Stricktly Strickland Q1 2019

Mortgage Industry Information, Opinion & Tips

DRE: This and That

The DRE has recently been doing cleanup of some of the more archaic regulations, including the old requirement that the Broker/Corporation maintain the original Salesperson or Broker-Associate license certificates. It has been many years since printed licenses were provided to the licensee by the Department and since they stopped mailing the hard copy the licensee was required to download a copy of the license and provide it to the broker of record. This is no longer required and the broker doesn’t have to keep a copy of the license. However, it is still the rule that each Broker/Corporation must have a contract, which includes a compensation agreement and supervision requirements. This extends to ALL licensees, even spouses who are licensed to the Broker/Corporation. No, the marriage license isn’t enough of a contract in this case! And, the Broker-of-Record and/or Corporation license should still be displayed in a location where the public can easily see it. In addition, either the Fair Lending or Fair Housing poster must be prominently displayed, depending on your licensed activities.

Another recent change is the requirement that all Broker-Associates working for another Broker/Corporation be registered to the responsible broker. Since January 2018 this had to be accomplished by both the Broker-Associate and the sponsoring broker completing and signing the RE-215 form. In the past months, the DRE has made this registration available via e-licensing on their website at This is so much better, as it is a simple and quick way to add the Broker-Associate, as are other tasks that can be completed via e-licensing. Make sure you are using e-licensing to add Salespersons to your license, to change mailing/office addresses for licensees, and to renew licenses. Unfortunately, at this time no changes or licensing for Corporations can be accomplished via e-licensing, but I’m assured that the Department is working to add capabilities for Corporation changes/licensing soon.

On the audit front, the DRE has hired several new auditors across the state in the last year and they are very busy with auditing mostly escrow, property management and private money mortgage brokers (in other words, companies with trust accounts). They are also revisiting those companies who were cited in audits over the last few years for a follow-up examination. If you have ever received a Cite and Fine from the Department, expect a call for another audit soon. And, whatever you do, make sure you are ready!

Another issue that has arisen recently is the topic of “Business-Purpose Loans.” The DRE has always agreed that the NMLS endorsement is not required for either the originator or the processor if the loan is not for “personal, household or family use,” but that definition is for NMLS endorsement requirements only. The DRE assures me that if the loan is secured by a 1-4 residential, owner-occupied property, it doesn’t matter what the loan is used for, they will still follow all of the rules and regulations regarding this type of property. We are seeing more and more violations being cited for this. Expect the DRE to come out with more information about their stance on this issue.

And, not to sound like a broken record, but trust accounting is still the biggest problem found in DRE audits. I cannot tell you how often I find brokers who “think” they have a trust account and find out that the account is not, and never was, a trust account. Or the broker who “thinks” the account is reconciled when they don’t understand the concept and necessity for a three-way account reconciliation (much less understanding what that term even means).

Finally, make sure you are filing your reports on time and accurately. Audits are triggered for late filing or incomplete or inaccurate filing. Check, recheck and triple check that you are filing on time and that the reports are done right.

Pam Strickland can be reached at