| Date: | 02/02/2022 |
|---|---|
| Organization: | Division of Banks |
WHEREAS, Danny Yen ("Danny Yen") is doing business in California under the fictitious business name of Real Estate Educational Services ("REES"), with his business operations located at 3643 Adams Street, Carlsbad, California 92008. Wendy Yen ("Wendy Yen") is the wife of Danny Yen, and in coordination with her husband directly participates in the REES business. Dat Yen a/k/a Pat Yen is the father of Dany Yen, and in coordination with his son directly participates in the REES business. Danny Yen, Wendy Yen, and Dat Yen will be collectively referred to herein as "Respondents".
WHEREAS, REES was approved by the Nationwide Multistate Licensing System & Registry ("NMLS") to offer education training to mortgage loan originators ("MLO" or "MLOs") and was assigned an NMLS-Approved course provider identifier number of 1405046.
WHEREAS, the States or State Agencies of California-Department of Financial Protection and Innovation ("California"), Maryland, and Oregon (individually, a "Participating State," and collectively, the "Participating States") have each • agreed, through its respective state mortgage regulatory agency, to negotiate and enter into this Settlement Agreement and Consent Order (hereinafter referred to as the "Agreement" or "Order").
WHEREAS, the Participating States have authority over individuals engaged in providing education courses and providing banked credit hours for education courses that are required for a state MLO license.
WHEREAS, the state mortgage regulators of the Participating States (hereinafter referred to individually as a "State Mortgage Regulator," and collectively as the "State Mortgage Regulators") are respective members of the Conference of State Bank Supervisors ("CSBS") and the American Association of Residential Mortgage Regulators ("AARMR") and have agreed to address enforcement concerns with Respondents in a collective and coordinated manner, pursuant to their respective statutory authorities, and in accordance with the protocols established by the CSBS/AARMR Nationwide Cooperative Protocol for Mortgage Supervision as well as the Nationwide Cooperative Agreement for Mortgage Supervision (collectively the "CSBS/AARMR Protocol and Agreement"). The State Mortgage Regulators and Respondents are collectively referred to herein as the "Parties."
WHEREAS, the State Regulatory Registry LLC ("SRR"), a wholly owned subsidiary of CSBS, owns and operates the NMLS. SRR administers pre-licensure ("PE") and continuing education ("CE") and Uniform State Test protocols. Title V of Public Law 110-289, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the "SAFE Act"), requires that state-licensed MLOs complete PE prior to initial licensure and annual CE thereafter. In order to meet PE requirements contemplated under the SAFE Act, state-licensed MLOs must complete 20 hours of NMLS-approved education. In order to meet CE requirements contemplated under the SAFE Act, state-licensed MLOs must complete 8 hours of NMLS-approved education. MLOs must complete these requirements themselves.
WHEREAS, the SAFE Act expressly provides that the NMLS shall set the standards for and give approval to all education course providers. Under the authority granted by the SAFE Act to set standards for course approval, the NMLS enacted a Standards of Conduct for Approved Course Providers ("SOC") by which all course providers must abide. As part of the SOC, course providers must satisfy the NMLS Approved Course Data and Document Retention Policy ("Document Retention Policy"). Accordingly, course providers agree to maintain all records relating their NMLS-approved courses for the preceding five years, including executed sign-in sheets and student signed NMLS Rules of Conduct (ROC) Acknowledgements.
WHEREAS, the Mortgage Testing and Education Board ("MTEB"), which was created by SRR, has approved Administrative Action Procedures for S.A.F.E. Testing and Education Requirements and NMLS-Approved course providers ("AAP"), which extends administrative authority to the MTEB to investigate alleged violations of the NMLS Rules of Conduct and the Candidate Test Security and Confidentiality Agreement ("CA"). The AAP also extends administrative authority to the MTEB/SRR to investigate alleged violations of the SOC, which apply to all NMLS-Approved course providers.
WHEREAS, in late 2020, MTEB obtained information about suspicious activity that identified a possible MLO education fraud scheme coordinated by and implemented through Respondents. Based on that information, and pursuant to the AAP, the Investigative Review Committee ("IRC") approved opening and pursuing an investigation into this matter.
WHEREAS, SRR's IRC issued a memorandum report concerning its investigation into the Respondents' coordinated MLO education fraud scheme. The IRC found that Respondents, by false pretenses, false representations, and through actual fraud, had intentionally and with knowledge of the falsity, provided course credit to MLOs who had allegedly completed an 8-hour in-person CE course in Southern California (the "In-person Education Fraud Scheme"), and that Respondents took online PE and/or CE courses on behalf of numerous MLOs (the "Online Education Fraud Scheme" and collectively with the In-person Fraud Scheme referred to as the "Education Fraud Schemes").
