Loan modification held not to be mortgage brokering

The Department of Financial Institutions (DFI) has long charged individuals with unlicensed mortgage brokering when their activities involved only residential home loan modification services at best. RCW 19.146.010 (14) defines a “mortgage broker” as “any person who, for compensation or gain, or in the expectation of compensation or gain (a) assists a person in applying for or obtaining a residential mortgage loan or (b) holds himself or herself out as being able to assist a person in obtaining or applying to obtain a residential loan. The plain meaning of the terms “apply” and “obtain” presuppose the absence of that which is sought. In short, the applicant applies to obtain a loan he does not have. That is not what a loan modification is, which is offering services relating to “modifying” loans which were already in existence. It should be noted that a modification does not substitute a new loan for the one already in place. It is not a refinance or a new loan in any sense of the word. It is a modification of an existing loan. Accordingly, the mortgage broker licensing requirement by its terms simply does not apply.Recently, Judge Shuh affirmed this. In in re Financial Solutions Law Group, the Judge wrote that he was ‘not persuaded that negotiating changes in the terms or conditions of mortgage loan is the same as, or a subset of, negotiating terms or a mortgage loan. The conduct occurs at a different time in the life of the loan and the person or entities involved are operating under different conditions and considerations depending on whether a new mortgage loan is at issue or a modification of an existing mortgage loan is at issue…I hold that the plain meaning of ‘negotiates terms of a mortgage loan’ does not include performing or offering to perform mortgage loan modification services.”Judge Shuh clearly got it right again. And perhaps the Department will draw the appropriate lesson and stop erroneously charging people.