DFPI Orders Mortgage Lender To Pay $160,000 For Alleged Unlicensed Mortgage Loan Originator Activity

California’s Department of Financial Protection and Innovation (DFPI) recently entered a consent order requiring a residential mortgage lender to pay a $160,000 administrative penalty and submit to enhanced compliance measures over alleged unlicensed mortgage loan originator (MLO) activity at a California branch.

What DFPI Found

According to the consent order, DFPI concluded that during 2021–2022 a California branch of a Texas‑based mortgage company used non‑loan officer employees to perform tasks that require an MLO license. The order states that this conduct violated the California Financing Law and the California Residential Mortgage Lending Act provisions that require every compensated MLO of a licensee to hold and maintain an individual MLO license.

The order also notes that the specific branch and its branch manager were no longer associated with the company as of 2022, and that the company reported it had enhanced oversight of unlicensed employees.​

Penalties and Obligations

Under the consent order, the company agreed to:

• Pay a $160,000 administrative penalty to DFPI.

• Cease and desist from violating California Financial Code section 22100(b) and California Residential Mortgage Lending Act section 50002.5(a) regarding unlicensed MLO activity.​

• Submit an officer declaration describing compliance enhancements implemented by the company as of the order date.

• Retain an independent compliance auditing firm, subject to DFPI approval, to audit potential unlicensed MLO activity from January 1, 2023 through the order’s effective date.

The audit report must be delivered within six months of the order’s effective date, and the company must pay an additional $500 administrative penalty for each current or former employee identified as having engaged in unlicensed MLO activity for that period.

Why This Matters for Lenders

Commentary on the order emphasizes that DFPI and other state regulators continue focusing on unlicensed activity in consumer finance, including mortgage origination. The case is being cited as a reminder that mortgage lenders should verify that only properly licensed individuals engage in MLO activities, with close attention to branch oversight, staffing models, training, and escalation procedures for sales and support staff.