WHEREAS, many of the MLOs that participated in the Education Fraud Schemes coordinated by Respondents are licensed as MLOs under the respective laws of each Participating State.
WHEREAS, based on the initial findings of the IRC, and pursuant to the CSBS/AARMR Protocol and Agreement, this matter was referred from the IRC for further investigation and possible enforcement action, and to which the CSBS Non-Depository Supervisory Committee authorized the creation of a regulator taskforce to coordinate the multi-state investigation and enforcement activity in this matter ("REES Regulatory Taskforce"). Specifically, the REES Regulatory Taskforce adopted the work of the IRC investigation and engaged in additional investigatory work that included requests for documentation and statements from Respondents regarding the facts and circumstances concerning the Education Fraud Schemes.
WHEREAS, the State Mortgage Regulator from California issued and served a Citation and Desist and Refrain Order on January 14, 2022 against Danny Yen based on violations of law occurring as a result of the Education Fraud Schemes (the "California Administrative Action"). The California Administrative Action seeks injunctive 'relief as well as the imposition of civil monetary penalties. Danny Yen timely filed his request for an administrative hearing to contest the California Administrative Action and the matter is currently set for a five-day trial to begin on February 14, 2022 before the California Office of Administrative Hearings, Los Angeles ("OAH"), OAH case number 2022010689.
WHEREAS, the State Mortgage Regulator from Maryland issued and served a Summary Order to Cease and Desist and Order to Stop Doing Business with Respondents on January 14, 2022 against Respondents based on violations of law occurring as a result of the Education Fraud Schemes (the "Maryland Administrative Action"). The Maryland Administrative Action seeks injunctive relief as well as the imposition of civil monetary penalties.
WHEREAS, the State Mortgage Regulator from Oregon issued and served a Notice Order on January 14, 2022 against Danny Yen based on violations of law occurring as a result of the Education Fraud Schemes (the "Oregon Administrative Action"): The Oregon Administrative Action seeks injunctive relief as well as the imposition of civil monetary penalties.
WHEREAS, Respondents enter into this Agreement for the purpose of resolving disputes with the State Mortgage Regulators, including concerning the conduct described in this Agreement, and in, the California Administrative Action, the. Maryland Administrative Action, and the Oregon Administrative Action, and do not contest the wrongdoing and violations of applicable laws, regulations, and/or rules described therein. Respondents acknowledge that the State Mortgage Regulators have and maintain jurisdiction over the underlying dispute, including all matters referred to in these recitals, and therefore have the authority to fully resolve the matter.
WHEREAS, Respondents represent to the State Mortgage Regulators that Respondents will comply with Respondents' obligations under this Agreement, and that Respondents will hereafter continue to comply with all regulatory requirements imposed by each State Mortgage Regulator.
WHEREAS, Respondents acknowledge and agree that the State Mortgage Regulators are relying, in part, upon Respondents' representations and warranties stated herein in making their determinations in this matter. Respondents further acknowledge that this Agreement may be revoked and the State Mortgage Regulators may pursue any and all remedies available under the law against Respondents if the State Mortgage Regulators later find that Respondents knowingly or willfully withheld information from the State Mortgage Regulators.
WHEREAS, the State Mortgage Regulators had legal authority to initiate their respective administrative actions based on the conduct identified by the REES Regulatory Taskforce investigation as described herein.
WHEREAS, Respondents do not contest the following relevant facts, including, but not limited to:
1) That Respondents knowingly and actively coordinated with at least 607 MLOs to implement the Education Fraud Schemes during the relevant time period of 2017 through 2020.
2) That Respondents fraudulently completed PE and CE requirements on behalf of the MLOs in violation of federal and state law under both the In-person Education Fraud Scheme and the Online Education Fraud Scheme;
3) That Respondents received monetary payments from MLOs that were deposited into the Respondents' bank accounts in exchange for Respondents' services in
4) the MLO Education Fraud Schemes. These payments were made to Respondents by various methods including, but not limited to, cash payments, Zelle transfers, Venmo transfers, and checks.
5) That, under the Online Education Fraud Scheme, Respondents fraudulently completed PE and CE courses on behalf of MLOs from their Carlsbad address with an Internet Protocol (IP) address of 76.88.84.139, which the Respondents had leased from Charter Communications during the relevant time period of 2017 through 2020. The MLOs were not physically present at the Carlsbad address and did not take, participate in, or complete the PE and CE courses at or from the Carlsbad address.
