New York Financial Firm Ordered to Surrender License Over Alleged Cheating on Regulatory Exams

Enforcement_NY2On November 19, 2015, the New York Department of Financial Services (DFS) announced​ that it had ordered​ a regional mortgage company to pay a $1 million fine and surrender its mortgage license over allegations the firm’s senior managers cheated on continuing education exams. Under New York law, all mortgage originators must complete continuing education courses and associated testing to maintain their license to originate mortgage loans. According to the DFS, the company’s chief executive officer and other senior managers encouraged the company’s compliance staff to complete continuing education requirements on behalf of senior management. Compliance staff and other employees also allegedly took screen shots of continuing education exam questions and shared them with senior management, in violation of various confidentiality requirements and ethical obligations.​

In addition to the alleged improprieties regarding continuing education requirements, the company also allegedly improperly issued subprime loans, misrepresented late fees on loan documents, and failed to maintain a proper line of credit with DFS-approved credit providers. The company also allegedly underreported its revenue to DFS on at least two occasions. Under the consent order, the company agreed to surrender its license to originate mortgages in New York State and to pay a $1 million penalty. The company may reapply for a mortgage license in three years.