The existence of outstanding non-mortgage charged-off accounts with a reported past due balance owed in excess of $5,000 as of the date of the credit report or other source information (unless solely as a result of medical expenses);
• The existence of a mortgage tradeline with a reported past due amount;
• The existence of a mortgage tradeline with one or more 60, 90, 120 or 150 day past due payments within 12 months of the date of the credit report;
• The existence of one or more non-mortgage accounts, with a cumulative past due balance in excess of $1,000;
• The Individual having gone through a foreclosure, preforeclosure sale (short sale) or mortgage-related charge-off within the past four years;
• The existence of a pattern of delinquent accounts within the past three years; and
• The Individual having filed a bankruptcy petition within the past five years.  The Department will not consider a bankruptcy as the sole basis for a finding that an Individual lacks the required financial responsibility/fitness but will consider the circumstances and explanation of events that caused the bankruptcy filing(s).

The policy statement delineates what items the Department will review in order to make a determination as to whether the Individual has sufficiently demonstrated financial responsibility.  If an Individual’s credit report or response to any application disclosure question contains adverse information, the Department will notify the Individual in writing of the specific issue and will specify the documentation that must be provided to the Department.  The policy statement includes examples of the type of documentation that the Department may request and the procedure to follow if such documents cannot be provided.

The Department has the legal responsibility to determine whether an Individual has sufficiently demonstrated financial responsibility, character, and general fitness before it can approve or renew a mortgage loan originator license or a mortgage broker/lender license.  To make this determination, the Department will consider the following:

• The Individual’s credit history reflected in a credit report;
• Supplemental information and documentation requested from and provided by the Individual as determined necessary by the Department;
• Supplemental information obtained from outside sources such as courts or third-party reporting agencies;
• Responses and information contained in the Individual’s application filings;
• Previous and current license history with the Department, to include any regulatory actions that have occurred;
• Other information that reflects upon the Individual’s character, general fitness, or financial responsibility;
• The timing and context of the information reviewed;
• Patterns of conduct; and
• Factors indicating the financially adverse information may be the result of the involuntary loss of job or income, divorce, or health issues.  Under such circumstances, the Individual must provide documents showing attempted workout arrangements with creditors or other factors that indicate the Individual has made an attempt to correct his or her financial difficulties.  However, contracting with a debt settlement company as a resolution effort, wherein creditors do not receive regular and timely payments, will not be considered or accepted.

No determination of financial responsibility, character and general fitness made by the Department will be based solely on the fact that an Individual has been a debtor in bankruptcy or has been the control person of an organization that filed a bankruptcy petition.  Also, the Department will not base a license application denial solely on a license applicant’s credit score or credit report.

The policy statement also specifies examples of factors that the Department may consider in determining whether to deny, condition, bar from renewal, suspend, or revoke a mortgage loan originator license or mortgage broker/lender license such as:

• The Individual has failed to fully provide any documentation required by the Department;
• The Individual has made a false attestation associated with a filing related to an application for a license or a license renewal;
• The Individual has failed to pay in full, or has failed to make arrangements with his or her creditor to pay in full, any past due non-mortgage accounts with cumulative balances of $1,000 or more, liens, judgments, or charged-off balances, either as of the date of the issuance of a credit report to the Department or at time of initial licensure, designation as a control person, or at renewal of any license.  The Department may make an exception if the accounts, liens, judgments, or charged-off balances are attributable solely to medical expenses;
• The Individual has past due child support payments;
• The Individual has past due student loan payments in excess of $1,000;
• The Individual is in arrears or has failed to comply with the terms of a repayment plan or agreement entered into with a creditor;
• The Individual has failed to make timely payments under a plan or agreement with any state or federal tax or other regulatory agency;
• The Individual has three or more non-mortgage accounts of any kind, except those solely related to medical expenses, 90 days or more past due with a cumulative balance of $5,000 or more;
• The Individual has been the subject of one or more foreclosure actions within the past three years; and
• The Individual has had a pattern of delinquent accounts, except those solely related to medical expenses, within the past three years.

Financial responsibility, character and general fitness are continuing requirements for Individuals and must be met at all times, to include, but not limited to, at initial licensure and renewal.

No mortgage loan originator license or mortgage broker/lender license will be approved on or after July 1, 2018, unless compliance with Idaho’s Financial Responsibility/Fitness Policy has been met.  Applications will be deemed withdrawn or abandoned if not completed within 60 days of notification to the applicant by the Department of deficiencies in the application.