6) That, under the In-person Education Fraud Scheme, Respondents gave banked
7) credit hours for course credit corresponding to completion of 8 hours of NMLS-approved education. Respondents falsely and with knowledge and intent to deceive provided credit to MLOs for the REES NMLS-approved course but Respondents did not actually teach the course. At no point did Respondents ever teach the REES NMLS-approved course. Respondents did not require MLOs to attend the course in person. Respondents did not require MLOs to sign ROC Acknowledgements. Respondents did not require MLOs to attend a course in person for 8 hours of instruction in order to receive course credit. Respondents did not require MLOs to take a graded final exam. Effectively, the MLOs were provided education credit for pay without completing any actual education or coursework. All MLOs that received banked credit hours for the REES NMLS-approved course obtained course credit without having ever attended the class.
8) That Respondents knowingly aided and abetted MLOs in violating the ROC and the CA by participating in the MLO Education Fraud Schemes.
9) That Respondents knowingly aided and abetted the MLOs that participated in the Education Fraud Schemes with violating state and federal laws concerning the completion of certain PE and/or CE requirements, which are mandatory requirements that the MLOs must complete in order to qualify for licensure by the State Mortgage Regulators.
10) That by knowingly and willingly coordinating and implementing the Education Fraud Schemes, Respondents violated the SOC.
11) That Respondents were aided and abetted by Dat "Pat" Yen ("Dat Yen") in the Education Fraud Schemes, including, but not limited to authorizing Dat Yen to collect cash payments from MLOs. Respondents further authorized Dat Yen to provide information to MLOs regarding Respondents' willingness to falsely complete PE and CE courses or falsely provide banked credit hours for payment without requiring the MLOs to actually attend the course offered by Respondents.
WHEREAS, the intention of the State Mortgage Regulators in effecting this settlement is to fully resolve the violations and misconduct described herein pertaining to Respondents' participation in the Education Fraud Schemes, including fully resolving the California Administrative Action, the Maryland Administrative Action, and the Oregon Administrative Action. Respondents further acknowledge and agree that by entering into this settlement with the State Mortgage Regulators the settlement shall have the effect of withdrawing any request for an administrative hearing that Respondents have filed concerning the California Administrative Action, the Maryland Administrative Action, and the Oregon Administrative Action. Respondents further acknowledge their right to an administrative hearing and hereby waive such right to a hearing and to any reconsideration, appeal, or other rights which may be afforded under California, Maryland, or Oregon law, or any provision of law in connection with this matter.
WHEREAS, The State Mortgage Regulators reserve all of their rights, duties, and authority to enforce all statutes, rules, and regulations under their respective jurisdictions against Respondents regarding any activities outside the scope of PE and CE courses for MLOs. Additionally, a State Mortgage Regulator may consider this Agreement and the facts set forth herein in connection with, and in deciding, any action, or proceeding under the jurisdiction of that State Mortgage Regulator. This Agreement and all statements and evidence provided by Respondents may be admitted into evidence in any judicial or administrative proceeding or matter before a State Mortgage Regulator, if relevant to such proceeding or matter. Moreover, a State Mortgage Regulator is not precluded from taking any action against Respondents for issues separate and apart from Respondents' actions pertaining to the MLO education courses.
WHEREAS, Respondents agree to fully cooperate with any State Mortgage Regulator in any other related investigation involving business entities or individuals not a party to this Agreement, including providing testimony at any administrative or other legal proceeding that may arise. Respondents agree to waive their constitutional rights regarding self-incrimination and any spousal privilege concerning the Education Fraud Schemes.
WHEREAS, Respondents hereby knowingly, willingly, voluntarily, and irrevocably consent to the entry of this Agreement, which is being entered pursuant to the authority vested in each State Mortgage Regulator and agree that Respondents understand all of the terms and conditions contained herein. Respondents acknowledge that Respondents have full knowledge of Respondents' rights to notice and a hearing pursuant to the laws of the respective Participating States. By voluntarily entering into this Agreement, Respondents waive any right to notice and a hearing, and review of such hearing, and also herein waive all rights to any other judicial appeal concerning the terms, conditions, and related obligations set forth in this Agreement. Respondents further acknowledge that Respondents have had an opportunity to consult with independent legal counsel in connection with Respondents' waiver of rights and with the negotiation and execution of this Agreement, and that Respondents have either consulted with independent legal counsel or have knowingly elected not to do so.
NOW, THEREFORE, this Agreement — incorporating the above recitals in their entirety — having been negotiated by the Parties in order to resolve the issues identified herein, without incurring the costs, inconvenience and delays associated with protracted administrative and judicial proceedings, it is by the State Mortgage Regulators listed below hereby ORDERED: