The Washington State Designated Mortgage Broker Exam is very tough.
Licensed loan originators who want to pass the WA DMB exam, especially people who have passed a mortgage broker exam in other states, think they’re going to cake-walk through this, and are surprised when they don’t pass the first time.
If you’ve been actively originating loans for many years, you already know your federal rules and regulations. The most important components of RESPA, TILA, TRID, Dodd Frank, the Fair Housing Protected Classes, the Equal Credit Opportunity Act prohibited “bases” are all embedded in your long term memory.
But what have you done to prepare yourself for test questions on how Washington State differs from other states?
WA State’s regulator, the Department of Financial Institutions (DFI) has a resource page for mortgage brokers and has a dedicated page for “designated mortgage broker exam frequently asked questions” and also published a study guide called, “test content outline.” If you’ve been actively originating loans, you’re going to do fine on Sections I, and II. If you have not been actively originating loans, check WA State Law to see if you even qualify to become a designated mortgage broker.
For Ethics, Section III, WA State DFI offers this:
A. Appraisals. For example, what behavior is acceptable when interact with an appraiser.
B. The anti-kickback provisions of RESPA Section 8.
And C: RCW 19.146.0201, the list of prohibited practices from the Washington State Mortgage Broker Practices Act
Study tip: Regulators do not regulate ethics. Regulators regulate LAW. An industry self-regulates ethical conduct. Examples of industries with ethical self-regulation in place: Attorneys have their Bar Association. Doctors have the American Medical Association. We have nothing. In the mortgage lending industry, we do not self-regulate ethics. Trade associations such as Mortgage Bankers and Mortgage Brokers exist to lobby congress on our behalf and do absolutely nothing to self-regulate ethical conduct. I am willing to bet that not one mortgage company has ever been denied membership in MBA or NAMB or any other trade group due to unethical conduct. This is a big reason why banks, lenders, and mortgage brokers continue to have more laws passed targeting our industry: Because we don’t self-regulate ethics.
With this in mind, state (and federal) regulators view the topic of “ethics” from a legal perspective. All the items listed in Section III are law:
A. Appraisals.
WA DFI has a few things to say about interactions with appraisers. In addition, WA DFI wants you to know the law that was passed in 2009 called the Mortgage Disclosure Improvement Act, which was the government’s attempt to improve TILA. Go to this link and do a keyword search on the word, “appraiser” and you’ll see 10 matches. Carefully review each part of TILA/MDIA that addresses the appraisal, the appraiser, and the requirement for no collusion between the appraiser and anyone who earns a fee when the loan closes.
B. RESPA
Section 8, the Anti-kickback provision of RESPA. Memorize it.
Use this document and your keyword search is “kickback” (not plural. There should be 8 matches.)
And for sure take a look at the October 8, 2015 CFPB Compliance Bulletin addressing MSAs (Co-marketing, in-house lender, co-advertisng, co-telemarketing, etc.)
Oh, and if you missed it, the Prospect-Mortgage-gets-caught-paying-RE/MAX-and-Keller-Williams-Cold-Hard-Cash -for-Deals case is instructive.
And the link to C is already posted above.
Now let’s get to the most important part:
Section IV Washington State LAWS AND RULES
First, we’ll dive into letter A.
There are two parts to WA State Law: The LAW was passed by state legislature and signed by our governor is the RCW, which stands for Revised Code of Washington. From this link, slowly scroll down until you see the Mortgage Broker Practices Act LAW: RCW 19.146 RCW
The second part of the Mortgage Broker Practices Act are the RULES. From the same link slowly scroll down until you see the WACs. The WACs are our state’s RULES. WAC means Washington Administrative Code. After our governor signs the law, he/she hands the law to our WA State regulator, the Department of Financial Institutions and DFI holds a series of rule-making meetings to answer questions about the law. The Q&As are published in the form of WACs and are written in plain language. The Mortgage Broker Practices Act RULES are WAC 208-660
Do you want to pass the test? Then you absolutely must read the MBPA laws and rules. If you do not read these laws, you will fail the exam. If you don’t like reading law, nobody is going to feel sorry for you and give you a license. You’re going to have to grow the hell up, stop whining, and read the law. If you don’t want to read our state’s law, go originate loans in some other state because we don’t want you here.
But wait! There’s more. WA DFI respectfully requests you know a little more about how other parts of the mortgage machine do business in our state. Let’s revisit the test content outline, which was really nice of DFI to publish for you. Look for Section IV, letter B. WA State gives you a short list of other state laws/rules that you should review, because they’re telling you that you might see a handful of questions on these laws: WA Consumer Loan Act, WA Usury Act, WA Consumer Protection Act, and WA Escrow Registration Act. You can find links to these laws from this same page. Remember to review both the law (RCW) and rules (WACs)
Bonus tip from me to you: We have three additional protected classes in our state beyond the Fair Housing protected classes: LGBTQ, Honorably discharged military Veterans, and the use of a service animal. Your personal opinion of these additional protected classes will not be on the test
Super extra cool bonus tip: Get into the mind of DFI. Here’s a link to the Enforcement Actions. At the top, find the fourth column called “Act” and read the violations of the Mortgage Broker Practices Act. You’ll see patterns. Example: brokers allowing loan originators to originate from an unlicensed location, failing to send disclosures, failing to file the annual reports, loan originators who lied on their attestation forms, fraudulent acts by LOs, and so forth. If I was in charge of the exam, I’d make sure that you got a few test questions on the most common violations of our state’s laws.
Here are some tips on how to structure your study time.
Study in small chunks of time. It never works to cram the day before. You’re only going to make yourself nervous and then you’re not going to sleep well the night before. Once you’ve scheduled the test, work backwards from that date and schedule an hour here, an hour there, with scheduled breaks between small chunks of study time. Tackle each section of the law in small pieces.
There is no set of study questions available for purchase that, if you memorize, will be on the test. You’re looking for an easy way and there is no easy way to pass this test. There is only one way: Read our state laws and rules.
AFTER you read WA State laws and rules, if you want to try your hand at some practice quizzes, I sell them here for $99. The quizzes focus only on the Mortgage Broker Practices Act. My advice is to read a small section of the law, and then try a few quiz questions, and repeat.
If you have any other questions, I’m easier to reach via email than over the phone: jillayne at ceforward dot com
Good luck and keep studying!